Do Exceptions to Consideration Nullify the Purpose?

Evaluate the role and purpose of the doctrine of consideration in contract law. Particularly in light of section 25 of the Indian Contract Act which sets out the exceptions to the consideration requirement. Do the exceptions to consideration nullify the purpose and role of the consideration doctrine in contract law? Do you think that consideration should remain an essential part of contract law?

Introduction:

In simple words contract is an agreement or exchange of promises made between two or more parties, which is competent in the eyes of law. In contract a legal relationship plays an important role. In contract the parties must have an intention to form a legal relationship. Suppose if there is no intention to form a legal relationship, which agreement cannot be treated as a valid or a legal contract. Usually there is no intention to form a legal relationship in social and domestic agreements like Invite someone for dinner does not form a legal relationship. Some agreements and commitment between father and mother, father and son and husband and wife does not form a legal relationship. A contract is valid only when the acts are legal. Prohibited works like killing someone for money, work like immoral for that society does not agree or unlawful acts are cannot be treated as a valid agreement. So, illegitimate works will not come under the contract act. “An agreement wherein it is clearly stated that “This agreement is not intended to create formal or legal agreement and shall not be subject to legal jurisdiction in the law of courts.” cannot be treated as a contract and not valid.” [1]

“According to The Indian Contract Act, 1872 Contract is:

Section 2(h), an agreement enforceable by law is a contract;

Section 2(e), every promise and every set of promises, forming the consideration for each other, is an agreement;

Section 2(b), when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.” [2]

“According to The Indian Contract Act, 1872 Consideration is:

Section 2(d), when, at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstain from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;

Section 2(f), promises which form the consideration or part of the consideration for each other, are called reciprocal promises.” [3]

“According to Sir Pollock; Consideration is the price for which the promise of the other is bought and the promise thus given for value is enforceable.” [4]

‘Ex nudo pacto non oritio actio’ means an agreement without any consideration is null and void, thus, it can’t be enforced by law.

“Section 25 of Indian Contract Act: As per S. 25 of Indian Contract Act, an agreement without any consideration is declared to be void, but there are some exceptions in this rule, in which an agreement is enforceable even though they are made without consideration.

There are following exception of this rule:

Love and Affection. S.25(1): Where an agreement is expressed in writing and registered under the law for the time being in force for the registration of documents and is made on account of natural love and affection between parties standing in a near relation to each other. It is enforceable even if there is no consideration.

Example: A for natural love and affection promises to give his son B Rs. 2000/-. A puts his promise to B into writing and register it. This is a contract.

Compensation for voluntary services. S.25(2): A promise to compensate wholly or in part, a person who has already voluntarily done something for the promisor, is enforceable, even though without consideration.

Example: A says to B, at the risk of your life you saved me from a serious accident. I promise to pay you Rs. 10,000/-. There is a contract between A and B.

Promise to pay a time barred debt. S.25(3): A promise by a debtor to pay a time barred is enforceable provided. It is made in writing and is signed by the debtor or by his agent generally or specially authorized in that behalf. The promise may be to pay the whole or any part of the debt of which the creditor might have enforced payment but for the law for the limitation of suits.

Example: A owes C Rs. 1500/- but the debt is barred by the limitation Act. A signs a written promise to pay C Rs. 750/- on account of the debt. This is a contract.

In any of these cases, such an agreement is a contract:

Explanation 1: Nothing in this section shall affect the validity, as between the donor and the done, of any gift actually made.

Thus, the rule ‘agreement without consideration’ does not apply to completed gift.

Explanation 2: An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be take into account by the Court in determining the question whether the consent of the promisor was freely given.” [5]

Importance of Consideration:

Consideration is one of the most essential element of contract. Consideration is a technical term in the sense of ‘quid pro quo’ i.e. something in return. When a party to an agreement promises to do ‘something’ he must get ‘something’ in return also. In short consideration is ‘something; which is of some value in the eyes of law. Suppose there an agreement without any consideration, the agreement is not a valid contract. Let’s take an example, suppose A’s uncle C is very rich. C promises to A that he will give him a brand new luxury car with no strings attached. Now suddenly C changed his mind, now A can’t force him for that. Because it was one-sided contract only and A has not done or promised to do anything in exchange. Therefore, consideration is very necessary in contract. We can say that contract is legal when both parties to a contract give and take something from each other so this is called the contract and it enforceable by law also.

Role of Exception to Consideration:

As I mentioned above also that in consideration some exceptions are there, but it has some conditions to enforce the contract:

It should be in writing.

It should be register with the proper authority.

All people who all are included in the contract must be near relatives.

Here near relatives means related by blood or marriage or family members.

In that contract, there should be natural love and affection.

But sometimes natural love also overruled by external situations. For example:

Natural love and affection

Rajlukhy Dabee v. Bhootnath Mokerjee: [6]

In this case defendant Mr. Bhootnath had a fight with his wife, Mrs. Rajlukhy Dabee. After they signed a registered contract that he will pay her a certain sum of money for her maintenance. Later on he changed his mind and he refused to give her money. The wife filed a case against his husband and claimed the maintenance amount.

It was held by Calcutta High Court that the agreement was void for want of consideration. Because at that time there was no presence of love and affection to make the contract effective.

Compensation for voluntary services

In this section for enforcement the act should be done voluntarily. If a person promise to pay after getting money for the act performed during his/her minority could be carried within this exception.

The promisor’s survival must be necessary during the performance of the act. In the case of Jubilee S. & W Co. v Chhotalal [7] , it was held that work done by the promoter of a company before its incorporation cannot be regarded as the work done for the company.

Time barred debt:

The debt must be such “of which the creditor might have enforced but for the law of limitation of suits.” The promise made should be an expressed one. A person to be charge with is a term wide enough to take into account the promise made by the person who is willing to pay the debt of another.

Conclusion:

A contract in general never complete without the presence of consideration. In real, consideration is the answer of these question “why are entering into this contract or what are you getting for being a partner in this contract?”. Suppose if consideration is not a part of contract, then court can never judge the decision. That’s why courts need acceptable proof in contract cases and that proof can come only if contract has a consideration. However, there are some exceptions in the Indian Contract Act 1872 and a contract can complete even without any consideration. According to my view these exceptions never nullify the purpose and role of consideration in contract law, rather than they help in some cases. Like some cases would have been proved void due to lack of consideration, in that exceptions like love and affection help them to prove as valid contract. With the help of exceptions court can easily judge the case and give their best decision. I think exceptions play a vital role in consideration and because of exceptions somewhere consideration is most essential part in the contract.