In English law, a contract that is under the seal is enforceable without consideration. In Indian law, there are no such provisions but still. The general rule is the ex nudo pacto non-oritur action, which means that no right of action arises from the contract which is entered into without any consideration. Still, under Section 25 of the Indian Contract Act, 1872, it provides certain exceptions under Section 25 of the Indian Contract Act.
Natural Love and Affection
The essence of the first exception is that a written and registered agreement based on natural love and affection between near relatives is enforceable without consideration.
In Rajlukhy Dabee v Bhootnath Mookerjee- The defendant promised to pay his wife a fixed sum of money every month for her separate residence and maintenance. The agreement was contained in a registered document that mentioned certain quarrels and disagreements between the two.
The Calcutta High Court refused to regard the agreement as one covered by the exception. The court could find no trace of love and affection between the parties whose quarrels had compelled them to separate.
Past voluntary services
A promise to compensate the person who has done something voluntary in the past for the promisor is enforceable. This exception is attracted in the cases when the services are rendered voluntarily. Thus where a service is rendered on behalf of a company that is not in existence, a subsequent promise to pay would not attract this provision. Even where the promisee has done something for the promisor which he had to do legally, then, it will also be covered under this exception.
Lastly, a promise to pay a time-barred debt is enforceable. The promise should be in writing. It should also be signed by the promisor 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. The debt must be such “of which the creditor might have enforced payment but for the law for the limitation of suits”.
Gift actually made
The provisions of “Consideration” do not affect the gift actually made. Under this Section, the gift is defined as:
- The gift is of movables then it should be accompanied by its delivery.
- The gift is of immovables then should be along with registration.
If the above conditions of gifts are fulfilled then lack of consideration would not affect the validity of these gifts. However, apart from the consideration, they could be questioned otherwise.
Where the gift of the property was made by a registered deed and is attested by two witnesses, it was not allowed to be questioned on the ground that she was the victim of fraud, moreover, she was not able to establish it.
Inadequacy of consideration
Adequacy of the consideration means that the consideration which is paid is equal in value to the value for which it is paid. Consideration can be terms of money, property, etc. inadequate consideration is not void but it renders the contract unenforceable because of the improper bargaining or by itself.
Inadequate consideration must be distinguished from nominal consideration. Nominal consideration is deliberately given to make the contract effective but inadequate consideration is less than the amount promised. Although the act does not make any distinction between the nominal and inadequate consideration it was made in the case of Midland Bank trust vs Green.