3

the benefit of the consideration. The deed of a lunatic is voidable in equity, but the consideration must be returned if the grantee was a bona fide purchaser.1

If the lunacy was known to the other party, the contract is voidable at the option of the lunatic, but is binding upon such other party. A lunatic may be sued upon a contract made by him when sane; and a mortgage executed by him before insanity may be foreclosed thereafter."

An inquisition of lunacy is notice, actual or constructive, to all parties dealing with the lunatic, and the contract of a person adjudged to be insane cannot be enforced against him.8

A lunatic is liable, quasi ex contractu, for necessaries supplied him."

$ 64. Contracts of Drunken Persons. A contract made by a person so intxoicated at the time as not to know what he is doing, or the consequences of his acts, is voidable at the option of such person. Whether the intoxication in any particular case is sufficient to deprive a person of the capacity to contract depends upon its own circumstances.2 If the intoxication was known to the other party, or was procured by such party, equity will the more readily relieve from the

3 Flack v. Gottschalk Co., S8 Md. 368; Brigham v. Fayerweather, 144 Mass. 48; Young v. Stevens, 48 N. H. 133; Scanlon v. Cobb, 85 Ill. 296; Ins. Co. v. Blankenship, 94 Ind. 535.

4 Evans v. Horan, 52 Md. 602. It was held in Odom v. Riddick, 104 N. C. 515, that the deed of a lunatic duly recorded could not be avoided as against bona fide purchasers.

5 Allen v. Berryhill, 27 Iowa, 534.

6 Stigers v. Brent, 50 Md. 214.

7 Berry v. Skinner, 30 Md. 567.

8 Flack v. Gottschalk Co., SS Md. 368.

9 McCormick v. Littler, 85 Ill. 62; Van Horn v. Hann, 39 N. J. L. 207. And it is so provided in the Uniform Sales Act.

1 Johns v. Frithcey, 39 Md. 259; Hewitt's Appeal, 55 Md. 514; Reinicker v. Smith, 4 H. & J. 422; Bush v. Breinig, 113 Pa. 310; Watson v. Doyle, 130 Ill. 415.

2 Conley v. Nailor, 118 U. S. 127.

3

deed or contract. Contracts made by a man when drunk may be ratified by him when sober, and he cannot afterwards avoid them, and such contracts are binding upon those who contract with him, whether they knew or did not know his condition.1

A transfer of shares of stock, procured from the owner while so intoxicated as to be incapable of transacting business, by fraud, with knowledge of his condition, and for a grossly inadequate consideration, will be set aside in equity; and if, without any fault of his, he is unable to restore the consideration, provision for its repayment may be made in the final decree.5

3 Griffith v. Fred. Co. Bank, 6 G. & J. 424; 2 Pomeroy Eq. Jur. § 249.

4 Zoest v. Williams, 42 Ind. 565; Matthews v. Baxter, L. R. S Ex. 132.

5 Thackrah v. Haas, 119 U. S. 499.

CHAPTER VI

MISTAKE

$ 65. The Consent May be Vitiated.

The parties to a contract may be competent, and may appear to have consented to the same thing, but the apparent consent of one or of both may have been given under such circumstances as make it no true expression of their will. These circumstances exist when there has been mistake, misrepresentation, fraud, duress or undue influence.

In the cases in which a party is allowed to show that his real will or purpose did not correspond with the declaration. made by him, the contract is either void or voidable. If his consent has been obtained by the fraud of the other party, he has indeed consented because under a mistake, but the rights of a defrauded party are greater than in a mere case of mistake, and therefore the unreality of the consent in this instance is treated exclusively from the point of view of fraud. A contract obtained by fraud, as well as one obtained by duress or undue influence, is voidable at the option of the party upon whom the fraud, etc., has been practiced. He may either repudiate it or affirm it as he may choose, the other party being bound. But when the apparent agreement has been caused by such a mistake as is deemed essential, since it is not produced by active fraud, and is in some cases common to both parties, the contract is void because not really consented to, and neither party can take advantage of it.

$66. Mistake in General. The kinds of mistake to be considered are those which prevent the formation of a valid contract, and not a mistake in the mere expression of that which has been agreed upon. If a written contract fails to express accurately the agreement actually made, on account of the mistake of the draftsman, it may be reformed in equity so as to correspond with the real will.1

1 Wood v. Patterson, 4 Md. Ch. 335, note; Keedy v. Nally, 63 Md. 311; Stiles v. Willis, 66 Md. 552; Boulden v. Wood, 96 Md. 332. This is one of the chief heads of equitable jurisdiction.

A mistake affecting the formation of a contract exists when there is a lack of conformity between our ideas and the reality of things. It may consist in believing that to be true that is false, or in believing to be false that which is true, or in supposing a thing to exist which does not exist, or in supposing a thing to be of a different nature from what it really is. A mistake is not quite the same thing as ignorance, in which case one does not positively believe that to be true which is false. Ignorance does not know, but mistake thinks that it does know when it does not.2 When one has entered into a contract on account of a mistake, it may be of such a character as to exclude the notion of any real agreement, or it may be such as to invalidate the consent. In the latter instance, consent has been given, but it is vitiated by the mistake.

There are many other instances in which mistake is a controlling factor in the determination of legal rights. One of the most important judicial facts is, for example, the good faith of one in certain transactions. Its basis, however, is error or ignorance. Mistake is also a ground for the recovery back of money paid on account of ignorance or error as to facts, as when a debt is supposed to exist but does not really exist.3

But where the formation of a contract is concerned there are only a few cases in which a man is permitted to allege that he said one thing and meant another, when a contract has been made with him upon the faith of what he did say; or in which either party is permitted to show that their mutual assent is vitiated by some common and fundamental

error.

Thus if a seller exhibits by mistake a wrong sample, a contract made upon the faith of it by the other party is valid. But if the other party knows that the mistake was

2 Compare the case of the uncut diamond with that of the barren cow mentioned in § 71, infra.

3 Baltimore City v. Lefferman, 4 Gill, 425; Dernburg, Pandekten, I, § 87.

4 Scott v. Littledale, 8 El. & B. $15.

made, or that the offer which he accepts was not the true expression of the offerer's purpose, the contract is void. The principal kinds of mistake affecting the formation of the contract are the following:

This is

$ 67. Mistake as to the Nature of the Transaction. often, but not always, caused by the misrepresentation of the other party, not amounting to fraud, or by the misrepresentation of a third party. Thus where a man signed a paper supposing it to be a contract of agency, when it was really a promissory note, it was held to be void.1 If an uneducated man signs, without reading it, a paper presented to him by a person in whom he has great confidence, supposing it to be of an entirely different tenor from what it really was, he is not bound.2

There may be in one sense a mistake as to the nature of the transaction when the parties misunderstand one another, as, for instance, when one party intends a gift and the other a loan. Thus, Ulpian says: "If I hand you money by way of making you a gift, and you accept it by way of a loan, then, as was said in Julianus, there is no gift made; but the question whether there is a loan is a point to consider. My own opinion is that there is no loan either, and on the whole I should say, the money does not become the property of the person who took it, as his view of the transaction when he took it was not the same as mine."3

But if the parties are agreed as to the transaction and are only mistaken as to its legal consequences, this makes no difference. When one makes a certain kind of contract, or does certain acts, the law attaches rights and liabilities to the transaction independently of the expressed intention of the parties.

5 Paget v. Marshall, 28 Ch. D. 255.

Sometimes knowledge by one

party of a mistake made by the other whose offer he accepts amounts

to fraud. May v. Platt [1900] 1 Ch. 616.

2 O'Brien v. Pentz, 48 Md. 562; Schafer v. Schafer, 84 Ill. 603.

3 Dig. 12, 1, 18 (Monro).