Model Answer
0 min readIntroduction
The cornerstone of a valid contract under Indian law is the principle of ‘consideration’. Section 2(d) of the Indian Contract Act, 1872, defines consideration as something of value exchanged between the parties to a contract. Generally, an agreement without consideration is deemed void *ab initio* – from the beginning. This principle ensures reciprocity and prevents gratuitous promises from being legally enforceable. However, the law recognizes certain situations where agreements lacking consideration are nonetheless enforceable, acknowledging practical realities and promoting fairness. This answer will explore the exceptions to the rule that an agreement without consideration is void, providing illustrative examples for each.
The General Rule: No Consideration, No Contract
As per Section 25 of the Indian Contract Act, 1872, any agreement without consideration is void. This means that a promise to do something without receiving anything in return is not legally binding. The rationale behind this rule is to prevent one party from unjustly enriching at the expense of another. Consideration can take various forms, including an act, forbearance, or a promise to do or not to do something.
Exceptions to the Rule
Despite the general rule, the Indian Contract Act, 1872, provides several exceptions where an agreement without consideration is valid. These exceptions are:
1. Express Promise to Pay a Time-Barred Debt (Section 25(1))
If a debtor makes an express promise in writing to pay a debt that is barred by the Limitation Act, 1963, the promise is enforceable even without fresh consideration. This acknowledges the debtor’s willingness to acknowledge and revive a legal obligation.
Example: A owes B ₹10,000, which is time-barred under the Limitation Act. A signs a written promise to pay B the full amount. This promise is enforceable despite the lack of new consideration.
2. Completed Gift (Explanation 2 to Section 25)
A completed gift, meaning the transfer of ownership has already taken place, does not require consideration to be valid. The act of gifting itself is sufficient.
Example: X gifts his car to Y and hands over the keys. This is a valid gift, even though Y did not provide anything in return.
3. Natural Love and Affection (Section 25(2))
An agreement made on account of natural love and affection between parties standing in a near relation (e.g., husband and wife, father and son, brother and sister) is enforceable even without consideration, provided it is made in writing and registered.
Example: A father promises to give his son ₹50,000 as a gift out of love and affection. This promise is enforceable if it is in writing and registered.
4. Past Consideration (Section 25(3))
Past consideration is an act already done before the promise was made. While generally not sufficient, it is an exception when the act was done at the promisor’s request and with the understanding that it would be compensated.
Example: A saves B’s property from fire without B’s request. Later, B promises to pay A ₹1,000 for the act. This promise is enforceable due to past voluntary service.
5. Compensation for Past Voluntary Service (Section 25(3) - continued)
This is closely related to past consideration. If someone voluntarily performs a service for another, and the other party subsequently promises to compensate them, that promise is enforceable.
Example: C finds D’s lost dog and returns it. D promises to give C ₹200 as a reward. This promise is enforceable.
6. Promise to Donate to Charitable Purposes (Section 25(4))
A promise to contribute to a charitable purpose, even without consideration from the charity, is enforceable if it is made in writing and is subscribed to by the promisor.
Example: X promises to donate ₹10,000 to a hospital in writing. This promise is enforceable even though the hospital doesn’t provide anything in return.
7. Performance of Existing Duty Imposed by Law (Not explicitly an exception, but relevant)
While not a direct exception to the ‘no consideration’ rule, performing a duty already legally obligated to do is generally not considered good consideration for a new promise. However, if the performance exceeds the existing duty, it can be valid consideration.
Example: A police officer is legally obligated to catch a thief. If someone promises to pay the officer ₹5,000 for doing so, the promise is not enforceable. However, if the officer goes above and beyond their duty and apprehends the thief at significant personal risk, the promise might be enforceable.
Conclusion
In conclusion, while the principle that an agreement without consideration is void remains a fundamental tenet of contract law, the Indian Contract Act, 1872, wisely provides exceptions to accommodate situations where enforcing a promise without consideration is just and equitable. These exceptions, ranging from promises to pay time-barred debts to donations to charity, demonstrate the law’s flexibility in balancing the need for reciprocity with practical considerations and societal values. Understanding these exceptions is crucial for a comprehensive grasp of contract law principles.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.