Introduction
In contract law, the general rule is that a valid contract requires consideration. However, specific exceptions exist where a contract can be enforceable even without consideration. Understanding these exceptions is essential for anyone entering into contractual agreements. Here’s a comprehensive look at the key exceptions to the rule of “no consideration, no contract.”
Exception to Consideration in Indian Contract
1. Natural Love and Affection
Contracts made out of natural love and affection between close relatives can be enforceable without consideration. The agreement must be in writing and registered under Section 25(1) of the Indian Contract Act, 1872.
Example: If two brothers, Peter and John, agree in writing to share inherited property out of mutual affection, this agreement can be enforced even without consideration.
2. Past Voluntary Services
A promise to compensate someone for a service voluntarily rendered in the past can be binding without consideration under Section 25(2) of the Indian Contract Act, 1872. The service must have been performed for the promisor who existed at that time.
Example: Peter finds and returns John’s lost wallet, and John later promises to pay Peter for this act. The promise is enforceable even though Peter’s act was voluntary and done in the past.
3. Promise to Pay a Time-Barred Debt
A written and signed promise to pay a debt barred by the statute of limitations is enforceable without consideration under Section 25(3) of the Indian Contract Act, 1872.
Example: Peter owes John Rs 100,000 from a loan taken five years ago, which is now time-barred. If Peter signs a written promise to pay Rs 50,000 as a settlement, this promise is enforceable despite the lack of consideration.
4. Creation of an Agency
Section 185 of the Indian Contract Act, 1872, states that no consideration is required to create an agency. This allows for flexibility in forming agency relationships without the necessity of consideration.
5. Gifts
Explanation (1) to Section 25 of the Indian Contract Act, 1872, states that gifts do not require consideration to be valid. If a donor makes a gift and the recipient accepts it, the agreement is legally enforceable.
Example: If Peter gifts John a car and John accepts it, the lack of consideration does not affect the validity of this agreement.
6. Bailment
Section 148 of the Indian Contract Act, 1872, defines bailment as the delivery of goods from one person (the bailor) to another (the bailee) for a specific purpose, without requiring consideration.
Example: Peter delivers his car to John for safekeeping. This bailment contract is valid without any need for consideration.
7. Charity
If someone undertakes a responsibility based on another’s promise to contribute to a charitable cause, the resulting contract is enforceable without consideration under Section 25 of the Indian Contract Act, 1872.
Example: Peter, a trustee, contracts to build a pond based on promised contributions, and some contributors withdraw. Peter can enforce their promises in court to ensure the funds are provided for the charity project.
Conclusion
Exceptions to the requirement of consideration in contract law allow for flexibility and fairness in various situations. Understanding these exceptions ensures certain promises and agreements are enforceable, providing legal protection and upholding the intentions of the parties involved. Whether it’s due to natural love and affection, past voluntary services, or charitable contributions, these exceptions are integral to the functioning of contract law.
Also Read: Essentials of Valid Consideration
Reference: lexosphere.in
