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Saturday, 10 March 2012

NO CONSIDERATION NO CONTRACT-EXCEPTIONS

Every agreement to be enforceable at law must be supported by valid consideration. An agreement made without consideration is void and is unenforceable except in certain cases. Section 25 specifies the cases where an agreement though made without consideration will be valid. These are as follow:


1. Natural love and affection [Sec. 25(1)]
           An agreement though made without consideration will be valid if it is in writing and registered and is made on account of natural love and affection between parties standing in a near relation to each other. An agreement without consideration will be valid provided-
(a) it is expressed in writing;
(b) it  is registered under the law for the time being in force;
(c) it is made on account of natural love and affection;
(d) it is between parties standing in a near relation to each other.
  All these essentials must be present to enforce an agreement made without consideration.


2. Compensation for services rendered [Sec. 25(2)]
           An agreement made without consideration will be valid if it is a promise to compensate wholly or in a part a person who has already voluntarily done something for the promisor or something which the promisor was legally compellable to do.To apply this rule, the following essentials must exist:
(a) The act must have been done voluntarily;
(b) for the promisor or it must be something which was the legal obligation of the promiser;
(c) the promisor must be in existence at the time when the act was done;
(d) the promisor must agree now to compensate the promisee.


3. Time-barred debt [Sec. 25(3)]
           A promise to pay a time-barred debt is also enforceable. But the promise must be in writing and be signed by the promisor or his agent authorized in that behalf. The promise may be to pay the whole or part of the debt. An oral promise to pay a time-barred debt is unenforceable


4. Completed gifts [Exp. 1 to Sec. 25]
           Explanation 1 to section 25 provides that the rule 'No consideration, No contract' shall not affect validity of any gifts actually made between the donor and the donee. Thus if a person gives certain properties to another according to the provision of the Transfer of Property Act, he cannot subsequently demand the property back on the ground that there was no consideration.


5. Agency (Sec. 185)
           There is one more exception to the rule. IT is given in section 185 which says that no consideration is needed to create an agency.


6. Guarantee (Sec 127)
           A contract of guarantee is made without consideration.


7. Remission (Sec 63)
           No consideration is required for an agreement to receive less then what is du. This is called remission in the law. 

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