The case of Canadian Imperial Bank of Commerce v. Milhomens examined the effect of one party's insanity on a contract. What did the Court find?
A) For a contract to be voidable because of insanity, one party must be insane and the other party must have known (or ought to have known) of the insanity.
B) Contracts are not enforceable by either party if one party can establish a mental defect.
C) If a insane person enters into a contract, that contract is automatically void.
D) If a person has the mental faculties to sign a contract, that person cannot be insane.
E) The relevant test for insanity is simply whether one party believed the other to be insane, at the moment the offer was made.

Question

Quizplus · Accepted Answer

The Court found that for a contract to be voidable because of insanity, one party must be insane and the other party must have known (or ought to have known) of the insanity. In other words, the presence of insanity alone is not enough to make a contract voidable, there must also be a lack of knowledge or awareness on the part of the other party.

The Case of Canadian Imperial Bank of Commerce V