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CMA Foundation · Fundamentals of Business Laws and Business Communication · Void and Voidable Agreements, No Consideration No Contract

Sunil agrees to superintend a lawful textile business for Anil and also an unlawful smuggling operation, for a single annual salary of Rs. 6,00,000. Which statement is correct?

The agreement is void. Under Section 24, when part of a single consideration or object is unlawful, the whole agreement is void. A single salary covers both the lawful textile work and the smuggling, so the lawful part cannot be separated and enforced.

  1. AThe agreement is void, since the object and the consideration are partly unlawfulCorrect
  2. BThe agreement is valid for the textile work only, and the salary is apportioned
  3. CThe agreement is voidable at Anil's option
  4. DThe agreement is valid because the lawful part is the larger part

Explanation

Under Section 24, if any part of a single consideration for one or more objects is unlawful, the agreement is void. Here one salary is paid for both lawful and unlawful work, so the consideration and the object are partly unlawful and the whole agreement is void. Apportionment, as in the second option, is not allowed under Section 24. The agreement is not voidable, since no consent is impaired.

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