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

Meera agrees to sell her old scooter, worth about Rs 40,000, to Karan for Rs 5,000. Both are adults, act freely and Meera is not cheated. Which statement is correct about the consideration?

The agreement is not void merely because the consideration is inadequate. The Act requires consideration to be lawful, not equal in value to the promise. If the parties are competent, consent is free and nothing is unlawful, a low price alone does not invalidate the contract.

  1. AThe agreement is void because Rs 5,000 is grossly inadequate
  2. BThe agreement is voidable at Karan's option because the price is low
  3. CThe agreement is not void merely because the consideration is inadequateCorrect
  4. DThe agreement is valid only if a court first decides that the price is fair

Explanation

Under the Contract Act, the law requires that consideration be lawful, not that it be adequate. Section 10 requires free consent, competent parties, lawful consideration and lawful object. Since Meera consented freely and nothing is unlawful, the low price alone does not defeat the contract. A court does not weigh whether the price is fair.

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