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

Under the Indian Contract Act, 1872, which statement about consideration in relation to an agency is correct?

No consideration is necessary to create an agency. Section 185 of the Indian Contract Act says so expressly, so a principal can validly appoint an agent without any payment or promise in return, and the appointment is not void for lack of consideration.

  1. AConsideration is necessary to create an agency, as for any contract
  2. BConsideration is necessary only if the agent is a company
  3. CNo consideration is necessary to create an agencyCorrect
  4. DConsideration is necessary only if the agency continues beyond one year

Explanation

Section 185 states that no consideration is necessary to create an agency. Hence a principal may appoint an agent without paying or promising anything. The other options invent conditions on company status or duration that the section does not contain.

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