Summary of Imperial Loan Co. V Stone case

Imperial Loan Co. V Stone [1892] 1 Q.B. 599

Principle: A failure to prove that the said person is of unsound mind will mean that the contract is valid. The contract therefore cannot be made void. Where a defendant in an action of contract sets up the defense that he was insane when the contract was made, he must, in order to succeed in this defense, show that at the time of the contract his insanity was known to the plaintiff. Insofar as that suggests such contract is voidable rather than void, it is open to doubt.

Judgment: The decision of Imperial Loan Co. v. Stone shows that if a person of unsound mind wishes to make a contract void, he needs to prove both conditions in Section 12(1) first. Failure to prove both conditions in the section will make the contract binding as if he was of sound mind at the time it was made.

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