Exception to consideration

In one minute

The general rule is that an agreement without consideration is void. Section 25 lists three cases where such a promise is still a contract. They are a registered promise out of natural love and affection, a promise to compensate a past voluntary act, and a promise to pay a time-barred debt.

Two more cases stand outside the numbered clauses. A completed gift is valid, and no consideration is needed to create an agency (section 185).

Examiners love this list. In real life, it explains when a family gift promise or a thank-you payment can be enforced.

Exam focus

Frequency: Rarely asked
Usually asked as: Long answer (10 to 15 marks)

Legal provision

Section 25 (opening words): "An agreement made without consideration is void, unless" one of the three cases below applies.
Section 25(1): it is in writing and registered, and is made on account of natural love and affection between parties standing in a near relation to each other.
Section 25(2): 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.
Section 25(3): it is a promise, in writing and signed by the person to be charged or by an authorised agent, to pay wholly or in part a debt that the creditor could have enforced but for the law of limitation.
Section 25, Explanation 1: nothing in the section affects the validity, as between donor and donee, of any gift actually made.
Section 185: no consideration is necessary to create an agency.

Meaning and definition

In the cases above the law says "in any of these cases, such an agreement is a contract". Each exception covers a promise that the law enforces although nothing was given in return.

The reason differs for each. A family promise that is written and registered shows seriousness. A thank-you payment rests on a real benefit already received. A promise to pay an old debt rests on a moral duty that remains.

Exceptions to the rule that an agreement without consideration is voidHow to read this: start at the top box and follow the lines down. Green boxes are the exceptions.

Agreement without consideration is void section 25
- Exceptions inside section 25
  - Natural love and affection section 25(1)In writing, registered, between near relations.
  - Compensation for a past voluntary act section 25(2)A promise to compensate someone who already did something for the promisor.
  - Time-barred debt section 25(3)A written, signed promise to pay a debt that limitation has barred.
- Exceptions outside the numbered clauses
  - Completed gift Explanation 1
  - Agency section 185

Detailed explanation

Each exception is explained below, using the Act's own illustrations where they exist.

1. Natural love and affection (section 25(1))

Three conditions must be met. The promise must be in writing. It must be registered. It must be made out of natural love and affection between near relations. All three are needed, and a spoken promise fails.

Example. In the Act's illustration (b), A promises his son B Rs 1,000 out of natural love and affection. A puts the promise in writing and registers it. This is a contract. Without registration, it would be void.

2. Compensation for a past voluntary act (section 25(2))

A promise to compensate someone who has already voluntarily done something for the promisor is enforceable. The same is true for something the promisor was legally compellable to do. The act came first and the promise after it.

Example. In the Act's illustration (c), A finds B's purse and gives it to him. B promises A Rs 50. This is a contract. In illustration (d), A supports B's infant son, and B promises to pay A's expenses. This is also a contract.

3. Promise to pay a time-barred debt (section 25(3))

A debt that the law of limitation no longer lets the creditor recover can still be revived by a fresh promise. The promise must be in writing and signed by the debtor or an authorised agent. It may cover the whole debt or part of it.

Example. In the Act's illustration (e), A owes B Rs 1,000, but the debt is barred by limitation. A signs a written promise to pay B Rs 500 on account of the debt. This is a contract.

4. Completed gifts (Explanation 1)

The rule on consideration does not undo a gift that has actually been made. As between donor and donee, the gift stands.

Example. Uma hands her niece Rs 10,000 as a wedding gift, and the niece accepts it. Uma cannot take it back for lack of consideration.

5. Agency (section 185)

No consideration is needed to create an agency. A person can appoint an agent without paying or promising anything.

Example. Rao asks his friend Siddiq to collect his pension from a bank. Siddiq agrees. The agency exists although Siddiq gave nothing in return.

Subscription promises

Two companion cases show where the line falls for a promise of money to a public cause.

Enforceable. In Kedar Nath Bhattacharji v. Gorie Mohammad (1886), Gorie Mohammad subscribed Rs 100 towards a town hall at Howrah. Relying on the subscription list, the trustee signed a contract with a builder. The Calcutta High Court held the promise enforceable, because the trustee had incurred liability on the strength of it.
Not enforceable. In Abdul Aziz v. Masum Ali (1914), a subscriber promised Rs 500 for repairing a mosque. The committee had begun no work and incurred no liability. The Allahabad High Court held the promise was not enforceable.

The rule from the two cases together is that a subscription promise binds only once the promisee has relied on it.

Example. A villager promises Rs 2,000 for a new temple wall. The committee hires masons on the strength of the promise. The villager is bound. If the committee had done nothing, the promise would be a bare promise.

Don't confuse: past voluntary act and past consideration

Both involve an act done before the promise. They differ on whether the promisor asked for the act.

Point	Past consideration (section 2(d))	Past voluntary act (section 25(2))
Was the act requested?	Yes, at the promisor's desire	No, it was voluntary
What makes the promise binding?	The past act is consideration	The section makes it a contract without consideration
Promise needed?	Yes	Yes, to compensate

Inside the concept. Lata looks after Sita's shop at Sita's request. Sita later promises Rs 5,000. This is past consideration.

Just outside the concept. Lata mends Sita's roof during a storm without being asked. Sita later promises Rs 2,000. This is a promise to compensate a past voluntary act under section 25(2).

Common mistakes

Forgetting that section 25(1) needs writing, registration and a near relation, all three.
Saying a time-barred debt promise can be oral. It must be in writing and signed.
Listing only the three clauses and missing completed gifts and agency.
Saying every subscription promise is enforceable. It binds only after reliance.

Apply it

Problem

A father orally promises his daughter Rs 5 lakh out of love and affection. He does not pay. Can she enforce the promise?

Issue. Does section 25(1) save a promise with no consideration?

Rule. Section 25(1) needs the promise to be in writing and registered, and made out of natural love and affection between near relations.

Application. The father and daughter are near relations, and the promise is out of love. But the promise is oral and unregistered.

Conclusion. The promise is void for want of consideration, and she cannot enforce it.

Leading case laws

Kedar Nath Bhattacharji v. Gorie Mohammad (1886)
Facts. Gorie Mohammad subscribed Rs 100 towards building a town hall at Howrah. The trustee, relying on the list, signed a contract with a builder. The subscriber refused to pay.

Principle. The promise was enforceable because the trustee had incurred liability on the strength of it.

Why it matters. It shows reliance as the point where a subscription becomes binding.
Abdul Aziz v. Masum Ali (1914)
Facts. A subscriber promised Rs 500 for repairing a mosque. The committee began no work and incurred no liability.

Principle. A bare subscription promise that nobody acted on is not enforceable.

Why it matters. It is the contrast case to Kedar Nath.

How to write this answer in the exam

5-mark answer

State the rule in section 25: no consideration, void.
List the three exceptions in clauses (1) to (3).
Give the Act's illustration for each.

10-mark answer

The general rule and its reason.
The three exceptions, each with conditions and an illustration.
Completed gifts (Explanation 1) and agency (section 185).
Subscription promises: Kedar Nath (1886) and Abdul Aziz (1914).
A table of past consideration and past voluntary act.
One-line conclusion.

Key points to remember

Section 25: an agreement without consideration is void, unless an exception applies.
Section 25(1) needs writing, registration and a near relation, out of natural love and affection.
Section 25(2) enforces a promise to compensate a past voluntary act.
Section 25(3) enforces a written, signed promise to pay a time-barred debt.
A completed gift is valid (Explanation 1). Agency needs no consideration (section 185).
A subscription promise binds only after reliance.

Quick self-test

1. What three conditions does section 25(1) need?

The promise is in writing, it is registered, and it is made out of natural love and affection between near relations.

2. How must a promise to pay a time-barred debt be made?

In writing and signed by the debtor or an authorised agent (section 25(3)).

3. Which case shows that a subscription promise binds once the promisee relies on it?

Kedar Nath Bhattacharji v. Gorie Mohammad (1886).