All India Bar Examination (AIBE) 4-IV Previous Year Question Papers with Answers

The correct option is C: Unenforceable.

Inadequacy of consideration does not make the contract void or voidable, but it can make it unenforceable. This means that the court may not enforce the contract if it finds that the consideration is so disproportionate or unfair that it indicates fraud, duress, undue influence, or mistake by one of the parties. In such cases, the court may either set aside the contract or modify it to make it more equitable. However, if the parties have freely and voluntarily agreed to the contract, then the court will not interfere with their bargain, even if the consideration is inadequate. The court will not measure the adequacy of consideration in terms of its economic value, but rather in terms of its legal sufficiency. As long as there is some consideration, no matter how small or insignificant, the contract will be valid and enforceable, unless there is evidence of some other defect or flaw in the contract formation.

Some of the web search results that support this answer are:

Consideration is not adequate if it involves an illusory promise or an item that is worthless, i.e., has no legal value, such as fake money; however, consideration does not have to be clearly equal in value to what is received in exchange; Inadequate consideration does not automatically invalidate an entire contract.

Consideration, in essence, ensures the enforcement of promises made by one party to another, in a manner that is acceptable by the law. In a written contract, even though inadequate consideration is not void, it can make a contract unenforceable.

In cases when the court decides that the consideration is not adequate then the contract does not become void but rather becomes unenforceable and raises questions on the bargaining power of the parties.