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CA Foundation · Business Laws · The Indian Contract Act, 1872

Harpreet agrees to sell his scooter worth Rs 60,000 to Imtiaz for Rs 25,000. Harpreet gave consent freely and was in sound mind; Imtiaz did not misrepresent anything. Harpreet later argues the agreement is void because the price is much less than the value. What is the legal position?

The agreement is valid. Consideration need not be adequate to the value of what is promised, provided it has some value and consent was free. Inadequacy alone does not make the contract void, though a court may consider it in judging whether consent was free.

  1. AVoid, because consideration must be adequate to the value of the thing
  2. BVoidable, because inadequate consideration shows undue influence
  3. CValid, because consideration need not be adequate if given with free consent, though the court may consider inadequacy when judging free consentCorrect
  4. DVoid, because the price must be at least half the market value

Explanation

Consideration must be real and of some value, but it need not be adequate. Since Harpreet consented freely, the contract stands. Inadequacy may only be weighed by a court when deciding whether consent was free. No rule requires a minimum percentage of market value.

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