How does Unsoundness of Mind occur?

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.”...

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....

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....

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:...

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?...