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IAI Actuarial Core Principles · Business Management · Sources of Indian law and valid contracts

Kavita, an actuarial consultant, signs an agreement with Zenith Insurance under which Zenith pays her a fee in return for her secretly arranging that a regulator's inspector overlooks certain solvency shortfalls. Zenith later refuses to pay. What is the effect of this agreement under Indian contract law?

The agreement is void because its object is unlawful: it aims to defeat solvency regulation and is against public policy. Consent and a promised fee do not make it enforceable, so Kavita cannot sue for payment.

  1. AValid, since both parties consented and consideration is a fee
  2. BVoidable at Zenith's option
  3. CVoid, because its object is unlawful, so Kavita cannot enforce paymentCorrect
  4. DValid, but enforceable only for half the fee
  5. Unenforceable only until the regulator is informed

Explanation

Consideration or object is unlawful if it is forbidden by law, defeats a law's purpose, or is fraudulent or opposed to public policy. Concealing solvency shortfalls from a regulator defeats regulatory law. The agreement is void, so neither party can enforce it; the existence of consent and a fee does not cure this.

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