IAI Actuarial Core Principles · Business Management · Sources of Indian law and valid contracts
Kavita, an actuary, agrees to sell her consultancy's client list to Deshmukh Re for Rs 12 lakh. Deshmukh Re's chief, in negotiation, falsely and knowingly says its solvency ratio exceeds 200% so that Kavita will accept deferred payment. Kavita relies on the statement and later discovers the ratio was 120%, though she could have checked the public filing with ordinary diligence. Which statement is correct?
The contract is voidable at Kavita's option. Consent obtained by a knowingly false statement of fact is caused by fraud, and the fraudster cannot escape by arguing she could have checked the public filing. It is neither void for mistake nor illegal.
- AThe contract is void because the statement is a mistake of fact by both parties
- BThe contract is voidable at Kavita's option for fraud, and her failure to check the public filing does not take away that right where the statement was a knowing falsehoodCorrect
- CThe contract is valid and binding because Kavita had the means of discovering the truth
- DThe contract is illegal because fraud makes the object unlawful
- The contract is unenforceable only because it lacks writing
Explanation
Consent obtained by fraud makes a contract voidable at the option of the deceived party. Under the Act, the plea that she could have discovered the truth with ordinary diligence does not protect a party who made a fraudulent statement of fact. The contract is not void, illegal or unenforceable for lack of writing.
Did you get it right without looking?
One question tells you little. A timed set on Sources of Indian law and valid contracts shows your real accuracy, how long you take and where you lose marks.
More Sources of Indian law and valid contracts questions
- Dr Nair, a person of unsound mind who has lucid intervals, enters into a contract to sell his flat to Gopal Realty during a period in which …
- Meera, an actuarial analyst at a Mumbai insurer, is reading about the hierarchy of Indian legal sources. She asks which source sits at the t…
- Priya, an actuary, is asked by her employer to explain which courts have primary authority over a criminal matter involving alleged fraud by…
- Kavita, an actuarial consultant, signs an agreement with Zenith Insurance under which Zenith pays her a fee in return for her secretly arran…
- Meera Textiles in Surat agrees in writing to sell a consignment of cloth to Rohan Traders for Rs 4,00,000. Rohan's only promise is to pay th…
- Mehta Actuarial Services emails a prospective client, Sunil, saying: 'We are willing to value your pension fund for Rs 2,00,000; reply if yo…