Sound Mind for the Purpose of Contracting.

Section.12:- 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.

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.

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 the contract, or form a rational judgement as to its effect on his interests,
cannot contract whilst such delirium or drunkenness lasts.

CASE

Indersingh v. Parmeshwardhari Singh AIR 1957 Pat 491.

A property worth about Rs 25,000 was agreed to be sold by a person for Rs. 7000 only His
mother proved that he was a congenital idiot, incapable of understanding the transaction and
that he mostly wandered about. Holding the sale to be void, Justice Sinha explained the effect
of Sec.12 in the following passage.

“ According to this section, therefore, the person entering into the contract must be a person
who understands what he is doing and is able to0 form a rational judgement as to whether
what he is about to do is to his interest or not.”

“The crucial point, therefore, is to find out whether he is entering into the contract after he has
understood it and has decided to enter into that contract after forming a rational judgement in
regard to his interest…..It does not mean that a man must be suffering from lunacy to disable
him from entering into a contract.”

“A person may to all appearances behave in a normal fashion, but, at the same time, he may be
incapable of forming a judgement of his own, as to whether the act he is about to do is to his
interest or not. In the present case (he) was incapable of exercising his own judgement.”
 CASE

Chacko v. Mahadevan AIR 2007 SC 2967.

Illustration (b) appended to Section 12 shows that a drunken man is in the same category as a
person of unsound mind. A sale deed of property was executed at the time when the transferor
was suffering from alchoholic psychosis which was proved by medical certificate. A valuable
land was sold for a paltry amount. The sale deed was ordered by the Supreme Court to be set
aside. The court said that unsoundness of mind is a finding of fact. There could be no
interference in second appeal.

CASE

Jyotirindra Bhattacharjee v. Sona Bala Bora AIR 1994 Gau 99.

The person in question filed cases against family members, remained away from house for long
periods, transferred family properties to the extent of making the family homeless, the court
said that all this was sufficient to indicate that the vendor was not normal and was not mentally
sound at the time of the sale. The Purchaser adduced no evidence that the vendor was of sound
mind.

CASE

Kimtu v. Lachhi Devi, 1999 AIHC 2533 (HP).

The Court disallowed the selling the property of the insane husband by wife. The Court
maintained that, selling the property of an insane by wife whose power of attorney was not
valid, the purchaser did not take care to verify facts, he resold it, the property was recovered
back without having to pay anything for improvements, etc.

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