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

Vikram agrees to sell a machine worth Rs. 1,00,000 to Neha for Rs. 60,000. Vikram's consent was freely given. How does the Indian Contract Act, 1872 treat the agreement?

The agreement is not void merely because the price is inadequate. Under Explanation 2 to Section 25, where the promisor's consent is freely given, inadequate consideration does not invalidate the agreement. A court may weigh inadequacy only when deciding whether consent was truly free.

  1. AVoid, because the consideration is inadequate
  2. BVoidable at Neha's option
  3. CNot void merely because the consideration is inadequate, since consent was freeCorrect
  4. DValid only if a court first certifies the price as fair

Explanation

Explanation 2 to Section 25 says an agreement whose consent is freely given is not void merely because the consideration is inadequate. Inadequacy may only be considered by the court when deciding whether consent was free. Here consent was free, so the Section 10 conditions are met.

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