28 February, 2016

VALIDITY OF AN AGREE MENT WITHOUT CONSIDERATION

The general rule is that an agreement made without consideration is void (Section 25). In ever valid contract consideration is very important. A contract may only be enforceable when a adequate consideration is there. However, the Indian Contract Act contains certain exception to this rule. In the following cases, the agreement though made without consideration, will be valid and enforceable.
1.      Natural Love and Affection: A written and registered agreement based on natural love and affection between the parties standing in near relation (e.g., husband and wife) t each other is enforceable even without consideration.
2. Compensation for past voluntary services: A promise to compensate, wholly or in part a person, who has already voluntarily done something for the promisor, is enforceable under (Sec. 25(2). In order that a promise to pay for the past voluntary services is binding the following essential factors must exist :
(i) The services should have been rendered voluntarily.
(ii) The services have been rendered for the promisor.
(iii) The promisor to be in existence at the time when services were rendered.
(iv) The promisor must have intended to compensate the promisee.
3.   Promise to pay time barred debt : Where a promise in writing signed by the person making it or by his authorised agent, is made to pay a debt barred by limitation it is valid without consideration [Section 25(3)].
4.  Agency: According to Section 185 of the Indian Contract Act, no consideration is necessary to create an agency.
5.    Completed gift: In case of completed gifts, the rule no consideration no contract does not apply. Explanation (1) to Section 25 states "nothing in this section shall affect the validity as between the donor and donee, of any gift actually made." Thus, gifts do not require any consideration.

Courtesy:- Legal Point Foundation

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