No Consideration, No Contract:
Consideration is one of the essential elements to support a valid contract. When a party to an agreement, promises to do something he must get 'something' in return. If he does not get something in return, the contract is not valid. This 'something' is defined as consideration. Therefore, an agreement without consideration is void and cannot become a contract.
Exceptions:
The following are the exceptions to the
rule ‘no consideration, no contract’: There are some cases where
contracts, even though not supported by consideration, are enforceable. These
are
1) An Agreement made on Account of Natural Love and Affection [Section 25 (1)]:
When an agreement is
made in writing and registered under the law, for the time being
in force, for the registration of documents, and is made out of natural love
and affection between parties standing in a near relation to each other,
no consideration is required in such a case .
For
E.g. An agreement between a father and his son or between a husband and wife.
Example:
An elder brother, on account of natural love and affection, promised to pay the
debts of his younger brother. The agreement was put to writing and was
registered. This was held to be a valid agreement, even though there was no
consideration for the promise.
Example: RajlukhyDevi Vs Bhootnath Mukherjee (In this case natural love and
affection was missing, therefore, agreement was not enforceable)
2) A Promise to Compensate for Past Voluntary Services
[Section 25 (2)]:
When
a promise is made 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, is enforceable at law, even though without
consideration.
(Voluntary
Service was done in past and after service promise was made)
E.g.
A supports B’s infant son. B promises to reimburse A’s expenses. This is a
contract.
Eg-
If A finds B’s purse and gives it to
him and B promises to give A ` 100, this a valid contract.
3) A Promise to pay Time-Barred Debt
[Section 25 (3)]:
A
promise to pay the time-barred debt, in whole or part is enforceable provided
it is in writing and is signed by the debtor himself or his agent on his
behalf.
(Time
barred debt: Which remain unclaimed for three
years.)
(Applied
on the cases covered under Law of Limitations act only)
For
E.g. A owes B Rs.1,000 but the debt is time-barred. A signs a written promise
to pay B Rs.500 on account of the
debt. This is a contract.
4) Creation of an Agency
[Section 185]:
No
consideration is required to create an agency.
5) Gift
[Section 25]:
According
to Section 25, nothing shall affect the validity as between the donor and donee
of any gift actually made. (Must be in writing)
6) Charitable Subscription:
If
promise started a work based on the promise, the promisor becomes liable
even without getting any consideration in return. (Kedarnath Vs Gauri Mohmed).
If a person promised to contribute anything to a charity and on his faith, the
promisee undertakes a liability to that extent, the contract shall be valid.
7) Gratuitous bailment:
Consideration is not required to effect a valid bailment of goods i.e. gratuitous bailment.
Comments
Post a Comment