CMA Intermediate · Business Laws and Ethics · Indian Contracts Act, 1872
Anil pays Rs 5,000 to Bhaskar under an agreement which is later discovered to be void. Under the Act, what is the position of Bhaskar, who received the money?
Bhaskar must restore the Rs 5,000 or compensate Anil for it. The Act says that when an agreement is discovered to be void, anyone who received an advantage under it is bound to restore it or make compensation.
- AHe may keep it as the agreement was voluntarily performed
- BHe must restore it or make compensation for it to AnilCorrect
- CHe must pay only half to Anil
- DHe must restore it only if Anil proves fraud
Explanation
When an agreement is discovered to be void, any person who has received an advantage under it must restore it or compensate the person from whom it was received. No fraud need be proved.
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