ICA: - Agreement without Consideration

ICA: - Agreement without Consideration

Agreement without consideration
SEC. 25, as a general rule, declares that an agreement without consideration is void. The section however, mentions three exceptions, when there is no need of any consideration for the validity of the contract. The provision is as under: An agreement made without consideration is void, unless—
(1)    it is expressed in writing and registered under the law for the time being in force for the registration of documents and is made on account of natural love and affection between parties standing in a near relation to each other; or unless
(2)  it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless.
(3)  It is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.In any of these cases, such an agreement is a contract.
 
Explanation 1.
Nothing in this section shall affect the validity, as between the donor and donee, of any giftactually made.
 
Explanation 2.
An Agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.Promise due to natural love and affection When the promise is made in favour of a near relation on account of natural love and affection, the same is valid even though there was no consideration for such a promise.(law point)The following requirements have got to be satisfied in order that the case is covered under this exception

1. The parties to the agreement must be standing in anear relationship to each other. What is near relationship has neither been defined in the Act, nor in any judicial pronouncement. But from the various decided cases it appears that it will cover blood relations or those related through marriage,73 but would not include those relations which are not "near", but only remotely entitled to inherit.

2. The promise should be made by one party out of natural love and affection for the other. In Rajlucky Dabee v. Bhootnath Mookerjee, it has been held that near relation between the two parties does not necessarily imply natural love and affection between them. After lot of disagreements and quarrels between a Hindu husband and wife they decided to live apart. At this stage the husband executed a registered document in favour of the wife whereby he agreed to pay for her separate residence and maintenance. In that agreement mention was also made about the quarrels and disagreements between the two.It was held that from the recitals in the document, it was apparent that the document had been executed not because of natural love and affection between the parties but because of the absence of it, and therefore the wife was not entitled to recover the sums mentioned in the document.

3. The promise should be in writing and registered. It is further necessary that the agreement should be in writing and registered under the law relating to registration of documents.

Compensation for past voluntary services The second exception of sec. 25 covers cases where a person without the knowledge of the promisor, or otherwise than at his request does the latter some service, and the promisor undertakes to recompense him for it.The promise to compensate though without consideration, is binding because of this exception. The exception also covers a situation where the promise is for doing something voluntarily "which the promisor was legally compellable to do." The exception covers situations where the service is rendered voluntarily and without promisor's knowledge. It is also necessary that the service must have been rendered to the promisor and nobody else.

Promise to pay a time-barred debt Sec. 25(3) requires the following essentials to be satisfied in such a case:

1. The promise must be to pay wholly or in part a time-barred debt, i.e., a debt of which the creditor might have enforced payment but for the law for the limitation of suits. It is necessary that the debt must be one of which the creditor might have enforced payment but for the law for the limitation of suits. It, therefore, does not cover such debts which are unenforceable for some other reasons. Thus, if an insolvent debtor has been discharged from payment under the Insolvency law a subsequent promise by him to pay that debt cannot be enforced unless there is a fresh consideration for the same.

2. The promise must be in writing and signed by the person to be charged therewith, or his duly authorised agent. Debt due by whom ? In Pestonji v. Hal Meherbai, the Bombay High Court has expressed the view that under this exception, the promise should be to pay time-barred debt due from the promisor, and not a promise to pay time-barred debts due from other persons. There should be express promise. Section 25(3) requires an express promise to pay a time-barred debt rather than a mere acknowledgment of the debt.