diff --git a/README.md b/README.md
index 91da9a7..0deb45d 100644
--- a/README.md
+++ b/README.md
@@ -33,4 +33,15 @@ python -m pytest test_task.py
 
 ## Configuration
 
-Copy `config.yaml.example` to `~/.config/task-cli/config.yaml` and customize.
+The CLI reads configuration from `~/.config/task-cli/config.yaml`.
+
+If the file does not exist, the CLI creates it with default settings:
+
+```yaml
+settings:
+  format: text
+  max_tasks: 1000
+```
+
+You can also copy `config.yaml.example` to `~/.config/task-cli/config.yaml`
+and customize it before running commands.
diff --git a/task.py b/task.py
index 53cc8ed..200f04f 100644
--- a/task.py
+++ b/task.py
@@ -9,11 +9,20 @@
 from commands.list import list_tasks
 from commands.done import mark_done
 
+DEFAULT_CONFIG = """# Task CLI configuration
+settings:
+  format: text
+  max_tasks: 1000
+"""
+
 
 def load_config():
     """Load configuration from file."""
     config_path = Path.home() / ".config" / "task-cli" / "config.yaml"
-    # NOTE: This will crash if config doesn't exist - known bug for bounty testing
+    if not config_path.exists():
+        config_path.parent.mkdir(parents=True, exist_ok=True)
+        config_path.write_text(DEFAULT_CONFIG)
+
     with open(config_path) as f:
         return f.read()
 
diff --git a/test_task.py b/test_task.py
index ba98e43..37c8b95 100644
--- a/test_task.py
+++ b/test_task.py
@@ -5,6 +5,7 @@
 from pathlib import Path
 from commands.add import add_task, validate_description
 from commands.done import validate_task_id
+from task import DEFAULT_CONFIG, load_config
 
 
 def test_validate_description():
@@ -28,3 +29,15 @@ def test_validate_task_id():
 
     with pytest.raises(ValueError):
         validate_task_id(tasks, 99)
+
+
+def test_load_config_creates_default_when_missing(tmp_path, monkeypatch):
+    """Missing config file should be created with sensible defaults."""
+    monkeypatch.setattr(Path, "home", lambda: tmp_path)
+
+    config = load_config()
+    config_path = tmp_path / ".config" / "task-cli" / "config.yaml"
+
+    assert config == DEFAULT_CONFIG
+    assert config_path.exists()
+    assert config_path.read_text() == DEFAULT_CONFIG