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CS Executive · Jurisprudence, Interpretation and General Laws · Contract Law

Vikram agrees to sell his car, worth Rs. 4,00,000, to Neha for Rs. 40,000. Vikram later claims the price was inadequate and that he is not bound. Which statement is correct under Section 25?

The agreement is a contract if Vikram's consent was freely given. Section 25, Explanation 2, provides that inadequate consideration alone does not make an agreement void, though the Court may treat the inadequacy as a factor in judging whether consent was truly free.

  1. AThe agreement is void because consideration must be adequate
  2. BThe agreement is a contract if Vikram's consent was freely given, even though consideration is inadequateCorrect
  3. CThe agreement is void only if the difference exceeds fifty per cent of value
  4. DThe agreement is valid regardless of whether Vikram's consent was free, as inadequacy is irrelevant

Explanation

Explanation 2 to Section 25 says an agreement with freely given consent is not void merely because consideration is inadequate. However, the Court may take inadequacy into account when deciding whether consent was freely given. The last option is wrong because inadequacy remains relevant as evidence on free consent.

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