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IAI Actuarial Core Principles · Business Management · Sources of Indian law and valid contracts

Priya agrees to sell her flat to Dev for Rs 40 lakh. Priya freely consents, but the price is much lower than the market value of Rs 55 lakh. Dev did not mislead her. Which statement is correct under the Indian Contract Act?

The agreement is not void merely because the price is below market value. Indian law requires consideration to exist and be lawful, not adequate, and since Priya consented freely without misleading by Dev, the contract remains valid.

  1. AThe agreement is void because consideration is inadequate
  2. BThe agreement is voidable because the price is less than market value
  3. CThe agreement is not void merely for inadequacy, because courts do not weigh its adequacy if consent is freeCorrect
  4. DThe agreement is valid only if Dev pays the market value within a year
  5. The agreement is valid only if a court first values the flat

Explanation

Explanation 2 to Section 25 states that an agreement is not void merely because the consideration is inadequate. Inadequacy may be relevant when the court judges whether consent was freely given, but here consent was free and no fraud occurred. The contract therefore stands.

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