LUNATIC. When a banker learns that a customer has become insane he should not pay any further cheques upon his account, but the banker must make quite certain that his information is correct. Cheques paid before knowledge of a customer's insanity would appear to be in order.
A mandate is terminated by the insanity of the person who gave it.
Cheques upon a lunatic's account should be honoured only when signed by the " Com mittee " or legal authority appointed by the Commissioners in Lunacy to deal with the lunatic's estate. Exceptions are, however, sometimes made in special cases, against a satisfactory indemnity.
Lunacy may be set up as a defence in an action on a bill as between immediate parties if the plaintiff knew of the insanity when he took the bill, but it is of no avail against a holder in due course. It is not a defence if the bill was given during a lucid interval, or, if given the previous period, was confirmed in the same period.
Where a person has been found insane by inquisition he is unable legally to deal with his property even during a sane interval.
If a guarantor becomes insane, and the banker has notice of the same, the position of the parties is similar to that when a guarantor dies, namely, the account of the debtor should be stopped.
In an action on a bill by or against an insane person, the Statute of Limitations begins to run from the date of the insane person's recovery and not from the date on which the bill was due to be paid.
On application by a partner the Court may decree a dissolution of the partnership when a partner is found lunatic by inquisi tion, or is shown to the satisfaction of the Court to be of permanently unsound mind (Section 35, Partnership Act, 1890).