Indian Contract Act 1872- Contract without Consideration
Published at : 06 Jan 2021
Though Consideration is essential in a valid Contract, however, in certain cases, a contract is valid even without any consideration. This is exception to the rule, ‘ no consideration, no contract’.
- Time barred debt: Time barred debt is normally unenforceable. However, a time barred debt becomes enforceable, if payment of time barred debt is promised in writing and signed by debtor or specifically authorized on his behalf [s.25(3)].
- Agency: No consideration is necessary to create an Agency [s.185]. An agent may enter into a valid contract, even if there is no consideration for him (i.e, even if Agent is not taking any commission).
- Promise for Past voluntary services : Normally, no liability arises for voluntary act, as consideration must flow from promisor. However, a promise to compensate past voluntary services is enforceable even without consideration [s. 25(2)].
- Bailment: Bailment is temporary transfer of possession of goods to another. Consideration is not necessary to effect a valid bailment of goods (called Gratuitous Bailment, like Delivery of valuables to neighbour for safe custody, lending bicycle to a friend for his use).
- Charity: If a person promises to contribute to charity and on this faith, the Promisee undertakes a liability not exceeding the promised subscription, the contract shall be valid.
- Remission: Where a person agrees to receive less than what is due to him, such an agreement is remission. No consideration is required for a contract of remission. (s. 63).
- Guarantee: A ‘contract of guarantee’ is a contract to perform the promise or discharge the liability of a third person, in case of his default. A contract of guarantee is not valid if made without consideration. However, the consideration received by the principal debtor is a sufficient consideration for the surety and the contract of guarantee shall be valid even if no consideration is received by the surety. (s.127).
- Agreement with Relatives: Agreements with Relative (having blood relation or relationship out of marriage), made in writing and registered, out of natural love and affection, is enforceable, even without any consideration :[s. 25(1)]
- Contract with Seal: A contract made in the form of a deed under seal is valid, even if it is made without consideration.
- Gifts: In case of completed Gift (with completed documentation as necessary), consideration is not needed between donor and donee. Hence, a contract of gift, even without consideration, is valid.
Indian Contract Act 1872- Contract without ConsiderationContract without ConsiderationNo Consideration - No Contract