The concept of mental incapacity plays a pivotal role in determining the validity of contracts under the Indian Contract Act, 1872 (ICA). Section 12 of the ICA specifies that a person is capable of contracting only if they can understand the terms and implications of the agreement. Mental incapacity, including temporary conditions like intoxication, can vitiate this capacity under certain conditions.

UNSOUNDNESS DUE TO ALCOHOL

CHACKO V. MAHADEVAN –

(Inadequate consideration though not invalid can be a ground to see whether consent was freely given- Sc.25)

• P sold one cent of land to D for Rs.18,000 and another for Rs.1000 each.

• P filed a suit to set aside the transaction alleging that he was given alcohol by D and it was under its influence that the document was signed.
• Medical certificate showing that P was not of sound mind (MENTAL INCAPACITY) at the time of signing.
• Res ipsa loquitor- One cent for 18,000 and then one for Rs.1000.
• Sale deed quashed.

SELF-INDUCED ALCOHOL CONSUMPTION

S BASAVARAJ V. V.N ADILAKSHMAMMA –

• D borrowed money from P and refused to reply on the ground that he was of unsound mind while entering into the contract.
• The medical certificate was generic in nature and failed to address the mental capacity at the time of making the contract.
• The court would be extremely cautious when a person brings himself in a position of alcohol addiction and then claims to be of unsound mind.
• Even those suffering from long term addiction would have lucid breaks where they can enter into contracts.
• AVOIDANCE OF CONTRACT IS NOT ONLY EXCEPTIONAL BUT GRANTED ONLY IN THE RAREST OF RARE CASES.
• Lack of conclusive proof; Appeal fails.

COMMON LAW POSITION ON MENTAL INCAPACITY

THE IMPERIAL LOAN COMPANY LTD. V. STONE –

• D signed a promissory note and it was later claimed that he was of unsound mind while executing it. D claimed that P knew of it when entering into the contract.
• Insanity will lead to a contract becoming void when
• The person was of unsound mind when entering into the contract.
• This was known to the plaintiff while entering into the contract (Not applicable in India).

MENTAL INCAPACITY

CHARANJITH SINGH V. CHATTRANJA.N PAL –

• Plaintiff was alleged to be of unsound mind and filed a suit(through his brother) claiming possession of property which had been transferred via a sale deed.
• D claimed that the deed was signed in the presence of P’s father and was valid.
• Conclusive medical certificate of incapacity produced. Once the party establishes mental incapacity, then onus shifts to the other to prove that he was mentally sound while entering the contract.
• The presence of father does not validate a contract otherwise invalid of mental incapacity.

NILIMA GHOSE CASE –

1. Appellant could not prove that she was of unsound mind at the time of entertain into the contract.
2. U/s 12 of ICA, unsoundness of mind would vitiate the capacity of a party to enter into a contract only if the party was of unsound mind, (i.e., incapable of forming a rational judgment as to the effects of the contract upon himself/herself) AT THE TIME OF THE MAKING OF THE CONTRACT – proving general unsoundness is insufficient.

Conclusion

Courts examine claims of mental incapacity with strict scrutiny. While contracts can be voided for incapacity, the burden of proof lies heavily on the claimant to establish incapacity at the time of agreement. This legal stance safeguards fairness in commercial dealings while preventing misuse of such defenses.

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Read – Hussainara Khatoon & Ors. v. Home Secretary, State of Bihar