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Fundamental Principles of Law of Contract and Allied Laws
Previous Year Question Paper with Solution
LLM · Group 2 Business Law
2022 Examination
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LLM Group 2 Business Law Fundamental Principles of Law of Contract and Allied Laws 2022 Question Paper with Solutions
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First published on munotes.in on 12 August 2026.
This edition revised 6 September 2026.
Published by munotes.in, Mumbai.
Model answers written and edited by the munotes.in editorial desk.
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The University does not publish an official answer key for this paper. The answers in this volume are model answers, written to show how a full-mark answer is built. They are a study aid, not an authority on what an examiner marked.
The question paper reproduced here is the paper as set by the University of Mumbai at the 2022 examination.
The law in these answers is stated as at August 2026, and five changes since these papers were set alter the answers. The Mediation Act, 2023 would substitute sections 61 to 81 of the Arbitration and Conciliation Act, 1996, but its section 61, which carries that Sixth Schedule, was never commenced, so conciliation is still governed by the 1996 Act. The 2019 scheme for appointing arbitrators through graded arbitral institutions was never brought into force, though Part IA creating the Arbitration Council of India was commenced on 12 October 2023. Gayatri Balasamy, 30 April 2025, gave courts a limited power to modify an award. Central Organisation for Railway Electrification, 8 November 2024, made unilateral appointment clauses impermissible. And the Specific Relief (Amendment) Act, 2018 made specific performance enforceable as of right rather than in the court's discretion.
Contents
The questions below are the paper as the University of Mumbai set it at the 2022 examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2022 examination, reproduced as the University of Mumbai set them, in the order it set them. Nothing has been reworded, added or left out. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 100 · 34 questions answered
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
SECTION I
Part A short questions, examination of 02/06/2022, each carrying 3 marks
attempt any ten of fifteen · 30 Marks
1.What are the effects of inadequacy of consideration under law of contract?[3]
Answer
For full marks, cover: Explanation 2 to section 25, the illustration, and the one situation in which inadequacy does matter.
Explanation 2 to section 25 of the Indian Contract Act, 1872 gives the whole answer: an agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate, but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.
The rule therefore has two limbs. Inadequacy by itself has no effect on validity. The law requires that something be given, not that a fair price be given, because the parties are the judges of value and a court that priced bargains would be rewriting them.
Illustration (f) to section 25 is the Act's own example: A agrees to sell a horse worth a thousand rupees for ten rupees, and A's consent to the agreement was freely given; the agreement is a contract notwithstanding the inadequacy of the consideration.
The second limb is where inadequacy does work. It is evidence on the separate question of free consent under section 14. A grossly inadequate consideration may support an inference of coercion under section 15 or undue influence under section 16, and where the transaction appears unconscionable and one party was in a position to dominate the will of the other, section 16(3) places the burden of proving that the contract was not induced by undue influence on the dominant party. Illustration (g) to section 25 puts the two limbs together: A agrees to sell a horse worth a thousand rupees for ten rupees, and A denies that his consent was freely given; the inadequacy of the consideration is a fact which the Court should take into account in considering whether or not A's consent was freely given.
Conclusion. Inadequacy of consideration does not by itself affect the validity of an agreement, because section 25 requires consideration and not equivalence. Its only effect is evidential: it is a circumstance the Court weighs in deciding whether consent was free, and where the transaction is unconscionable and the parties unequal it can shift the burden of proof under section 16(3).
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