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

Rohan asks his friend Meera to lend Rs 20,000 to Sameer, and Meera does so. In Rohan's promise to repay if Sameer defaults, what is the effect of Meera's act under Section 2(d) read with Section 127?

Meera's loan to Sameer, made at Rohan's request, is sufficient consideration for Rohan's guarantee. Section 127 says anything done for the benefit of the principal debtor can support the surety's promise, so the benefit need not reach Rohan himself.

  1. AIt cannot be consideration because Rohan received no benefit himself
  2. BIt cannot be consideration because Meera's loan went to a third person
  3. CIt is consideration only if Rohan and Sameer are related
  4. DIt can be sufficient consideration for Rohan's guarantee, as it was done for the benefit of the principal debtorCorrect

Explanation

Section 127 states that anything done or promised for the benefit of the principal debtor may be sufficient consideration to the surety. Meera's loan to Sameer was done at Rohan's desire. Benefit need not flow to the promisor himself, so options A and B are wrong.

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