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Q. "An Agreement without consideration is void."


Explain this rule and state exceptions if any.
Indian Contract Act 1872 in section 2(e) says that every promise and every set of
promises that form a consideration for each other is an agreement. Thus, it is clear
that the formation of consideration for a promise or promises is a key ground on
which a promise becomes an agreement. There cannot be an agreement if there is
no consideration. Section 25 of the act says the same thing in precise terms and
also gives three exceptions when an agreement without consideration is a valid
contract:

Section 25: An agreement without consideration is void unless,

1. it is in writing and registered and the promise has been made due to natural
love and affection between the parties standing in near relation to each other.
2. it is a promise to compensate, wholely or in part, a person who has
voluntarily done something for the promisor or something that the promisor
was legally bound to do.
3. it is a promise to pay for a time barred debt.

Natural Love and Affection

Rajlukhy Debi vs Bhootnath Mukherji - Court found no evidence of love.


Bhiwa vs Shivram - A person gave half of his property to his brother in order to
be reconciled with him. Court held that it was due to natural love and affection.
Past and Executed Consideration
The definition in 2(d) says "...has done or abstained from doing...". Thus, an act
already done can be a valid consideration. However, a past consideration and an
executed consideration must be distinguished. For example, if A saves B from
drowning and if B promises to pay A 50/-, under English law, B is not bound by
the promise because there was no promise when the act was done. The act of
saving is past consideration. On the other hand, if A promises to pay 50/- to who
ever finds his dog and if B finds and produces the dog, A is bound to pay because
the promise existed before the act. This is called executed consideration.

However, in Indian law, Section 25 (2) explicitly says that a promise to


compensate a person who has voluntarily done something for the promisor is
binding. Thus, if B saves A from drowning and if A promises to pay B, then A is
bound by the promise.

Further, in the case of a past service on request without any promise to pay, it is
construed that there is an implied promise to pay only the amount of payment is
not fixed. Thus, a promise to pay for a past service upon request is a valid contract.
In the case of Sri Sandhi Ganpatji vs Abraham, it was held that services
rendered to a minor, which were continued after his majority upon his request is a
valid consideration for a promise to pay.

Value of the consideration


It is important that the consideration has some value in the eyes of law. If A
promises to B to give his Rolls Royce if B brings it from the garage, the promise is
not binding because the consideration has no value in the eyes of law. However, if
A sells his horse worth 1000/- to B for 10/-, it is a valid consideration even if it is
not adequate provided that the consent was free. Explanation 2 of section 25 says
that inadequate consideration may be considered to be against free consent.
Haigh vs Brooks - A promise to pay for returning a document, which later on was
found to be worthless, was held to be a valid because the document was considered
of some value at the time of the contract.
However, consideration need not be adequate.
De La Bere vs Pearson - A person lost money due to a financial advice given in a
newspaper. The newspaper was held liable because the consideration of buying the
newspaper was of some value even if not adequate.

Debi Radha Ranee vs Ram Dass - Forbearance to sue to sue is a valid


consideration.

Performace of existing duties


In general performance of something that one was already required to do is not a
valid consideration.

Performance of Legal Obligation


For example, a policeman is under legal obligation and performance of his duties
cannot be a valid consideration.

Performance of contractual Obligations


In the case of Ramchandra Chintaman vs Kalu Raju 1877, a lawyer was
promised to get 100/- more if he wins the case. The promise was held not binding
because the lawyer was already under contractual duty to do his best in the case.

However, a performance of a pre-existing contract with a third party was held a


valid consideration. In the case of Shadwell vs Shadwell, an uncle's promise to
pay his nephew if he married some girl was held valid. This was held by MP HC in
the case of Gopal Co. vs Hazarilal Co AIR 1963.

Promise to pay less than the amount due.


Section 63 of Indian Contract Act says that payment of a smaller sum in
satisfaction of a larger dept is valid if this has been done under an agreement
between the creditors and the debtors. It further gives an illustration that if A owes
B 5000 rs and if B accepts 2000Rs as a satisfaction of the whole amount at the time
and place where 5000 rs were due, the payment of 2000 rs discharges A of his
debt.

Q. What are the important components of a


consideration?
Section 2(d) defines consideration as follows:
When, at the desire of the promisor, the promisee or any other person, has done or
has abstained from doing, does or abstains from doing, or promises to to or abstain
from doing, such an act or abstinence becomes a consideration for the promise.

At the desire of the promisor


To be a valid consideration, the act must be at the desire of the promisor and not of
anybody else. In the case of Durga Prasad vs Baldeo 1880, the plaintiff had build
the shops on the desire of the collector and not of the defendants. Therefore the
promise by defendants to pay a percentage of sales was held not binding.
In the case of Kedar Nath vs Gauri Mohd. 1886, the defendant had pledged
100/- for construction of town hall. The plaintiff started work on that pledge and so
the defendant was held liable to pay.

Provider of the consideration (Privity)


The British law has two principle governing the consideration.
1. The consideration must move from the promisee to the promisor.
2. Only the person who is a party to the contract can sue for the performance.

Privity of Consideration
In India, the first rule is not followed at all. In fact section 2(d) specifically says
that consideration can be provided by the promisee or any other person. This was
held in the case of Chinnaya vs Ramaya 1882.

Privity of Contract
In the case of Tweddle vs Atkinson 1882, it was held by the privy council that the
person who is not a party in the contract cannot sue. SC in the case of MC
Chacko vs State Bank of Travancore 1969 has adopted the same principle and
held that the since the bank was not a party to the contract between the father and
the son, it cannot enforce the contract.
However, based on Privy Council's observation of the culture in terms of marriage
and family relationship, in the case of Kwaja Mohd. Khan vs Hussaini Begum
1910, some exceptions to this rule have been accepted.

1. Trust or Charge
When an agreement forms a trust for the benefit of a third person, the third person
can enforce the agreement. This was held in the case of Kwaja Mohd. Khan vs
Hussaini Begum 1910 as well as in Rana Uma Nath Bakhs Singh vs Jung
Bahadur AIR 1938.

2. Marriage, partition, and other family matter


In the case of Daropti vs Jaspat Rai 1905, it was held that the wife was able to
enforce the husband to fulfill a promise that he gave to her father about providing
her a separate residence.

3. Acknowledgement or Estoppel
Where by the terms of a contract a party is to make payments to a third party and
the party acknowledges this to the third party, a binding obligation is created
towards him. This was held in the case of Devraja Urs vs Ram Krishnaiya AIR
1952.

Question
"No consideration,No contract" Explain with exception.
Question Submitted By :: Jayanta Kr. Das I also faced this Question!! Rank Answer Posted
By Re: "No consideration,No contract" Explain with exception. Answer
#1
Consideration:-
Consideration for a particular promise exists where some
right, interest, profit or benefit accrues (or will
accrue)
to the promisor as a direct result of some forbearance,
detriment, loss or responsibility that has been given,
suffered or undertaken by the promisee. The consideration
must be executory or executed, but not past.
Consideration
is executoryConsideration can be anything of value (such
as
an item or service), which each party to a legally-
binding
contract must agree to exchange if the contract is to be
valid. If only one party offers consideration, the
agreement is not legally a binding contract. In its
traditional form, consideration is expressed as the
requirement that in order for parties to be able to
enforce
a promise, they must have given something for it (quid
pro
quo): something must be given or promised in exchange or
return for the promise.

contract:-
A contract is an exchange of promises between two or more
parties to do or refrain from doing an act which is
enforceable in a court of law. It is where an unqualified
offer meets a qualified acceptance and the parties reach
Consensus In Idem. The parties must have the necessary
capacity to contract and the contract must not be either
trifling, indeterminate, impossible or illegal.

Hence by watching both definitions you can understand


that
contract required benefit for both parties. if there is
no
consideration for one party it means that party is not
getting any benefit so. If there is no benefit for both
party it means why they will make contract. And if
benefit
is only for one party then that is no contract because it
is not full feeling contract first essential of exchange
of
promises, goods, services or something worth full for
both
parties

Is This Answer Correct ? 40 Yes 20 No


2
Avinash Verma
Re: "No consideration,No contract" Explain with exception. Answer
#2
Exceptions to the rule that “No consideration – No
contract”

Section 25 declares that `an agreement made without


consideration is void'. It means that consideration is a
must in all cases. Exceptions to the rule are:
• written and registered agreement out of natural
love and affection between the parties;

• promise to compensate a person who has voluntarily


done something for the promisor;

• promise to pay time-barred debt;

• completed gift;

• creation of agency

Is This Answer Correct ? 31 Yes 6 No


2
Sebastian

Re: "No consideration,No contract" Explain with exception. Answer


#3
Section 25 declares that `an agreement made without
consideration is void'. It means that consideration is a
must in all cases. Exceptions to the rule are: •
written and registered agreement out of natural
love and affection between the parties; • promise to
compensate a person who has voluntarily done something
for
the promisor;• promise to pay time-barred debt;•
completed gift; • creation of agency

Is This Answer Correct ?


8 Yes 7 No
0
Anil Trapasiya
Re: "No consideration,No contract" Explain with exception. Answer
#4
Exceptions to the rule that “No consideration – No
contract”

Section 25 declares that `an agreement made without


consideration is void'. It means that consideration is a
must in all cases. Exceptions to the rule are:
• written and registered agreement out of natural
love and affection between the parties;

• promise to compensate a person who has voluntarily


done something for the promisor;

• promise to pay time-barred debt;

• completed gift;

• creation of agency

Is This Answer Correct ?


6 Yes 4 No
0
Sabastian Tharakan George Lion
Re: "No consideration,No contract" Explain with exception. Answer
#5
"consideration"

" 'consideration is the price for which the


promise of the another is bought'"

"contract"

" every agreement and promise enforceable at law is


contract"

"(so why no consideration no contract)"


according to contract act every promise or every set of
promise forming the consideration for each other is an
agreement.so, there can't be an agreement without
consideration and there can't be a contract without
agreement.

section "10" of the contract act say's that all


agreement are contract if they are made with the free
consent of the parties competent to contract for a lawful
consideration and with lawful objects.
therefore(sec:25)
"an agreement with out consideration is void."

ndian Contract Act,1872


Act No : 9

Section : Agreement without consideration, void, uncles it is in writingand


registered, or is a promise to compensate for something done, oris a promise to
pay a debt barred by limitation law

25.Agreement without consideration, void, uncles it is in writingand registered, or is a


promise to compensate for something done, oris a promise to pay a debt barred by limitation
law.-An agreement madewithout consideration is void, unless- (1) it is expressed in writing and
registered under the law for the time being in force for the registration of 1*[documents], and is
made on account of natural love and affection between parties standing in a, near relation to each
other ; or unless (2) it is a promise to compensate, wholly or in part, a person who has already
voluntarily done something for the promisor, or something which the promisor was legally
compellable to do ; or unless (3) it is a promise, made in writing and signed by the person to be
charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly
or in part a debt of which the creditor might have enforced payment but for the law for the
limitation of suits. In any of these cases, such an agreement is a contract. Explanation 1.-Nothing
in this section shall affect the validity,as between the donor and donee, of any gift actually made.
Explanation 2.-An agreement to which the consent of the promisoris freely given is not void
merely because the consideration is inade-quate ; but the inadequacy of the consideration may be
taken intoaccount by the Court in determining the question whether the consentof the promisor
was freely given.--------------------------------------------------------------------- 1 Subs. by Act 12 of
1891 for "assurances".---------------------------------------------------------------------30 Illustrations
(a) A promises, for no consideration, to give to B Rs. 1,000.This is a void agreement. (b) A, for
natural love and affection, promises to give his son,B, Rs. 1,000. A puts his promise to B into
writing and registers it.This is a contract. (c) A finds B's purse and gives it to him. B promises to
give ARs. 50. This is a contract. (d) A supports B's infant son. B promises to pay A's expensesin
so doing. This is a contract. (e) A owes B Rs. 1,000, but the debt is barred by the LimitationAct.
A signs a written promise to pay B Rs. 500 on account of thedebt. This is a contract. (f) A agrees
to sell a horse worth Rs. 1,000 for Rs. 10. A'sconsent to the agreement was freely given. The
agreement is acontract notwithstanding the inadequacy of the consideration. (g) A agrees to sell a
horse worth Rs. 1,000 for Rs. 10. Adenies that his consent to the agreement was freely given.
The inadequacy of the consideration is a fact which the Courtshould take into account in
considering whether or not A's consent wasfreely given.

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