Site navigation

Credit is scarce. In an ordinary lending transaction, a bank agrees to lend to a borrower only at an…

Illustration (d) to section 16 treats this as an ordinary transaction. A high rate during a tight money market does not by itself establish domination of the borrower’s will…

Choose your answer

Credit is scarce. In an ordinary lending transaction, a bank agrees to lend to a borrower only at an unusually high interest rate. The borrower accepts. On these facts alone, what follows under the Indian Contract Act, 1872?

Select one answer
Answer and explanation

Correct answer A

Illustration (d) to section 16 treats this as an ordinary transaction. A high rate during a tight money market does not by itself establish domination of the borrower’s will or its use to gain an unfair advantage.

Option feedback

Option A

The illustration treats the stipulated transaction as ordinary business without undue influence.

Option B

An unusually high rate in the stipulated market does not by itself establish undue influence.

Option C

Even where undue influence is proved, section 19A provides a power to set the contract aside.

Option D

The price of credit alone does not establish a fiduciary relationship.

Practice for these exams

Related question papers

Related exam syllabi

Related questions in this topic