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Topic 13: “NO CONSIDERATION- NO CONTRACT”

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 follows:
1. Natural love and affection [Sec. 25 (1)]: An agreement though made with out consideration will be valid if it is in writing and registered and made on account of natural love and affection.
For example: ‘A’ for natural love and affection promise to his son Rs 1000. ‘A’ puts his promise to ‘B’ in writing and registered it. This is a contract.
2. Compensation for services rendered [Sec. 25 (2)]: A agreement made without consideration may be valid. If it is a promise to compensate wholly or in part a person who has already voluntary done something for the promisor.
For example: ‘A’ finds ‘B’s purse give it to him ‘B’ promises to give ‘A’ Rs 100 this is a contract.





3. Time – barred debts [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.
For example: Raghav owes Murli Rs. 10,000. This debt is time batted by the limitation Act even then, Murli, promises in writing to pay Raghav Rs. 4,500 on account of debt. This is a contract.
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 done.
For example: ‘A’ gifted his property to ‘B’ under the Provision of the Transfer of Property Act. ‘A’ 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 general 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 that what is due. This is called remission in the law.





8. Doctrine of Promissory Estoppel: The person making the representation or promise becomes bound by the same, if another person has acted on the faith of such promise or representation. The promise can ask for enforcing the promise even if there is no consideration.
For example: Mr. X establishes an industrial unit on the faith of tax concession announced by a State Govt. for a particular specified period. The state is bound by estoppels and cannot withdraw tax concession earlier than promised by it. (UNION OF INDIA V.S GODFREY 1986)



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