Certain legal principles and specific factual situations are provided in each of the following questions. Apply the principles to the given facts and select the most appropriate answer.
LEGAL PRINCIPLE : A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgement as to its effect upon his interests.
FACTUAL SITUATION : Mr. Xiu who is actually of sound state of mind, but occasionally of unsound state of mind, enters into a contract with Mr. Yan when he was of unsound state of mind. Mr. Yan having come to know about this fact afterwards wants to file a suit against Mr. Xiu.
DECISION :