BUSINESS ADMINISTRATION
BUSINESS LAW
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an exchange of money for goods or services
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a promise not to sue
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an exchange of money for property
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a charitable pledge
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Detailed explanation-1: -If a person undertakes a liability on the promise of another to contribute to charity, then the contract is valid. In this case, the no consideration no contract rule does not apply. Example, Peter is the trustee of his town’s charity organization.
Detailed explanation-2: -A contract without consideration is void because it is not legally enforceable. “Consideration” means that each party must provide something of value to the other party as designated by the contract terms.
Detailed explanation-3: -This is mentioned in Section 173 of the Act. For example: ‘A’ pledged his house with a bank for a loan of INR 2, 50, 000. The interest on the same was INR 10, 000. The bank can retain the pledged house until ‘A’ repays the entire amount along with the interest i.e. INR 2, 60, 000.
Detailed explanation-4: -10. Under what situations is consideration not binding? Consideration is not binding if the promise does not create a duty or impose an obligation such as with illusory promises. Illusory promises include termination clauses in contracts and output and requirements contracts.
Detailed explanation-5: -Types: Consideration could be a promise, performance, forbearance, or property with legal value, but the economic benefit is not required.