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CMA Foundation · Fundamentals of Business Laws and Business Communication · Capacity of Parties, Free Consent

Meera Traders agreed to buy a godown from Suresh after Suresh intentionally lied that it was free of any mortgage. The godown was in fact mortgaged. Which of the following is the correct position under Section 19 of the Indian Contract Act, 1872?

The contract is voidable at Meera's option because her consent was caused by fraud. She may rescind it, or insist that it be performed and that the mortgage debt be redeemed so she is placed as if the representation were true.

  1. AThe contract is void from the beginning and nobody can enforce it
  2. BThe contract is voidable at Meera's option, and she may instead insist on performance with the mortgage debt redeemedCorrect
  3. CThe contract is voidable only at Suresh's option
  4. DThe contract is valid and Meera has no remedy

Explanation

Suresh's false statement made to deceive is fraud, so consent was not free. Under Section 19 the contract is voidable at the option of the deceived party, Meera, who may alternatively insist on performance and be put in the position as if the statement were true, as in the illustration on a mortgaged estate. It is not void, nor voidable at the wrongdoer's option.

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