An insane person who knows not what he does cannot make a bargain, nor transact any business.

Explanation

A person who lacks the mental capacity to understand the nature of a transaction cannot be bound by it — contracts and bargains require a meeting of minds, and an insane person has no mind to give.

Where this applies

• A man suffering from severe dementia signs a contract to sell his home for a fraction of its value — the sale is void because he lacked the mental capacity to understand the transaction.
• A woman in a psychotic episode agrees to give away her life savings to a stranger — no binding gift was made because she didn't comprehend what she was doing.
• A person with a severe intellectual disability signs a car loan with predatory terms — the lender cannot enforce the agreement because the borrower could not understand the bargain.