EXCEPTIONS TO CONSIDERATION
Author: Saamya Gautam (University of Lucknow)
INTRODUCTION
Section 2(h) of the Indian Contract Act define a contract as “An agreement enforceable by law” Section 10 of the Indian Contract Act provides:-
What agreements are Contracts– All agreements are contracts if they’re made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and aren’t hereby expressly declared to be void.
Thus, according to the provisions of section 10 of the Indian Contract Act, lawful consideration is one of the essentials of a contract. Consideration is a very important aspect of contractual relationships and Section 25 of the Indian contract act provides that an agreement without consideration is void. Thus consideration is essential for an enforceable contract and without the involvement and inclusion of this element the contract cannot fructify.
In Currie v. Misa, it had been defined, “A valuable consideration within the sense of the law may consist either in some right, interest, forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other.” The contract would simply become void if no consideration is there. But the presence of consideration is not universal. There are certain exceptions to the overall rule.
The exceptions to the general rule of consideration squarely fall within the purview of the statute. Indian Contract Act in section 25 categorically provides for the situations whereby the requirement of consideration ends. In my assignment, I will discuss such exceptions.
These exceptions may be explained under the following headings:
A. EXCEPTIONS UNDER SECTION 25
Section 25 of the Indian contract act provides:
An agreement made inconsiderately is void, unless—
(1) it’s expressed in writing and registered under the law for the nonce effective for the registration of 1[documents], and is formed on account of natural love and affection between parties standing during a near reference to each other; or unless.
(2) it’s a promise to compensate, wholly or partially, an individual 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 partially a debt of which the creditor may need enforced payment except for the law for the limitation of suits. In any of those cases, such an agreement may be a contract.
Explanation 1.— Nothing during this section shall affect the validity, as between the donor and done, of any gift actually made.
As section 25 provides, in the conditions stated below, consideration is not necessary for the validity of the contract
1. Natural love and affection
Section 25(1) makes it clear that an agreement without consideration maybe valid if the following conditions are fulfilled-
a. The parties to the agreement are nearly related
For the applicability of this clause, the parties to the agreement must be standing in a near relationship with each other. There is no definition to the expression near relation. However, from the decided cases it appears that the expression near relation blood relation and relations through marriage.
b. Natural love and affection
For the application of this clause, there must be natural love and affection between the parties and agreement must be the result of this natural love and affection. If the parties are nearly related but there is no love and affection between them then this exception will not be applicable.
c. The agreement must be written
d. The agreement must be registered under the law relating to the registration of documents.
Illustrations (a) and (b) of sec 25 makes the contents of this provision crystal clear:
(a) A promises, for no consideration, to give to B Rs. 1,000. This is a void agreement.
(b) A, for natural love and affection, promises to give his son, B, Rs. 1,000. A puts his promise to B into writing and registers it. This is a contract.
In Rajluckhy Dabee V. Bhootnath Mookerjee[1], the defendant promised to pay his wife a hard and fast sum of cash for each month for her separate residence and maintenance. The agreement was a registered document during which certain quarrels and disagreements were mentioned. The Calcutta supreme court refused to take the agreement together falling under this exception. The court could find no trace of affection between the parties whose quarrels had compelled them to separate. during this exception, it’s necessary that the agreement is entered into amorously and affectionately.
The decision of Bombay High Court in Bhiwa V. Shivaram[2], A sued B his brother for a share in certain lands. But the suit was dismissed as B solemnly affirmed that the property wasn’t ancestral and agreed by registers writing to offer a one-half of an equivalent property. this suit was born to obtain the share. The plaintiff admitted that he and his brother had been on bad terms. But in spite of the strained relations, the court held that this is often just a case to which section 25(1) should be canceled by him was willing to offer him his property.
A family settlement between a person and his wife was made for providing maintenance to the wife. This was held to be enforceable because it had been meant for deriving satisfaction and peace of mind from family harmony. So it might be interpreted either as a consideration or as love and affection.[3] The court followed the decision of the Supreme Court in Ram Charan Das v Girja Nandini Devi,[4] where it had been observed that “the courts give effect to a family settlement upon the broad and general ground that its object is to settle existing or future disputes regarding property among members of a family. The word ‘family’ during this context isn’t to be understood within the narrow sense of being a gaggle of persons who are recognized in law as having the proper of succession or having a claim to a share within the property at issue. The consideration for such a settlement, if one may put it that way, is that the expectation that such a settlement will end in establishing or ensuring amity and goodwill among persons bearing a relationship with one and another. That consideration having gone by each of the disputants, the settlement consisting of recognition of the proper asserted by one another can’t be permitted to be impeached thereafter.” an equivalent view was again reiterated in Maturi Pullaiah v Maturi Narasimham.[5]
2 . Past Voluntary Services
According to clause (2) of section 25, an agreement may be valid if- it’s been entered into to compensate (wholly or in part) an individual who has already voluntarily done something for the promisor or something which the promisor was legally compellable to try to.
Illustration (c) and (d) of Section 25 makes this provision crystal clear:
(c) A finds B’s purse and provides it to him. B promises to offer A Rs. 50. this is often a contract.
(d) A supports B’s infant son. B promises to pay A’s expenses in so doing. this is often a contract.
The Bombay High Court had held in Sindha Shri Ganpatsinghji v Abraham[6] that that “services rendered at the will of the minor expressed during his minority and continued at an equivalent request after his majority form an honest consideration for a subsequent express promise by him in favour of the one that rendered the services”.
The aspect of voluntariness is extremely crucial. The services that are being mentioned within the provisions are like past services, it’s also important for the appliance of this clause that the services must are done to the promisor and to not anybody else, alongside it, the promise should be made by the person for whom the services are rendered.
3. Promise to pay a time-barred debt
According to clause (3) of sec 25 Indian Contract Act provides that a written promise to pay a debt barred by the Limitation Act is enforceable even inconsiderately. For the appliance of this clause
a) The promise must be in writing;
b) It must be signed by the promisor or his agent authorised for this purpose
c) It may be a promise to pay wholly or partially a debt.
Illustration (e) of the section makes this exception more clear to understand: (e) A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. this is often a contract
Such a promise to pay the time-barred debt is without consideration; hence, it is often called a ‘gracious promise’.
To invoke this exception either party has got to acknowledge the barred and outstanding debt clearly.
The acknowledgment needn’t be expressed. If the above-mentioned conditions are fulfilled the limitation would stand revived.
Madras High Court in Puliyath Govinda Nair VS Parekalathil Achutan Nair,[7] in regard to this exception. The court held that the words by the person to be charged therewith are enough to cover a case of a person agreeing to take the liability for payment of a debt that is due by another person and it need not be limited to a person who is indebted from the very beginning. In comparison to this view, the one expressed by the Bombay High Court In Pestonji Manekji Mody VS Bai Meherbai,[8] where the Court had made it clear that the promise under this exception should be to pay a time-barred debt that is due from the promisor and not from anyone else seems to be better since the intention of the legislation appears to be to permit enforcement of a certain agreement even though time-barred if the promisor prefers to revive the same by fresh promise in writing.
4. Completed Gift
The gift presented by a donor and received by the done are going to be a legitimate agreement even inconsiderately (explanation 1 of section 25 of Indian Contract Act). Thus within the agreements made by way of gift consideration isn’t necessary.
B. OTHER EXCEPTIONS
The following exceptions to the overall rule that an agreement inconsiderately is void also are notable:
1. Contract of Agency
Section 185 specifically states that no consideration is important to make a contract of agency. Thus, when an individual is appointed as an agent, his appointment agreement is valid inconsiderately. An agent gets the commission as remuneration, but no consideration is important at the time of appointment agreement is formed.
2. Section 63 of the Indian contract act
This section provides that promisee may dispense with or remit, wholly or partially the performance of the promise made to him or may extend the time for such performance or may accept rather than it ‘any satisfaction which he thinks fit…For this promise, no consideration is important and such promises are going to be binding even inconsiderately.
For Example, A owes 50,000 rupees to B. A pays to B and B accepts, in satisfaction of the entire debt, 20,000 rupees paid at the time and place at which 50,000 rupees were payable. the entire debt is discharged and no consideration therefore.
CONCLUSION
Thus the consideration is an important element to fulfill the entire requirements of a legitimate contract. The failure of consideration would cause the cancellation of the whole agreement. But, the statutory exceptions also can be not ignored. it’s very clear and expressly as long as the situations so explained above would fall in exception to the overall rule of the consideration applicable general principles. In such cases, the courts consider that the need for consideration has been met and therefore the terms of contracts are supported by such stipulation and an agreement inconsiderately is going to be valid.
[1] (1990) 4 CWN 488.
[2] (1899) 1, Bom.L.R. 495.
[3] Manali Singhal v. Ravi Singhal, AIR 1999 Del 156.
[4] AIR 1966 SC 323.
[5]AIR 1966 SC 1836.
[6]ILR 1947 Bom 807.
[7](1940) 1 MLJ 682.
[8](1928) 30 BOMLR 1407.
