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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. 60,000, to Karan for Rs. 8,000. Meera gave her consent freely. Which statement is correct under the Indian Contract Act, 1872?

The agreement is not void merely because the price is inadequate. If Meera's consent was freely given, inadequacy of consideration does not affect validity. The Court may consider the inadequacy only when deciding whether her consent was really free. Consideration must exist and be lawful, but it need not be adequate.

  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 Karan's option because of the inadequate 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 was freely given is not void merely because the consideration is inadequate. Since Meera consented freely, the low price does not invalidate the agreement. The option calling it void is wrong because adequacy of consideration is not required, only its existence and lawfulness.

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