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CMA Foundation · Fundamentals of Business Laws and Business Communication · Consideration and Legality of Object

A sells and delivers goods to B on credit. Later, C, without any consideration, promises A in an agreement to pay for the goods if B defaults. Applying the official text, what is the legal position of C's promise?

C's promise is void. The goods were delivered before C's promise and not at C's desire, and C received nothing in return. Illustration (c) to Section 127 states that such a later promise without consideration is void.

  1. AIt is a valid guarantee because C benefits B
  2. BIt is voidable at C's option
  3. CIt is void, as there is no consideration for C's promiseCorrect
  4. DIt is valid because the goods were delivered by A

Explanation

Illustration (c) to Section 127 states that where A has already sold and delivered goods to B and C afterwards, without consideration, agrees to pay in default of B, the agreement is void. The delivery was made before and not at C's desire, so it cannot support C's promise. Option four is wrong for this reason.

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