State the exceptions to the rule No consideration no contract.

No consideration no contract exceptions .

A promise without consideration cannot create a legal obligation. The general rule is that an agreement made without consideration is void rule is contained in Section 25 of the Indian Contract Act, which declares that an agreement made without consideration is void. This means that consideration is must in all the cases. But this Section provides certain exceptions where an agreement is valid even without consideration.

These cases are :

Agreement made on account of natural love and affection [Section 25 (1)]: An agreement without consideration is enforceable if, it is (i) expressed in writing and (ii) registered under the law for the time being in force for the registration of documents, and is (iii) made on account of natural love and affection, (iv) between the parties standing in near relation to each other.

The following conditions must be satisfied for the application of the exception:

  • The agreement is in writing
  • It is registered.
  • It is made on account of natural love and affection
  • It is between parties standing in near relation to each other.

Agreement to compensate for past voluntary services [Section 25 (2)] : An agreement without consideration is enforceable, if it is a promise to compensate wholly, or in part, a person who has already voluntarily done something for the promiser, or something which the promiser was legally bound to do.

Agreement to pay time-barred debt [Section 25(3)] : According to this exception, a promise to pay a time barred debt wholly or in part is enforceable if such promise is in writing and signed by the debtor or his authorized agent. A time barred debt cannot be recovered and, therefore, a promise to repay such debt is without consideration.

The following conditions must be satisfied for the application of this exception:

  • He promise should be in writing.
  • It should be signed by the promiser or his authorized agent.
  • The debt must be time-barred therefor, the limitation period for the recovery of the debt must have expired.
  • There must be an express promise to pay. It may be to pay whole or part of the debt.

Completed gift : The gift actually made by a donor and accepted by the done will be valid even without consideration. So in case of a gift actually made, consideration is not necessary.

Contract of agency : Section 185 specifically states that no consideration is necessary to create an agency. Thus, when a person is .appointed as an agent, his appointment is valid even if there is no consideration. Although, generally, an agent gets remuneration by way of commission for the services rendered, but no consideration is immediately necessary at the time of appointment.

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