Government of India
Bare Act As Per The Government of India

Section 12 of Indian Contract Act

12. What is a sound mind for the purposes of contracting.— 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 judgment 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.

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

MCQs Based on Section 12 of the Indian Contract Act, 1872

1. According to Section 12 of the Indian Contract Act, a person is said to be of sound mind if he is capable of:

A. Earning money and living independently
B. Understanding the contract and forming rational judgment
C. Reading and writing in English
D. Knowing the Indian Penal Code

Correct Answer: B
Explanation: Section 12 says a person is of sound mind if he can understand the contract and form a rational judgment about how it affects his interests.

2. Which of the following persons can legally enter into a contract under Section 12?

A. A person who is drunk at the time of making the contract
B. A person suffering from high fever and is delirious
C. A person admitted in a mental hospital but is in a sound state of mind at the time of contract
D. A person who is mentally unstable at all times

Correct Answer: C
Explanation: A person who is usually of unsound mind but is of sound mind at the time of contract can enter into a valid contract.

3. A person who is usually of sound mind but becomes temporarily insane due to fever or intoxication:

A. Can always enter into a valid contract
B. Cannot enter into a contract during the period of insanity
C. Is permanently disqualified from making contracts
D. Can enter into contracts only with medical permission

Correct Answer: B
Explanation: If the person is of unsound mind at the time of the contract (even if temporarily), the contract is not valid.

4. Which of the following is an example of unsound mind under Section 12?

A. A person with mild depression
B. A person who cannot speak
C. A person who is so drunk that he cannot understand the contract
D. A person who is deaf

Correct Answer: C
Explanation: If a person is too drunk to understand the contract or its impact, he is considered of unsound mind at that time.

5. According to Section 12, when is the mental condition of the person relevant for determining soundness of mind in a contract?

A. At the time of signing the contract
B. At the time of performing the contract
C. At the time of making the contract
D. At any time during the contract process

Correct Answer: C
Explanation: The law specifically states that the person must be of sound mind at the time of making the contract, not before or after.

6. Which of the following best defines “sound mind” under Indian Contract Law?

A. One who is always mentally fit
B. One who understands the contract and its consequences at the time of making it
C. One who is not deaf or dumb
D. One who has completed 18 years of age

Correct Answer: B
Explanation: The legal test is based on the person’s ability to understand and judge the contract at the time it is made.

7. In the illustration given in Section 12, a sane man becomes delirious due to fever. Can he make a valid contract during that time?

A. Yes, if he has a witness
B. No, because he is of unsound mind at that time
C. Yes, if he signs it in front of a notary
D. Yes, if the other party agrees

Correct Answer: B
Explanation: A person who is delirious cannot make a valid contract because he is unable to understand or judge the contract’s impact.

8. Which of the following is NOT true about Section 12?

A. It defines who is of sound mind
B. It applies only to minors
C. It applies to people of changing mental conditions
D. It includes illustrations to explain the concept

Correct Answer: B
Explanation: Section 12 deals with mental capacity, not with age. Minors are covered under Section 11 of the Indian Contract Act.

9. Under Section 12, what happens if a person usually of unsound mind enters into a contract during a lucid interval (period of mental clarity)?

A. Contract is void
B. Contract is voidable
C. Contract is valid
D. Contract requires court approval

Correct Answer: C
Explanation: If the person is of sound mind at the time of contract (even if usually unsound), the contract is valid.

10. What is the primary test for determining soundness of mind under Section 12?

A. Medical history
B. Ability to express opinion
C. Ability to understand the contract and its effect on his interests
D. Presence of a lawyer during the contract

Correct Answer: C
Explanation: The law focuses on the person’s mental capacity to understand and make a rational judgment about the contract.

Section 12: Condition-Based Practice Questions

Q 1: Person Usually of Unsound Mind

Condition: Ravi is mentally ill and lives in a mental health institution. However, on certain days, he becomes completely normal and mentally stable.

Question: Can Ravi enter into a valid contract during those days when he is mentally stable?

Answer: Yes. Under Section 12, a person who is usually of unsound mind but occasionally of sound mind can enter into a valid contract during the periods when he is of sound mind. So, if Ravi is mentally stable at the time of making the contract, it is valid.

Q 2: Temporary Unsoundness

Condition: Meena is generally mentally stable but suffers from high fever and becomes delirious. During that time, she signs a contract to sell her land.

Question: Is the contract valid?

Answer: No. A person who is usually of sound mind but occasionally of unsound mind cannot enter into a contract during periods of unsoundness. Since Meena was delirious and unable to form rational judgment at the time of signing, the contract is invalid.

Q 3: Drunkenness at Time of Contract

Condition: Arun was heavily drunk when he signed a contract for purchasing a car.

Question: Is the contract valid under Section 12?

Answer: No. If a person is so drunk that he cannot understand the nature of the contract or cannot form a rational judgment, the contract is void. Since Arun was intoxicated at the time of contract, it is not valid.

Q 4: Capability at Time of Agreement

Condition: Shalini had a history of mental illness but had recovered fully. She made a contract after recovery.

Question: Is her past mental illness a reason to invalidate the contract?

Answer: No. What matters under Section 12 is the person’s mental state at the time of making the contract. If Shalini was of sound mind at that time, her past illness is irrelevant. The contract is valid.

Section 12: Problem-Based Practice Questions

Q 1: Contract During Drunkenness

Problem: Rahul, after drinking heavily at a party, enters into an agreement to sell his expensive watch to a stranger at a very low price. The next day, Rahul realizes he was too drunk to understand the deal and files a case to declare the contract void.

Question: Will Rahul succeed in court under Section 12?

Answer: Yes, Rahul is likely to succeed. As per Section 12, if a person is so drunk that he cannot understand the nature of the contract or judge its effect on his interests, the contract is not valid. Since Rahul was intoxicated and unaware of what he was agreeing to, the contract can be declared void.

Q 2: Lucid Interval Contract

Problem: Pooja suffers from schizophrenia but experiences clear mental states (lucid intervals) from time to time. During one such period, she entered into a contract to lease her property.

Question: Is this contract legally enforceable?

Answer: Yes. According to Section 12, a person who is usually of unsound mind can make a contract when she is of sound mind. If it can be proven that Pooja was mentally fit at the time of making the agreement, the contract is valid and enforceable.

Q 3: Contract by Delirious Person

Problem: During a severe viral fever, Aamir became delirious and confused. In that condition, he signed a loan agreement. Later, he refused to repay the loan, saying he was not in his senses.

Question: Can Aamir be held liable under the contract?

Answer: No. As per Section 12, a person must be able to understand the contract and form a rational judgment. If Aamir was delirious and unable to understand the agreement at the time of signing, the contract is not valid, and he cannot be held liable.

Q 4: Challenge to Contract Based on Past Mental History

Problem: Manoj entered into a contract to sell his land. The buyer later found out that Manoj had been treated for mental illness five years ago and now wants to cancel the contract.

Question: Can the contract be cancelled on this ground?

Answer: No. Section 12 focuses on the mental condition at the time of making the contract, not past medical history. If Manoj was of sound mind when he made the contract, it is valid and cannot be cancelled merely due to his past condition.

Final Thoughts

Introduction

Section 12 of the Indian Contract Act, 1872, explains what is meant by a “sound mind” for making a valid contract. It says that a person must be mentally fit at the time of entering into the contract. He should be able to understand what he is agreeing to and should be able to judge how that agreement will affect his own interests. If a person is not in a sound mental state at the time of the agreement, the contract becomes invalid. This section also covers cases where a person is sometimes of sound mind and sometimes not.

Sound Mind for Contract

This means, a person must be mentally well at the time of making the contract, not before or after. He should:

  1. Understand the contract, and
  2. Judge its effect on his life or interests in a logical way.

Who is a Person of Sound Mind?

A person is said to be of sound mind if:

Example: Ravi wants to sell his bike to Suresh. Suresh is mentally stable and understands the price, the condition of the bike, and his need for it. He is of sound mind. The contract is valid.

Who is Not of Sound Mind?

A person is not of sound mind if:

This may happen due to:

Persons with Changing Mental Conditions

Section 12 also talks about people who are:

Let’s see both:

1.Usually Unsound, Occasionally Sound: Such a person can make a contract only when he is of sound mind.

Illustration (a): A patient in a mental hospital who sometimes becomes normal can make a contract during those normal periods.

2.Usually Sound, Occasionally Unsound: Such a person cannot make a contract during unsound periods.

Illustration (b): A healthy man who becomes very drunk or has high fever and cannot think properly cannot make a contract during that time.

Why is Section 12 Important?

Conclusion

Section 12 of the Indian Contract Act ensures that only those people who are mentally fit and capable can enter into legal agreements. A person’s mental condition at the exact time of contract is what matters the most. This section helps protect individuals and ensures fairness in contracts.