No consideration, No contract

by • 28/05/2012 • B.com part 2 Business LawComments (0)966

Q2- No consideration, No contract. Explain.

GENERAL RULE:

 

According to Section 10 consideration is one of the essential elements of a contract. According to Section 25, an agreement made without consideration is void.

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EXCEPTION TO THE GENERAL RULE NO CONSIDERATION, NO CONTRACT

 

The following are the exception to the general rule No Consideration, No contract.

 

a-      AGREEMENT MADE ON ACCOUNT OF NATUAL LOVE AND AFFECTION:

Such agreement made without consideration is valid if,

 

  • It is expressed in writing.
  • It is registered under the law.
  • It is made account of love and affection.
  • It is between parties standing in a near relation to each other.

 

Example:

A husband by a registered document promised to pay his wife Rs 1000 per month as per pocket money. This agreement is valid.

 

b-      PROMISE TO COMPENSATE

Such promise made without consideration is valid if:

 

  • It is a promise to compensate (wholly or on part).
  • The person who is to be compensated has already done something volume tarily or has done something which the promsior was legally bound to do.

 

Example:

X finds Y’s purse and gives it to him. Y promises to give Rs 500 to X. This is a valid contract even though the consideration did not move at the desire of Y, the promisor.

 

 

c-      PROMISE TO PAY TIME BARRED DEBT

Such promise without consideration is valid if:

 

  • It is made writing
  • It is signed by the debtor or his agent
  • It related to a debt, which could not be enforceable by a creditor because of limitation.

 

d-      COMPLETED GIFTS OR TO GHIVE SOMEONE AS GIFT

The gifts actually made by a donor and accepted by the donee are valid even without consideration. Thus, a completed gift needs no consideration.

 

  • Possession of gift must be delivered.
  • For this purpose there is no need of natural love or near relation between donor and donee.
  • Gift does not need consideration for its validity.

 

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