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No Consideration No Contracts : Explain with exceptions

           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

 

  1. 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.

  1. 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 .

  1. 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.

  1. 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.

  1. Agency (Section 185) : No Consideration is necessary to create an agency.

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