An agreement without Consideration is void:
Consideration is the most essential element for the validity of an agreement. An agreement without consideration is void unless it comes under any of the exception set out in sub-clauses (1) to (3) of section 25 of the Contract Act 1872.
Exception 1, agreement made on account of natural love and affection:
- On account of natural love and affection.
- Is expressed is writing.
- Registered under the law for the time being in force for the registration of document is valid.
In a case which falls under clause (1) of section 25, the contract cannot be declared to be void on the ground of the absence of any monetary consideration. Therefore, where a person under takes by means of a registered document, out of natural love and affection, to discharge the debt due by another and, on the former failing to do so, the debtor himself discharge the debt as the breach of the obligation becomes actionable under section 25.
Meaning of near relation:
Parties standing in a near relation do not mean “near relative” only. The parents of a Muslim lady stand in near relation to her husband and an agreement to pay them certain maintenance is a valid disposition within section 25(1).
Where a person settles an annuity upon his alleged wife who was not validly marriage to him the settlement cannot be construed to be a contract for consideration of natural love and affection but is a gift pure and simple and no consideration for it is necessary.
Compensation for past services: (Clause 2).
This a promise to compensate, wholly, or in part a person who has already voluntarily done.
- Something for the promisor, or
- Something which the promisor was legally compel-able to do and the promisor afterwards in consideration thereof has expressly made it. Or
- Otherwise at his request does the latter some services.
Where the agreement is made by a person to compensate another for the past service rendered by him the agreement is valid. Thus clause appears to cover cases where a person without the knowledge of promisor undertakes to re-compensate him for it. Thus a promise to compensate another for the assistance he had rendered in a suit which the promisor was interested is valid within the meaning of section 25 (2)
Contract to pay time-barred debt: Clause (3).
A time barred debt can form a good consideration because the debt is not extinguished although the remedy is lost. Therefore, under section 25 (3) a debtor can enter into an agreement in writing to pay the whole or part of a debt of which the creditor might have enforced payment but for the law of limitation.
Time Barred debt:
Where suit was factually barred by time, same would be deemed to be within u/s 25 Contract Act, 1872 where debtor had acknowledge such debt and promised to pay the same provided such acknowledgment was made within three years of filing the suit
Agreement to pay time barred debt:
Cannot be avoided u/s 25. (NLR 1987 UC 324))
Facts to be established for claiming benefits:
Facts to be established for claiming benefits u/s 25, Contract Act, 1872 were that there must be a promise; which must be signed by a person to be charged therewith or by an agent generally or specially authorized in that behalf; and there must be a debt barred by time. (1993 CLC 1565 (b)).
Time Barred debt obtained under coercion:
Promise in writing to pay time-barred debt obtained under coercion, promise invalid promisee not entitled to any relief on basis of such writing.