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“Consideration must always be at the rate of market price of the proposal.” The statement is

The statement is false. Explanation 2 to section 25 of the Indian Contract Act, 1872 says an agreement to which consent is freely given "is not void merely because the…

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“Consideration must always be at the rate of market price of the proposal.” The statement is

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The statement is false. Explanation 2 to section 25 of the Indian Contract Act, 1872 says an agreement to which consent is freely given "is not void merely because the consideration is inadequate". Consideration need only have some value in the eyes of the law; it need not match the market price.

Inadequacy may only be taken into account by the court in deciding whether the promisor's consent was freely given. There is no special rule requiring market-price consideration for sales of goods or Government contracts.

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