Mental Incompetency and Contracts

Law of Contracts


“A person is said to be of unsound mind for the purpose of making a contract, if at the time when he makes it, he is incapable of understanding it, and of forming a rational judgement as to its effect upon his interests.

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.”


(1) A patient, in a lunatic asylum, who is at intervals, of sound mind, may contract during those intervals.

(2) 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 judgement as to its effect on his interest, cannot contract whilst such delirium or drunkenness lasts.

From the above examples given, it is obvious that Soundness of mind of a person depends on two facts:

(i) his capacity to understand the terms of the contract, and

(ii) his ability to form a rational judgement as to its effect upon his interests.

Contracts with Lunatics

A lunatic is a person who is mentally deranged due to some, mental strain or other personal experience. However, he has some intervals of sound mind. He is not liable for contracts entered into while he is of unsound mind. However, as regards contracts entered into during lucid intervals, he is bound. His position in this regard is identical with minor,

i.e., in general the contract is void but the same exceptions as discussed above (under minor’s contracts) are relevant.

See also  Four Stages of Commission of a Crime

Contracts with Idiots

An idiot is a person who is permanently of unsound mind. He does not have lucid intervals. He is incapable of entering into a contract and, therefore, a contract with an idiot is void. However, like a minor, his properties, if any, shall be liable for recoveries on account of necessaries of life supplied. Also he can be a beneficiary.

Contracts with Drunken or Intoxicated Persons

A person who is drunk, intoxicated or delirious from fever so as to be incapable of understanding the nature and effect of an agreement or to form a rational judgment as to its effect on his interests cannot enter into valid contracts whilst such drunkenness or delirium lasts.

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