According to Section 11 of the Indian Contract Act 1872, Persons of unsound mind are not competent to Contract.
Section 12 of the Indian Contract Act 1872, "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 judgment as to its effect upon his interest.
Contracts of persons of unsound Mind
A lunatic is a person who is mentally deranged due to some mental strain or other personal experience. He suffers from intermittent intervals of sanity and insanity. He can enter into a contract during the period when he is of sound mind. In India a Lunatic's Contract is void.
An idiot is a person who has completely lost his mental power. He does not exhibit an understanding of even ordinary matters. Idiocy is permanent whereas lunacy denotes periodical insanity with lucid intervals. An agreement of an idiot, like that of a minor and it is void.
3) Drunken or intoxicated persons:
A drunken person who suffer from temporary in capacity to contract. for example: at the time when he is so drunk that he is incapable of forming a rational judgment. The position of a drunken person is similar to that of a lunatic.
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.
When a unsound mind person is capable to enter into a contract ?