Persons of unsound mind and persons disqualified by law
Contract I · Unit II · Topic 9 of 24 · 6 min read
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Cases checked to exist. Read the judgment before quoting a holding.
Every case cited here has been checked to exist — the citation resolves and names the right parties. The propositions attributed to each case have not been verified line by line against the judgment. Case names link through to the full judgment: read it before quoting a holding in an examination answer, and never carry a proposition from notes into court on trust.
1. Section 12: the test
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 judgment as to its effect upon his interests. Two limbs, both required:
- Understanding the terms and nature of the transaction; and
- Judgment: being able to weigh what the transaction means for him.
Section 12 then states the two rules that follow:
- A person who is usually of unsound mind but occasionally of sound mind may make a contract when he is of sound mind.
- A person who is usually of sound mind but occasionally of unsound mind may not make a contract when he is of unsound mind.
The statutory illustrations: (a) a patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals; (b) a sane 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 interests, cannot contract while the delirium or drunkenness lasts.
2. Burden of proof and lucid intervals
The law presumes sanity. A party who alleges unsoundness must prove it. Once he proves that the person was usually of unsound mind, the burden shifts to the party relying on the contract to show that it was made in a lucid interval. The reverse also holds: if a person was usually of sound mind, whoever says he was not, at the moment of contracting, must prove it.
Unsoundness is a question of fact. Old age, physical weakness or illiteracy do not by themselves make a person of unsound mind, though they may be relevant to undue influence under section 16.
3. Drunkenness and other temporary incapacity
Intoxication counts only if it reaches the level described in illustration (b): the person could not understand the terms or judge their effect. Being merely under the influence is not enough. The same applies to delirium, hypnosis, or the effect of drugs. The question is always the state of mind at the time of contracting.
4. Effect: void, not voidable
The Act does not say so expressly, but sections 10 and 11 require a competent party, and the reasoning of Mohori Bibee v. Dharmodas Ghose (PC, 1903) applies equally to unsoundness. An agreement by a person of unsound mind is void. English law treats it as voidable where the other party knew of the incapacity (Imperial Loan Co. v. Stone, 1892); Indian law does not adopt that distinction.
5. Necessaries supplied to a person of unsound mind: section 68
Section 68 applies to any “person incapable of entering into a contract”, so it covers persons of unsound mind as much as minors. Where such a person, or anyone whom he is legally bound to support, is supplied with necessaries suited to his condition in life, the supplier is entitled to be reimbursed from the property of the incapable person. The statutory illustrations are directly in point:
- (a) A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B's property.
- (b) A supplies the wife and children of B, a lunatic, with necessaries suitable to their condition in life. A is entitled to be reimbursed from B's property.
The liability is of the property only; there is no personal decree.
6. Problem
Ramesh, a shopkeeper, supplies food grains, clothes and school books to the wife and children of Suresh, who is a lunatic. Suresh owns agricultural land. Can Ramesh recover the price?
Issue. Whether a supplier of necessaries to the dependants of a person of unsound mind can recover their price, given that no contract with that person is possible.
Law. Under sections 11 and 12, Suresh is not competent to contract, and any agreement with him is void. Section 68, however, gives a supplier of necessaries to an incapable person, or to anyone whom he is legally bound to support, a right to be reimbursed from the incapable person's property. Illustration (b) to section 68 is on these facts.
Application. Suresh is legally bound to maintain his wife and minor children (under his personal law and section 144 of the Bharatiya Nagarik Suraksha Sanhita, 2023). Food grains, clothes and school books are ordinary necessaries; Ramesh must show that the quantities and quality were suited to the family's condition in life and that they were not already supplied from elsewhere. Suresh has property, so there is a fund to satisfy the claim.
Conclusion. Ramesh can recover a reasonable price for the necessaries from Suresh's property under section 68. He cannot obtain a personal decree against Suresh, and nothing beyond necessaries (for example, luxury goods) is recoverable.
7. Persons disqualified by law
The third limb of section 11 excludes persons “disqualified from contracting by any law to which they are subject”. The usual list:
- Alien enemies. A national of a country at war with India, residing there, cannot contract with Indians during the war without government licence. Contracts made before the war are suspended or dissolved depending on whether they help the enemy. Under section 83 of the Code of Civil Procedure, 1908, an alien enemy residing in India may sue only with the permission of the Central Government.
- Foreign sovereigns and ambassadors. They can contract and enforce their contracts, but cannot be sued in Indian courts without the consent of the Central Government (section 86, CPC), unless they submit to the jurisdiction.
- Convicts. In English law a convict undergoing sentence could not contract (Forfeiture Act, 1870, since repealed). Indian law has no general statutory bar of this kind; restrictions arise only from prison rules and the practical fact of custody.
- Insolvents. On adjudication, the insolvent's property vests in the Official Receiver or Assignee. He cannot contract in respect of that property until discharged.
- Companies beyond their objects. A company can contract only within the objects in its memorandum. A contract outside them is ultra vires and void, and cannot be ratified even by all the shareholders: Ashbury Railway Carriage and Iron Co. v. Riche (1875, House of Lords), followed in India.
How this is examined
The lunatic's family problem was set in January 2026 and is answered as above, with illustration (b) to section 68 quoted. As a short note: “Who is a person of sound mind?” or “Persons disqualified by law”. In an essay on capacity, this material is usually combined with minors: section 11, then minors, then section 12, then disqualified persons, then section 68 for both.
Now try the real questions: Contract I past question papers.