Agreements Without Consideration- Meaning, Characteristics, Exceptions
One of the fundamental ideas of contract law is Agreements without consideration. Read the complete blog to learn more!
Izhar Ahmad15 Nov, 2023
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Agreements Without Consideration: Enforcing a formal contract requires the addition of consideration a price agreed upon by the promisee to pay the promisor. This price can appear as a gain to the promisor or a loss to the promisee.
According to the Indian Contract Act of 1872, giving consideration is important for the legal legality of any contract; a deal lacking consideration is considered void. Section 2(d) of this act describes payment as a valuable item shared between signing parties for the successful completion of the contract's terms and agreements.Consideration Meaning
The Indian Contract Act, 1872 defines consideration as follows in Section 2(d): Consideration is when, upon the request of the promisor, the promisee or any other individual has performed, refrained from, is performing, or is refraining from an action. This action or refraining from action is termed as consideration for the promisee. When the promisee acts—whether in the past, present, or future—at the promisor's request, this action—whether done so in the past, present, or future—is taken into account as consideration.Characteristics of Consideration
For consideration to be legally valid, it must possess certain characteristics:Authenticity of Consideration:
The consideration exchanged between the parties in a contract must be genuine and credible. Any agreement lacking consideration is considered null. It shouldn't include any forbidden or unlawful activity. If the law prohibits it, or if it involves fraudulent, immoral actions, or potential harm to individuals or property, the consideration is deemed unreal.Originating from the Promisor's Request:
In a contractual context, consideration should only be provided in response to the desire or request of the promisor. Services rendered voluntarily are not considered as valid consideration, and the provider cannot seek reciprocal services. For instance, if A voluntarily took care of B during an illness, A cannot claim consideration for this act, and without consideration, a contract cannot be established.Involvement of Third Parties:
According to the Indian Contract Act of 1872, a promisee can offer consideration to either the promisor or a third party, provided the promisee has no objections. In such cases, the third party holds the right to sue the contracting parties.Temporal Aspects of Consideration:
Consideration in a contract can be categorized as past, present, or future. Present and future considerations are termed as executed and executor, respectively. Executed consideration refers to an already completed action by the promisor. In contrast, executor consideration pertains to a service promised by one party but not yet fulfilled. Additionally, past consideration involves an action or service that occurred before the contract agreement was formulated. It is crucial to note that past consideration is legally valid only if it was provided by the promisee at the promisor's request.Looking for the Best Commerce Coaching?
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Exceptions to Agreements Without Consideration
While a contract is typically deemed null and void without consideration, there are specific exceptions outlined in Section 25 of the Indian Contract Act. These exceptions encompass:Voluntary Services:
When an individual provides a service voluntarily and a promise is made in return, such agreements without consideration are legally enforceable. Additionally, if someone performs an action that the promisor was legally obligated to do, any promise tied to that service is considered valid. For example, if A, a neighbor, prevents a fire at B's house, and B promises to pay A Rs. 10,000 later, this agreement without consideration is recognized as valid in a court of law.Love and Affection:
Section 25(1) of the Indian Contract Law recognizes agreements without consideration in cases of love and affection between individuals directly related by blood or close relations. For such agreements to be enforceable, they must be in writing and formally registered. For instance, if C agrees to pay his brother D a specified sum daily for a year, and this agreement is formally documented and registered, it is legally binding.Time-Barred Debt:
In situations where a debt becomes time-barred, meaning it is no longer legally collectable due to the passage of time, a written promise to repay, signed by the borrower or their authorized agent, makes the agreement legally enforceable. This exception applies even if there was no consideration involved initially.Gifts and Charity:
The exchange of gifts or charitable acts stands as an exception to the general rule that agreements without consideration are void. Any gift or charity exchanged between parties is considered a valid agreement under the law, even in the absence of consideration. Furthermore, promising to make a gift in the future is enforceable.Alternatives to Agreements Without Consideration
According to Section 25 of the Act, a contract lacking consideration is generally deemed invalid, with a few exceptions. To be considered valid, the contract must meet the following conditions:- It is registered and documented in writing.
- It involves compensating for a consumer service provided to the promisor in the past.
- It is a legally binding written commitment to settle an entire debt or a portion of it, even if it has exceeded the legally defined time limit.
Agreements Without Consideration FAQs
What is the doctrine of nudum Pactum?
The doctrine of nudum pactum refers to a bare or naked agreement without legal significance, typically lacking consideration, rendering it unenforceable.
What is Section 27 of the Indian Contract Act?
Section 27 prohibits agreements that restrain trade or legal proceedings, rendering them void.
What is Section 57 of the Indian Contract Act?
Section 57 allows the enforcement of a contract even when a person who has conferred a benefit without any obligation to do so, and it is found to be just and equitable.
What is Section 28 of the Indian Contract Act?
Section 28 renders agreements in restraint of marriage, trade, and legal proceedings void, with certain exceptions.
What is Section 26 of the Indian Contract Act?
Section 26 voids agreements that restrain marriage except for reasonable restrictions and conditions agreed upon by the parties.
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