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CMA Foundation · Fundamentals of Business Laws and Business Communication · Capacity of Parties, Free Consent

Ramesh is usually of unsound mind but has lucid intervals. During one such interval he understands fully and sells his scooter to Kavita for a fair price. Which statement is correct?

The contract is valid. A person who is usually of unsound mind but occasionally of sound mind may make a contract during a period of sound mind. Ramesh understood the transaction at the time, so his capacity existed when he contracted.

  1. AThe contract is void because he is usually of unsound mind
  2. BThe contract is valid because he was of sound mind when he made itCorrect
  3. CThe contract is voidable at Kavita's option only
  4. DThe contract is valid only if his guardian ratifies it afterwards

Explanation

A person usually of unsound mind but occasionally of sound mind may contract when he is of sound mind. Ramesh was in a lucid interval and understood the terms, so the contract is valid. Habitual condition does not matter if the capacity exists at the time of contracting.

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