Section 11 of the Indian Contract Act, 1872 disqualifies a person with unsound mind to being competent in a contract.

Section 12 of the Indian Contract Act, 1872 states that a person has to be sound in mind for entering into a contract so as to they can assess the consequences of the contract.

There are three main concepts of unsoundness:

• Lunatics

A person who is mentally unsound due some mental strain or traumatic experience in past. He might suffer from intermittent intervals of sanity and insanity. Their contract is void in nature.

• Idiots

A person who has completely lost their mental power not being able to understand even day to day chores. It is a permanent loss and cannot be recovered.

• Person under influence of intoxication

A person under influence of intoxication barres from entering into a contract only during that period of time.

In Inder Singh v. Parameshwari Singh (AIR 1957 Pat 491),it was held by Honourable Justice Sinha that the effect of section 12 of Indian Contract Act, 1872 is such that a person entering into the contract must have rational sense of judgement as the terms and conditions are not in his favour or harmful to him. A man has to suffer from lunacy, he may seem normal in his appearance and might also behave in normal fashion but he is incapable of forming a judgement of his own, which safeguards his interests to disable him from entering into a contract. This section distinguishes lack of sense of judgement due to illiteracy or language barrier.

In Nilima Ghosh v. Harjeet Kaur (AIR 2011 Del 104) it was held that the most relevant thing for declaring an agreement void is whether the person in question was suffering from mental disability at the time o execution of the contract.

In Ashfaq Qureshi v. Aysha Qureshi (AIR 2010 chh 58), where a Hindu girl (Nivedita Yadav @ Aysha Qureshi) was married to a Muslim man, the girl filed a suit that she was under the influence of intoxication, was not conscious about the ongoing conversion and nikah ceremony. Also, that she has not lived with the man for a single day.She proved all the facts and the marriage was declared void on the ground that since she was intoxicated ,she was not in any position to make a decision using rational judgement in providing consent in the marriage.

Burden of Proof

It was held in Mohamed Yakub v. Abdul Quddus (AIR 1923 Pat 18717) that the burden of proving insanity is on the person who alleges it. It was laid down as under: “…the test of soundness of mind is that he is capable of understanding the business and of forming a rational judgement as to its effect upon his interest. There being a presumption in favour of sanity, the person who relies on the unsoundness of mind must prove it sufficiently to satisfy this test…mere weakness of mind is not sufficient..” as quoted in Indar Singh v. Parameshwardhari Singh, AIR 1957 Pat 491).

In the matrimonial case alleging schizophrenia, Ram Narain Gupta v. Rameshwari Gupta (AIR 1988 SC 2260), it was held that the burden of proof of the existence of the requisite degree of mental disorder is on the spouse basing the claim on that state of facts.

In Subrah-manya Sastry v. Lakshmi narasamma (AIR 1958 AP 22), it was held that “A lunatic is not a person who is continuously in a state of unsoundness of mind and once it has been established that a person is a lunatic, the burden of proof is on the part who alleges that a document he relies on as having been executed by the alleged lunatic was executed by him during a lucid interval”

In Amina Bibi v. Saiyad Yusuf, (AIR 1922 All 449) it was held that “Not being in a position to understand or to determine rationally whether it was likely to operate to his benefit by reason of his mental condition, the lease must be held to be void and unenforceable.”      

Limitation

According to Section 12 of the Indian Contract Act, 1872, the act of disposition or contract will be void from its very inception due to incompetency to the contract.

In Musammat Amina Bibi v. Saiyad Yusuf. 70 Ind Cas 968: ILR (1922) 44 All 748, it was held that no question of limitation arises in such a matter as it was void from the very inception.

It can be concluded by saying that any contract that is entered by a lunatic is void. It was held in the case of Mohree Bibi v. Dharmodas Ghosh.1903 30 Cal 539 by the Judicial Committee Section 65 of the Indian Contract Act provides that when an agreement is discovered to be void, any person who has received any advantage under such agreement is bound to restore it or to make compensation for it to the person from whom he received it and was asked to proceed on the basis of the agreement or contract, mentioned therein, having been between parties competent to enter therein to. If that to be so then Section 65 has no application because upon finding defendant was of unsound mind at the time of the agreement.

In the case of Thurstan v. Nottingham Permanent Benefit Building Society. 1902 1 Ch D 1 , it was held that Section 38 and 41 of the Specific Relief Act have no application because there is neither cancellation of any document nor rescission of a  contract. These statutory provisions are of no avail to the plaintiff. Equity also does not add merit to his case upon the finding that the defendant was of unsound mind as “a Court of equity cannot say that it is equitable to compel a person to pay any money in respect of his transaction which as against that person the legislature has declared to be void”.

The difference between English Law and Indian Law on the topic of Lunatic’s agreement is different. In Indian law, the onus of proof lies on the accusing party to prove the sanity or insanity of the alleged accused whereas in English Law an individual is presumed to be sane as a prerequisite of entering into a legally bound contract.

Reference

• https://www.srdlawnotes.com/2017/09/contracts-of-persons-of-unsound-mind.html
• https://indianlawlive.net/2022/01/13/sound-mind-and-unsoundness-of-mind-in-indian-civil-law/
• https://blog.ipleaders.in/unsoundness-of-mind-contract-india/
• https://llbmania.com/2021/11/14/contrast-between-indian-english-contract-law/
• https://llbmania.com/2021/11/14/contrast-between-indian-english-contract-law/

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