In the Indian Contract Act of 1872, a person of unsound mind refers to an individual who lacks the mental capacity to understand the consequences of their actions or to make rational decisions. Section 12 of the Act outlines that agreements made by persons of unsound mind are voidable at the option of the party who is of sound mind. However, for an agreement to be voidable, it must be proven that at the time of making the contract, the person of unsound mind was incapable of understanding its nature and consequences. This provision protects individuals with mental incapacities from being exploited in contractual agreements. A contract made by a person of an unsound mind is considered to be a void contract, but it is to be noted that such a person cannot avail of any benefits out of the contract. The property of a person of unsound mind will always be liable.
Geeky Takeaways:
- As per Section 11 of the Indian Contract Act, for a valid contract, each party to a contract must have a sound mind.
- A person is said to have a sound mind when a person is in a state to make rational decisions.
- Both the parties to a contract must understand the contract well and make decisions.
- If a person with an unsound mind enters into a contract, the effect of the contract shall be void.
What is a Sound Mind?
As per Section 12 of the Indian Contract Act, 1872 “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 forming a rational judgment as to its effects upon his interests.”
An agreement entered by a person of unsound mind is void as against him but he can derive benefit under the same. Also, the property of an insane person will always be liable for necessities supplied to him or to someone to whom he is legally bound to support with necessities.
How does Unsoundness of Mind occur?
1. Lunatics: A Lunatic is a person who is mentally unstable due to some mental strain or other past personal experience. He suffers from intervals of sanity and insanity. He can enter into a contract during the period when he is of sound mind and such contracts will be valid. In case he enters a contract when he is of unsound mind, then such a contract will be void.
2. Idiots: An idiot is a person who has completely lost his mental power and mental capacity to understand things. He does not possess any understanding of basic ordinary matters of general day-to-day livelihood. Idiocy is a permanent incapacity; whereas, lunacy is a periodical insanity with lucid intervals. An agreement of an idiot has the same treatment as that of a minor and it is void.
3. Drunken or Intoxicated Persons: A drunken person suffers from temporary incapacity to contract due to the consumption of alcohol or drugs. For example, at some point in time when the person is so drunk that he is incapable of forming any rational judgment he loses the capacity to understand the transaction. The position of a drunken person is similar to that of a lunatic and is void when he is not in his state of mind.
4. Burden of Proof: In any case, the prime responsibility of proving unsoundness of mind is on the person who alleges the unsoundness, for the presumption that a person is of sound mind. The burden is heavy and is not discharged by mere proof that at the time when the contract was executed, the person did not have any sign of insanity.
5. Hypnotism: Hypnotism produces temporary incapacity, till the time a person is under the impact of artificially induced sleep. Hence, a person would be considered to be of unsound mind when he is in a state of hypnotism.
Important Case Laws
1. In Inder Singh V. Parmeshwardhari Singh (AIR 1957 Pat 491), a property whose actual worth was ₹25,000 was agreed to be sold by a person for ₹7,000 only. His mother proved that the person who sold the property was a born idiot and was incapable of understanding the effects of the transaction. The court held the sale of the property to be void. The court stated, “According to Sec. 12 of the Indian Contract Act, the person entering into a contract must be a person who understands what he is doing and is able to form a rational judgment as to whether what he is about to do is to his interest or not”. The crucial point, therefore, is to find out whether he is entering into the contract after he has made an understanding of the transaction and regarding his interest. It does not necessarily mean that a man must be suffering from lunacy to disable him from entering into a contract. A person may behave in a normal fashion, but at the same time, he may be incapable of forming a judgment of his own. In the present case, the person was incapable of exercising his judgment and hence, the transaction is void.
2. In another famous case of Halsbury’s Laws of England, the court stated that Consent is an act of reason accompanied by deliberation and it is upon the ground that there is a want of rationale consent that the contract of unsound mind is generally deemed to be invalid. In other words, there cannot be a contract of the person of unsound mind.
Effect of Agreements made by persons of Unsound Mind
The general principle of agreement made by a person who is of unsound mind is that such a contract shall be void. As in RD Somasundaram Pillai, by next friend S. Bhuaneswar v. S. Janaki Ammal, 1955-1 MLJ 310 it was observed that a contract by a person of unsound mind is void similar to a minor’s contract. Both are void-ab-initio and there is no need for any suit or proceeding where such persons seek relief for the cancellation of the document. They purely ignore the existence of such a document as the contract is void and has no effect. There can be two cases when a person of unsound mind enters into a contract:
Case I: When a person is usually of unsound mind but occasionally of sound mind. In such a case, the person can enter a contract at times when he is of sound mind. So, a patient in a lunatic asylum who at certain intervals becomes of sound mind may enter into a contract during such period.
Case II: When a person is usually of sound mind, but occasionally of unsound mind. In such a case, the person cannot enter a contract when is of unsound mind. If in case, he made any contract at the time of being unsound, such contract will have no effect and will be considered void. Thus, a sane man who is in a drunk state cannot enter into a contract in the state of drunkenness.
Conclusion
Unsoundness of mind is a circumstance that renders a contract to be treated as void. To constitute a valid and binding contract, both the parties contracting must have the capacity to arrive at a reasonable judgment and shall be in a position to understand the consequences of the transactions they are entering into. To be competent to enter a contract, a person must be of sound mind. A person of unsound mind is suffering from temporary or permanent mental incapacity and is unable to form a rational judgment. However, the term insanity itself has no particular definition but it is a term that is used to express varying degrees of mental disorder. Unsoundness of mind is equated with mental disorder and also includes the state of lunatic, drunkard, and idiot. All the contracts entered by a person of unsound mind have the same effect as of the minor, they are considered as void and there is no effect of the contract. Indian Contract Act has specified that in case there is a temporary mental illness then such a person can enter a contract at times when is sane, however, if the person is in a permanent mental incapacity then such contract shall be void.
Frequently Asked Questions (FAQs)
1. Who is a person of sound mind?
Answer:
As per Section 12 of the Indian Contract Act, 1872, where a person is capable of understanding the terms of a contract and can make a rational judgement and pick what is best for his interests, only then the person will be considered a person of sound mind for the entering into a contract.
2. What is the effect of a contract entered by a person of unsound mind?
Answer:
An agreement entered by a person of unsound mind is void against him but he can derive benefit under the same.
3. Can the property of a person of unsound mind be liable?
Answer:
Yes, the property of a person of unsound mind can be liable for necessities supplied to him or to someone to whom he is legally bound to support with necessities.
4. On whom does the burden of proof lie in the case of a person of unsound mind?
Answer:
In any case, the primary burden of proving unsoundness of mind is on the person who alleges the unsoundness, for the presumption that a person is of sound mind.
5. Can a person of unsound mind enter a contract?
Answer:
A person of unsound mind can’t enter a contract but if the person has temporary unsoundness of mind, then he might enter the contract at times when he is sane and can understand the terms of the contract. When a person is usually of unsound mind but occasionally of sound mind; in such a case, the person can enter a contract at times when he is of sound mind.
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