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CMA Foundation · Fundamentals of Business Laws and Business Communication · Void and Voidable Agreements, No Consideration No Contract

Meera agrees to sell her scooter, worth Rs 40,000, to Arjun for Rs 5,000. Meera gave her consent freely and no one pressured her. Which statement is correct?

The agreement is not void merely because the consideration is inadequate. Under Explanation 2 to Section 25, where the promisor's consent is freely given, inadequate consideration does not invalidate the agreement. Meera consented freely, so the Rs 5,000 price does not defeat the contract.

  1. AThe agreement is void because the consideration is grossly inadequate
  2. BThe agreement is not void merely because the consideration is inadequateCorrect
  3. CThe agreement is voidable at Arjun's option because of the low price
  4. DThe agreement is valid only if the Court first fixes a fair price

Explanation

Explanation 2 to Section 25 says an agreement to which the promisor's consent is freely given is not void merely because the consideration is inadequate. Since Meera consented freely, the low price does not make it void. It is not voidable at Arjun's option, as he is not the party whose consent is in question.

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