Agreements Without Consideration Are Void, Unless

Broken down: the three exceptions

Exception 1: natural love and affection, section 25(1)

Four conditions, all of which must be satisfied.

1. The agreement is expressed in writing.
2. It is registered under the law for the time being in force for the registration of documents.
3. It is made on account of natural love and affection.
4. The parties stand in a near relation to each other.

Miss any one and the exception fails. The Act's illustration (b) has all four: A, for natural love and affection, promises to give his son B one thousand rupees, puts the promise into writing and registers it. That is a contract.

"Near relation" is not defined and depends on the personal law and the circumstances of the parties. Natural love and affection must actually be present, and the requirement is real: where a settlement between close relatives is made in an atmosphere of quarrel and disharmony, the courts have held that natural love and affection was absent, so the exception did not apply even though the parties were nearly related and the document was registered.

Exception 2: compensation for past voluntary service, section 25(2)

Three conditions.

1. The act was already done before the promise.
2. It was done voluntarily, that is not at the promisor's request. This is the whole point of the exception: an act done at the promisor's request is already past consideration and good under section 2(d), so it needs no exception.
3. It was done for the promisor, or it was something the promisor was legally compellable to do.

No writing and no registration are required here.

The Act's illustrations are exactly on point. (c) A finds B's purse and gives it to him; B promises to give A fifty rupees. This is a contract. (d) A supports B's infant son; B promises to pay A's expenses in so doing. This is a contract, and it is the second branch, because B was legally compellable to maintain his own child.

Exception 3: a time barred debt, section 25(3)

Four conditions.

1. There is a debt which the creditor might have enforced but for the law of limitation.
2. There is a promise to pay it, wholly or in part.
3. The promise is in writing.
4. It is signed by the person to be charged, or by his duly authorised agent.

The Act's illustration (e): A owes B one thousand rupees, but the debt is barred by the Limitation Act; A signs a written promise to pay B five hundred rupees on account of the debt. This is a contract.

Two points that decide problems. The promise may be for part of the debt, and the illustration shows exactly that. And a bare acknowledgment of the debt is not the same as a promise to pay it: an acknowledgment made before the period expires extends limitation under section 18 of the Limitation Act 1963, whereas section 25(3) creates a fresh enforceable promise after the period has run.

The two Explanations

Explanation 1: gifts already made are untouched. The section is about promises to give, not about completed gifts. Once a gift has actually been made, its validity as between donor and donee is unaffected by the absence of consideration. So a father who hands over jewellery cannot demand it back on the ground that he received nothing for it.

Explanation 2: adequacy is not required, but inadequacy is evidence. Discussed in [Consideration: What It Is, and the Rules It Obeys]. Illustrations (f) and (g) are the pair: the horse worth a thousand rupees sold for ten is a contract; where free consent is disputed, the inadequacy is a fact the court should take into account.

Two further cases outside section 25

Section 25 is not the whole list, and an answer that stops at three exceptions is incomplete. Two other provisions of this Act dispense with consideration.

Section 63: remission. A promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or extend the time for performance, or accept any satisfaction he thinks fit. No consideration is required. This is a clear departure from the English rule in Pinnel's Case. See [Remission and Waiver of Performance].

Section 185: agency. "No consideration is necessary to create an agency." A person may be appointed an agent gratuitously and the appointment is good.

To these is often added a third from outside the Act: a completed gift, which Explanation 1 preserves, and a charitable subscription where the promisee has, on the faith of the promise, undertaken a liability, though that is better analysed as ordinary consideration.

A worked example

Vikram makes four promises in one week. Assess each.

• He promises his brother Aditya five lakh rupees "out of brotherly affection", says so in front of the family, and writes nothing down. Exception 1 fails: there is no writing and no registration. The agreement is void under section 25. Affection and near relation are not enough by themselves.
• The same promise, put into a written deed and registered. All four conditions of Exception 1 are satisfied, so it is a contract, exactly as illustration (b).
• His neighbour Farida, unasked, rescued Vikram's dog from a drain last month. Vikram now promises her ten thousand rupees. Exception 2 applies: the act was already done, it was voluntary, and it was for the promisor. A contract, and no writing is needed. Note that it could not have been consideration under section 2(d), because the act was not at Vikram's desire.
• Vikram owes a supplier two lakh rupees on an invoice from 2019, now time barred. He signs a letter promising to pay one lakh. Exception 3 applies: a debt the creditor could have enforced but for limitation, a promise to pay part of it, in writing, signed by him. A contract for one lakh rupees. Had he merely written "I acknowledge this debt", without promising to pay, the exception would not be satisfied.

Now change the last one. He makes the promise orally in front of two witnesses. Exception 3 requires writing and signature, so the promise is void.

What it does NOT mean

"Any promise between close relatives is binding." Exception 1 needs all four conditions, and writing plus registration are the two most often missing.

"A promise to pay for past services is always binding." Under Exception 2 the service must have been voluntary and done for the promisor. If it was done at his request, it is good under section 2(d) instead, which is a different route to the same answer.

"A time barred debt can be revived by admitting it." Section 25(3) needs a promise to pay, in writing and signed. A bare acknowledgment does something different, and only within the limitation period, under section 18 of the Limitation Act 1963.

"Section 25 lists every case where consideration is unnecessary." It does not. Section 63 (remission) and section 185 (agency) also dispense with it, and Explanation 1 preserves completed gifts.

"Inadequate consideration makes the agreement void." Explanation 2 says the opposite, while making inadequacy relevant evidence of whether consent was free.

Quick revision

• s.25: an agreement made without consideration is VOID, unless it is one of three cases, in which case it is a contract.
• (1) Natural love and affection: writing + registration + natural love and affection + near relation. All four. Illustration (b).
• (2) Past voluntary service: the act was already done, voluntarily, for the promisor, or was something he was legally compellable to do. No writing needed. Illustrations (c) the purse, and (d) the infant son.
• (3) Time barred debt: a promise in writing and signed to pay wholly or in part a debt the creditor might have enforced but for limitation. Illustration (e).
• Explanation 1: a gift actually made is unaffected. Explanation 2: consideration need not be adequate, but inadequacy is evidence on free consent.
• Outside s.25: s.63 remission needs no consideration, and s.185 no consideration is necessary to create an agency.

Test yourself

1. State the rule in section 25 and its three exceptions. An agreement made without consideration is void unless it is expressed in writing and registered and made on account of natural love and affection between parties standing in a near relation to each other; or it is a promise to compensate wholly or in part a person who has already voluntarily done something for the promisor, or something the promisor was legally compellable to do; or it is a promise in writing and signed by the person to be charged, or his authorised agent, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law of limitation. In any of these cases the agreement is a contract.

2. A father orally promises his son two lakh rupees out of affection. Is it enforceable? No. Exception 1 requires the agreement to be expressed in writing and registered, as well as made on account of natural love and affection between parties in a near relation. Affection and relationship alone do not satisfy it, so the agreement is void under section 25.

3. Why does Exception 2 require the service to have been voluntary? Because a service rendered at the promisor's request is already consideration under section 2(d), past consideration being good in India, so no exception is needed for it. Exception 2 exists precisely for the case that section 2(d) cannot reach, where the act was done without being asked and so did not move at the desire of the promisor.

4. Distinguish section 25(3) from an acknowledgment under the Limitation Act. Section 25(3) creates a fresh contract out of a written and signed promise to pay a debt whose recovery is already barred, and it may be for part only. An acknowledgment under section 18 of the Limitation Act 1963 must be made before the period expires and merely starts a fresh period of limitation running for the existing debt; it is not a promise to pay and does not revive a barred claim.

5. Name two provisions outside section 25 under which no consideration is required. Section 63, by which a promisee may dispense with or remit performance, extend the time, or accept any satisfaction he thinks fit, without consideration, departing from the English rule in Pinnel's Case; and section 185, which provides that no consideration is necessary to create an agency.