Understanding Legal Capacity: Can Someone of Unsound Mind Enter into a Valid Contract?

In the vast landscape of contractual agreements, the fundamental principle remains that any person is generally competent to bind themselves to a contract, as long as the terms are legal and not void due to public policy reasons.

However, the key factor in determining this competence lies in the capacity to contract – the legal ability of an individual or juridical person to enter into a contractual relationship.

Legal recognition of an individual's capacity to contract is contingent upon their understanding and appreciation of the consequences of their actions. In essence, the law requires a person to be mentally sound enough to comprehend the terms of a contract fully. But what about individuals who may be of unsound mind?

The question arises: Can a person who is mentally unsound enter into a valid contract? The answer, intriguingly, is not a straightforward yes or no.

Where a person is considered to be of unsoundmind but, in most cases, experiences moments of lucidity, during which he/she regains a semblance of sanity, that is sufficient to regain the legal capacity to contract, make a will, and to act on his/her own behalf, such a person, without medical proof to prove otherwise is said to be competent to enter into a valid contract.

The challenge lies in determining whether they possessed the legal capacity to contract during those moments.

There must be proof that there was an offer made, acceptance of the offer, and valuable consideration passed between the parties for the contract to be deemed valid.

In conclusion, while the general rule asserts that any person can bind themselves to a contract, the specifics become intricate when dealing with individuals of unsound mind. The law recognizes the potential for these individuals to enter into valid contracts during lucid intervals, emphasizing the need for careful scrutiny and evidence to establish legal capacity in such cases. Understanding the nuances of mental health and legal competence is crucial in navigating the delicate intersection of mental well-being and contractual obligations.

Dr. Diana Kazira v Rwanchwende and Another (Civil Appeal 81 of 2020) [2023] UGCA 298 (2 November 2023)

Probitas Lawyers are here to guide and advise you in your contractual agreements, ensuring an extra layer of required due diligence to prevent you from unnforeseen complications.