1) Introduction : 

       Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is sound mind and is not disqualified from contracting by any law to which he is subject.
      According to Section 11 of the Indian Contract Act, 1872 a person of unsound mind is not competent to contract.

2) Sound Mind - Definition :

         Section 12 of the Indian Contract Act, 1872 defines the term Sound mind as "A person is said to be of sound mind for the propose 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 interest.

           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.

Examples :

         (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 whilst such delirium or drunkenness lasts.

3) Following are the persons of unsound mind :

(i) Idiots

(ii) Lunatics

(iii) Drunken or Intoxicated persons

 Idiots : An Idiot is a person with especially a profound intellectual disability. He does exhibit understanding of even ordinary matters.

Lunatics : A lunatic is a person who is clinically insane,  mentally deranged due to some mental strain or other personal experience.  In India a lunatic's contract is void.

Drunken or Intoxicated persons : A drunken person is under the influence of alcohol. A drunken person suffers from temporary incapacity to contract. 

See also  

1) Types of Agreement (The Indian Contract Act, 1872)

2) Difference  between Offer and Invitation to Offer

3)  Difference between General offer and Specific offer

4) Contract of Indemnity

5) Contingent Contracts


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