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

Ravi, a landowner's agent, secretly agrees with Mehul, for a payment, to get Mehul a lease of land belonging to Ravi's principal, without telling the principal. What is the legal status of the agreement between Ravi and Mehul?

The agreement is void. Under Section 23 an agreement whose object implies fraud is unlawful, and an agent secretly obtaining the principal's land lease for another for money commits fraud by concealment on the principal. Payment of money does not make it valid.

  1. AValid, because Mehul has paid money as consideration
  2. BVoidable at the option of Mehul
  3. CVoid, because it implies a fraud by concealment on the principalCorrect
  4. DValid, but only if the lease is eventually registered

Explanation

This follows the illustration to Section 23 about an agent who obtains a lease for a third party without the principal's knowledge. The agreement implies a fraud by concealment on the principal, so its object is unlawful and the agreement is void. Payment of money does not cure unlawfulness.

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