authority to bind him by future purchases from A without express prior notice to A. It is also held that where a husband fails to supply his wife with food, clothing, and other necessaries suitable to her station in life, she has authority to pledge her husband's credit for such necessaries.37 These powers also exist when living apart from her husband by his fault and during his absence from home, but not when a wife lives apart from her husband by her own fault. MENTAL DEFECTS Another ground of incapacity arises in the case of a person non compos mentis. § 50. Contracts of Insane Persons. The general rule as to contracts of insane persons, idiots, or others incapable through mental disease of understanding what they are doing, is, that their contracts are voidable and subject to subsequent repudiation or ratification upon being restored to reason.38 As in the case of infants, obligations imposed by law and liabilities for necessaries for the insane person39 and his family are valid and binding. On the other hand, an appointment of an agent by an insane person or the executing of a deed are generally held void. By statute it is enacted in many States that all contracts of a person non compos mentis, except for necessaries, are absolutely void when made after an adjudication of lunacy by a competent court. Where the contract of the insane person is fair and reasonable, and made with one who did not know of the other person's insanity, and who has executed his portion of the contract, it is generally held that it cannot be avoided by the insane person. "The modern cases show that when that state of mind was unknown to the other contracting party, and no advantage was taken of the lunatic, the defense cannot prevail, especially where the contract is not merely executory, but executed in whole or 37 Morrison v. Holt, 42 N. H. 478, 80 Am. Dec. 120. in part, and the parties cannot be restored to their original position." 40 This rule is generally applied when necessary to prevent a wrong being done. § 51. Contracts of Drunkards. The contract of one who at the time of entering into it was so intoxicated as to be incapable of understanding, is voidable.41 If made when under guardianship because of having been judicially found to be an habitual drunkard, the contract is generally declared void, even though the drunkard was sober when the contract was made. The liability of drunkards for necessaries is in general the same as in the case of infants and insane persons. CORPORATE LIMITATIONS § 52. Contracts of Corporations. A corporation is an artificial being created by law and given certain powers under its charter. Corporations are of two general kinds -public corporations, such as municipalities, created for the discharge of public duties, and private corporations, created for private advantage or profit. Corporations exercising some public functions, but for private gain, such as railroad, gas, or canal companies, are called quasi-public corporations. A corporation possesses only those powers which are expressly or impliedly conferred by its charter. Contracts made outside of these powers are called ultra vires and are generally void because of lack of capacity in the corporation to perform them. But where the contract has been performed by one of the parties thereto, the other is estopped to avoid it because of its being ultra vires. A corporation since it is an artificial being, can only act through its agents, and is only bound when the agent is acting within his powers.42 40 Patterson, J., in Molton v. Camroux, 4 Exch. 17, 19. 41 Carpenter v. Rodgers, 61 Mich. 384, 28 N. W. 156, 1 Am. St. Rep. 595. 42 See article on Private Corporations. CHAPTER V REALITY OF CONSENT In addition to the elements of offer and acceptance, form, consideration, and competent parties, previously considered, it is also necessary that there be consent of both parties to enter into contractual relations. If their apparent consent was given under such circumstances that the agreement is not a real expression of the intention of the one or both of the parties, the court will avoid the contract at the suit of the innocent party. Apparent consent to an agreement may not be real for one or more of five principal reasons: (1) The parties may not have had the same thing in mind, or one or both of them may have formed untrue conclusions as to the subject-matter of the agreement. Here the consent is not real because of Mistake. (2) One of the parties may have formed untrue conclusions as to the subject matter of their agreement because of statements innocently made or facts innocently withheld by the other party. Here the consent is not real because of Misrepresentation. (3) One of the parties may have formed untrue conclusions because of a misrepresentation by the other party with knowledge of its untruth, or by intentional withholding of facts which there was a duty to disclose. Here the consent is not real because of Fraud. (4) One of the parties may have entered into the agreement because of actual or threatened personal violence. Here the consent is not real because of Duress. (5) One of the parties may have entered into the contract under circumstances where he was morally incapable of resisting the will of the other party. Here the consent is not real because of Undue Influence. 53 MISTAKE § 53. Nature Of. It must be borne in mind that we are dealing here with mistakes of intention and not mistakes of expression. The latter are treated under the subject of interpretation of contracts. Furthermore, we are not considering cases arising from false statements or violence or oppression. These are considered under the topics of Misrepresentation, Fraud, Duress, and Undue Influence. Cases where the performance does not fulfill the expectations of one of the parties, are considered elsewhere under the subject of performance of the contract. It is almost a universal rule that a man is bound by an agreement to which he has expressed clear assent, uninfluenced by fraud, violence, or oppression. The law judges an agreement from the terms which the parties have used in expressing their intentions, and each party has a legal right to believe that the other party intended what he said or did by way of offer or acceptance. Thus, it is a general rule that one who signs a written instrument will not be permitted to say that he did not read it or intend to agree to its terms, and where one accepts a written offer he cannot say he did not know its provisions. If he cannot read, it is his duty to have some reliable person read it to him and explain it.1 This rule is frequently applied to bills of lading, insurance policies, and express receipts. § 54. As to Usefulness. Mistake by a party as to the usefulness of an article for the purpose for which he intends to use it, or as to his need for it, will not enable him to avoid the contract.2 Where a man who was desirous of being a freeholder in a certain county, contracted to buy a house which he believed to be in that county, he was held bound by the contract, even though the house proved to be located in another county. § 55. As to Value or Quality. A mutual mistake as to the value or quality of the article contracted for, will not enable the mistaken party to avoid the contract. Thus, where 1 Chicago R. Co. v. Belliwith, 83 Fed. 437. 2 Casserleigh v. Wood, 119 Fed. 308. a party sold a small rough stone to a jeweler for one dollar, it was held that the sale was binding even though the rough stone proved to be a rough diamond worth $1,000,3 since both parties were ignorant of the nature of the stone and its value. The same rule was applied in a case where the subject of the sale was a promissory note, the makers of which were insolvent, but of which fact both parties were ignorant. The result is also the same where a mistake is made by the offeror, of which the offeree is ignorant. Thus, where a contractor makes a mistake in figuring the cost of a building, or a station agent by mistake quotes too low a freight rate to a shipper, an acceptance by an offeree who is ignorant of the mistake creates a binding contract. The rule would be different, however, if the offeree knew or had good reason to suppose that the price or rate named was a mistake.5 § 56. Mistake as Ground for Avoiding Contracts. Contracts may be avoided on the ground of mistake only where a mistake as to the nature of a written instrument was induced by misrepresentation of some third person; or where one party mistakes the identity of the other party contracted with; or where there is a mutual mistake as to the identity of the subject-matter; or where there is a mutual mistake as to the existence of the subject-matter. As to Nature of Transaction. As previously stated, one who has signed a written instrument will not be allowed to avoid liability by saying he did not read it, but this is not true where the one signing was not negligent in failing to read it and his signature was procured by misrepresentation as to its nature. In a leading case it was held that a very old man who had been induced to indorse a bill of exchange upon the representation of the acceptor that it was a guaranty, was not liable to a bona fide purchaser of 3 Wood v. Boynton, 64 Wis. 265, 25 N. W. 42, 54 Am. Rep. 610. 4 Hecht v. Batcheller, 147 Mass. 335, 17 N. E. 651, 9 Am. St. Rep. 708. 5 Harran v. Foley, 62 Wis. 584, 22 N. W. 837; Shelton v. Ellis, 70 Ga. 297. • Foster v. Mackinnon, (1869) L. R. 4 A. P. 704, 711, 38 L. J. C. P. 310. |