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

Under Section 23 of the Indian Contract Act, 1872, which of the following is a ground on which the consideration or object of an agreement is treated as unlawful?

Consideration or object is unlawful under Section 23 if, were it permitted, it would defeat the provisions of any law. Inadequacy, non-monetary form or being given by a stranger are not listed grounds of unlawfulness in that section.

  1. AIt is inadequate when compared with the market value of the promise
  2. BIt is of such a nature that, if permitted, it would defeat the provisions of any lawCorrect
  3. CIt is not in the form of money
  4. DIt is given by a person who is not a party to the agreement

Explanation

Section 23 lists the grounds of unlawfulness: forbidden by law, defeating the provisions of any law, fraudulent, injury to person or property of another, and immoral or opposed to public policy. Inadequacy of consideration, a non-monetary form, or a third-party giver is not listed there as making it unlawful.

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