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

Sunita agrees to sell her scooter, worth Rs. 60,000, to Nikhil for Rs. 15,000. She gave her consent freely. Later she wants to avoid the deal, saying the price is grossly inadequate. What is the legal position?

The agreement is a valid contract. Under Explanation 2 to Section 25, an agreement made with free consent is not void merely because the consideration is inadequate. Inadequacy is relevant only to whether consent was free, and Sunita gave hers freely, so she cannot avoid it.

  1. AThe agreement is void because consideration must be equal to the value of the goods
  2. BThe agreement is a valid contract, since inadequate consideration alone does not make it void when consent was freeCorrect
  3. CThe agreement is voidable at Nikhil's option
  4. DThe agreement is valid only if the price is at least half the value

Explanation

Explanation 2 to Section 25 says an agreement to which the promisor's consent is freely given is not void merely because the consideration is inadequate. A court may consider inadequacy only when deciding whether consent was really free. Sunita's consent was free, so the contract stands. Distractor A wrongly demands adequacy of consideration.

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