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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 his scooter, worth Rs. 60,000, to Waseem for Rs. 6,000. Vikram's consent was freely given. What is the effect of the inadequate price on the agreement?

The agreement is not void merely because the price is inadequate. Under Explanation 2 to Section 25, if the promisor's consent is freely given, inadequate consideration does not invalidate the agreement. The Court may consider inadequacy only as evidence on whether consent was freely given.

  1. AThe agreement is not void merely for inadequacy of considerationCorrect
  2. BThe agreement is void because the consideration is inadequate
  3. CThe agreement is voidable at Vikram's option because of the low price
  4. DThe agreement is valid only if the Court fixes a fair price

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. Illustration (f) of the section gives a horse worth Rs. 1,000 sold for Rs. 10 as a contract. Inadequacy may only be weighed by the Court when deciding whether consent was really free.

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