Exceptions to Consideration under Indian Contract Act
Exceptions to Consideration under Indian Contract Act, 1872
1. Introduction to Consideration
Consideration is a core requirement for a valid contract under Section 2(d) of the Indian Contract Act, 1872.
It means something in return for which a promise is made, which can be an act, abstinence, or promise.
General Rule:
“An agreement without consideration is void.” (Section 25, now Section 2(d) read with Section 25 of the Contract Act)
However, there are important exceptions where an agreement without consideration is valid.
2. Exceptions to the Rule of Consideration
These exceptions are specifically mentioned under Section 25 (Indian Contract Act, 1872) and elsewhere in the Act:
a. Natural Love and Affection
Where a promise is made out of natural love and affection between parties standing in a near relation to each other, the agreement is valid even without consideration, provided it is in writing and registered.
Key Points:
Must be between parties closely related.
The promise must be in writing and registered.
Case Law:
Chinnaya v. Ramayya
The Privy Council upheld a promise made by a father to son without consideration based on natural love and affection, as it was in writing.
b. Promise to Compensate for Past Voluntary Service
When someone has voluntarily done something for another without any obligation, and the other person promises to compensate for it later, such promise is valid even without fresh consideration.
Case Law:
Lalman Shukla v. Gauri Dutt
Though the facts here mainly relate to communication of offer, the principle that past voluntary acts may form the basis of future promise compensation applies.
c. Promise to Pay a Time-Barred Debt
A promise to pay a debt that is barred by limitation law (i.e., too old to be enforced legally) is enforceable even without fresh consideration.
Case Law:
Pinnel’s Case (English Law)
Though generally payment of lesser sum is not good consideration, promise to pay barred debt is an exception under Indian law.
Explanation:
The acknowledgment or promise revives the debt, making it legally enforceable.
d. Promise Made to Pay a Debt by a Third Party
A promise made by a third party to pay a debt owed by another is valid without consideration from the third party.
Example: A friend promises to pay your debt to a creditor.
e. Completed Gifts
A gift or voluntary transfer of property made without consideration is valid if it is properly executed and registered as per law.
3. Summary Table of Exceptions
| Exception | Condition/Requirement | Case Law/Example |
|---|---|---|
| Natural Love and Affection | Writing and registration; near relation | Chinnaya v. Ramayya |
| Promise to Compensate Past Voluntary Service | Voluntary act done before promise | Lalman Shukla v. Gauri Dutt (principle) |
| Promise to Pay Time-Barred Debt | Promise to pay old debt even without new consideration | General principle; recognized in India |
| Promise by Third Party to Pay Debt | Third party promise without consideration | Recognized under Indian law |
| Completed Gifts | Proper execution and registration | - |
4. Important Points
These exceptions recognize the practicalities of social and commercial life, allowing some promises to be enforceable even without fresh consideration.
The writing and registration requirement in the case of natural love and affection is a safeguard against fraud.
The promise to pay a time-barred debt is an important exception to ensure fairness in financial dealings.
5. Conclusion
While consideration is fundamental to contract formation, Indian Contract Law recognizes certain exceptions where a contract can be valid without consideration. These exceptions balance legal strictness with fairness and social realities, ensuring that genuine promises made out of love, past voluntary acts, or debt acknowledgment are enforceable.
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