No Consideration No Contracts : Explain with exceptions
General Rule: According to Section 10, consideration is one of the essential elements of a contract. According to Section 25, an agreement made without consideration is void. For example, P promises to pay Rs. 5000 to his girlfriend Y. This promise cannot be enforced by Y because she is not giving anything to P for this promise.
Donation Given in Temple cannot say a consideration.
So, without consideration contract cannot become valid contract
Exceptions to the General Rule NO CONSIDERATION, NO CONTRACT
- Agreement made on Account of Natural Love and Affection (Section 25(1)]
Such Agreement made without consideration is valid if:
- It is expressed in writing
- It is registered under the Law
- It is made on account of Love and affection and
- It is between parties standing in a near relation to each other.
Nearness of relation by itself does not necessarily import love and affection.
Example: A Hindu husband by a registered document promised to pay his wife Rs. 1000 per month as her Pin – pocket money. This agreement is valid.
- Promise to Compensate (Section 25(2) )
Such promise made without consideration is valid if:
- It is a promise to compensate (wholly or in part) and
- The person who is to be compensated has already done something voluntarily or has done something which the promisor was legally bound to do.
Example : X finds Y purse and gives it to him . Y promises to give Rs. 500 to X . This is valid contract even though the consideration did not move at the desire of Y , the promisor .
- Promise to pay time barred Debt (Section 25(3)
Such promise without consideration is valid if :
- It is made in writing
- It is signed by the debtor of his agent , and
- It relates to a debt which count not be enforced by a creditor because of limitation
According to the law of limitation , a debt which remains unpaid or unclaimed for a period of 3 years becomes a time barred debt which is legally not recoverable.
- Completed Gifts (Explanation to Section 25)
Time gifts actually made by a donor and accepted by the done are valid even without consideration. Thus, a completed gift needs no consideration.
Example: X transferred some property to Y by a duty written and registered deed as a gift. This is a valid contract even though no consideration moved.
- Agency (Section 185) : No Consideration is necessary to create an agency.