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An Agreement Without A Consideration Is Void Ab Initio
An Agreement Without A Consideration Is Void Ab Initio
However, the Indian Contract Act contains certain exceptions to this rule. In
the following cases, the agreement though made without consideration, will be
valid and enforceable.
Section 25(1) states that when parties to the contract are standing in near
relationship with each other and on ground of natural love and affection
they enter in a contract which is in writing and registered as per relevant
law relating to the registration of the documents, such a contract may be a
valid contract even without consideration.
Illustration:-
‘A’ father of ‘B’ agrees to transfer some portion of his property to his
Son and he gets this contract registered with the appropriate authority.
In this illustration the contract is grounded on natural love and
affection and between a father and his son who are standing in near
relationship with each other, thus it would be valid even in absence of
specific consideration to the father.
Case Law:-
1) In the case, Rajlukhy Vs. Bhoothnath Mookherjee (1900) 4 CWN
488, a Hindu husband, after a lot of disagreement and quarrels
between him and his wife decided to live a part. He after referring to
the quarrels and disagreement executed a registered document in
favour of his wife whereby he agreed to pay for her separate
residence and maintenance. Held, the agreement was void, because
the document had been executed not on account of natural love and
affection between the parties. Hence, wife was not entitled to recover
the sum mentioned in the document.
2) In Radhakrishna Joshi vs Syndicate Bank (2006), the Plaintiff
advanced a loan to the Defendant’s son, who died later. The
Defendant executed the documents acknowledging to pay the loan
even though he was not the guarantor. Here, the Karnataka High
Court held that nature obliges the parents to provide for the children;
therefore, the undertaking given by the father to pay the loan is a
reasonable consideration.
2. Gratuitous payments:-
Section 25 (3) states that “It is a promise, made in writing and signed by
the person to be charged therewith, or by his agent generally or specially
authorised 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 India the Limitation Act provides for some maximum permissible time
period over certain legal claims. According to this Act every transaction
has a well defined time for completing such transaction. If a loan has
become time barred then the lender loses his right to claim the right to
repayment. If the creditor on his own agrees to repay the loan then it is
different transaction altogether. Such transaction requires consideration.
If for such reason the creditor agrees to repay the time barred debt then it
is not necessary to have consideration in such a transaction. Such debt
legally being a time barred debt does not require consideration.
Case Law:
In Umesh Chandra Chakravarty vs United Bank of India (1991), the
Court discussed the difference between the acknowledgement of the
liability under Section 18 of the Limitation Act, 1963, and the time-
barred debt. It was held that the acknowledgement of debt is made
before the expiration of the prescribed period of limitation. In contrast,
the promise to pay the time-barred debt is after the expiry of the
limitation period and will result in a new cause of action. Thus, in this
case, it was held that the old debt by the plaintiff could not be revived;
however, the promise to pay made after the expiration of the debt
would be maintainable.
4. Contract of Agency:-
According to the law of agency the an agent is the person who acts as an
authorized representative on behalf of the other and is paid for the same.
When a person is appointed as an authorized representative then such
representative gets some benefit from such contract. According to a
representation contract it is not necessary to prove consideration. The
person for whom the authorized representative acts as such pays
remuneration to the authorized representative. Hence only to be an
authorized representative, there is no necessity of the consideration.