As stated earlier, as per Section 11 of the Contract Act, for a valid contract, it is necessary that each party to it must have a ‘sound mind’.

Meaning of Sound Mind? Section 12 of the Contract Act defines the term ‘sound mind’ as follows: “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 effects upon his interests.”

According to this Section, therefore, the person entering into the contract must be a person who understands what he is doing and is able to form a rational judgement as to whether what he is about to do is in his interest or not. The Section further states that:

(i) “A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.” Thus a patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals.


(ii) “A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.” Thus, a same man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interest, cannot contract whilst such delirium or drunkenness lasts.

In Halsbury’s Laws of England, it is stated : “The general theory of the law in regard to acts done, contracts of unsound mind are generally deemed to be invalid; or in other words, (subject to exceptions), there cannot be a contract by a person of unsound mind.”

Unsoundness of mind may arise from: (a) Idiocy – It is God given and permanent, with no intervals of saneness. The mental powers of an idiot are completely absent because of lack of development of the brain; (b) Lunacy or Insanity –

It is a disease of the brain. A lunatic loses the use of his reason due to some mental strain or disease. Of course he may have lucid intervals of sanity, (c) Drunkenness – It produces temporary incapacity, till the drunkard is under the effect of intoxication, provided it is so excessive as to suspend the reason for a time and create impotence of mind; (d) Hypnotism – it also produces temporary incapacity, till the person is under the impact of artificially induced sleep; (e) Mental decay on account of old age, etc.


In cases where the contract is sought to be avoided on any of the above grounds, the burden of proof lies on the party who sets up such a disability, but if unsoundness of mind is once established, the burden of providing a lucid interval is on him, who sets it up (Mohanlal vs. Vinayak).

Effects of agreements made by persons of unsound mind :

An agreement entered into by a person of unsound mind is treated on the same footing as that of minor’s and therefore an agreement by a person of unsound mind is absolutely void and inoperative as against him but he can derive benefit under it (Jugal Kishore vs Cheddu). The property of a person of unsound mind is, however, always liable for necessaries supplied to him or to any one whom he is legally bound to support, under Section 68 of the Act.