LAW OF CONTRACTS ASSIGNMENT

TOPIC: A STUDY OF PROVISIONS PERTAINING TO

CONSIDERATION UNDER THE INDIAN CONTRACT ACT, 1872 WITH
RELEVANT CASES
CLASS: B.A.LLB. 2nd SEMESTER
SUBMITTED TO: DR. AMBIKA
SUBMITTED BY: MANVENDRA SINGH RANA
ROLL NO: 1020212224
DECLARATION
I, hereby declare that the assignment entitled “A study of provisions pertaining to consideration
under the Indian Contracts Act, 1872 with relevant cases” is an outcome of my own efforts under
the guidance of Dr. Ambika Ma’am. I further declare that the following project has not been
submitted to any other university. I followed the guidelines provided by the university.
ACKNOWLEDGEMENT
I would love to put conversational expression of gratitude to Dr. Ambika Ma’am, Assistant
Professor at Himachal Pradesh National Law University providing me an opportunity through
this project to explore the various sections under the topic ”Consideration under the Indian
Contract Act, 1872 with relevant cases”, thereby helping me assimilate and pickup on it. I
believe this will help me comprehend better and get an enhanced hang on some aspects of the
Contracts. I would like to thank all the people who helped me finding the resources for making
the project. At last I would like to thank all those who helped me compile the research in this
project work.
INDEX
 INTRODUCTION
 PERFORMANCE OF EXISTING DUTIES
 PERFORMANCE OF CONTRACTUAL OBLIGATIONS
 CASE LAWS
 ILLUSTRATIONS
 BIBLIOGRAPHY
INTRODUCTION
Consideration is defined under Section 2d of the Indian Contracts Act, 1872. It is defined as
when the promisee at the request to the promisor has:

 Done or abstained from doing something,

 Does or abstains from doing something,
 Promises to do or abstain from something,
Then such act or abstinence is called consideration.

Why do we need consideration

Only the promises that are backed by consideration are enforceable because any promise made
without any obligation is usually very rash and without any sort of deliberation. The reason for
making consideration an essential part of a contract is because it levies a sort of burden on the
parties to fulfil the terms of the contract. For Example, if, A promises to give B a car without B
doing or abstaining to do anything for it, makes the promise by an unenforceable. This will be a
gift and not a contract per se.

Legal requirements as to consideration

 Must move at the desire of the promisor- Section 2d of the Indian Contract Act, 1872,
clearly mentions that the consideration should be at the desire of the promisor if the
consideration is made at the will of the third person or is not according to the promisor
then it is not a good consideration.

 Can move from the promisee or another person- Unlike English law in which the
consideration must move at the desire of the promisor, in Indian law as long as there is
consideration it is immaterial as to who has furnished it. Moreover, in the case
of Chinnaya vs Rammyya the consideration can also move at the desire of the third
party but only in the condition where he is the beneficiary of the contract.

 Can be an act, abstinence or even a promise- If the promisee does something or

abstains from doing something for the promisor, at his desire, then it will be a good
consideration.
 Can be past, present or future:
PAST- When the consideration is given before the promise was made. For example- A saves B
at the latter’s desire. B after a month promises to pay A. the act of A will amount to past
consideration for the payment made by B.
PRESENT- When the consideration is given at simultaneously to the promise made, then this is
present consideration or executed consideration. For example- cash sales.

FUTURE- When the consideration of the promise made is to be passed at a future date then that
is called future or executory consideration. For example- A promises to pay B, when the latter
will fetch newspaper for him.

 Consideration need not be adequate- It is not necessary that the consideration is equal
or adequate for the promise made. However, it is mandatory that the consideration
should be something in which the law attaches some value. It is for the parties to
decide the value of the consideration and not a court of law. For example- A sells
table to B and B gave him rs 500. It will be difficult for the court to ascertain the value
of the table, so if A is satisfied with the amount given then the consideration is valid.

 Should be real- although the consideration need not be adequate it should be real and
not illusory. The consideration should not be physically impossible, legally not
permissible or based on an uncertain event or condition.

 Should not be something which the promisor is already bound to do- a consideration
to do something which the promisor is already required to do is not a good
consideration. For example- the public duty done by a public servant.
 Should not immoral, or against the public policy of the state- under Section 23 of the
Indian contract it is given that consideration should not be illegal, immoral or against
public policy. the court should decide the legality of the consideration and if found to
be illegal than no action on the agreement should be allowed.

Stranger to a contract

It is a general principle that the contract can be enforced only at the behest of the parties to the
contract. No third party could enforce it. It arises from the contractual relationship between the
two parties. However, Lord Dennings has criticised this rule a number of times as this rule has
never benefited the third party whose roots go deeper in the contract. This rule has two
consequences-

 No third party could enforce the contract.

 The contract between the parties cannot levy an obligation on any person other than
those party to a contract.

Exception

There are three exceptions to this rule:

  Marriage settlements- When an agreement is made with regards to marriage, family
settlement or partition and is made in such a way that it benefits another person who is
not a party to the contract then he may sue for the enforcement of the contract.

 Covenants running with the land- in cases of the contract of property the purchaser
will be bound by all the conditions and covenants of the land, even though he was not
a party to the original contract.
 Acknowledgement of estoppels- in case the terms of the contract require that an
agreement has to be made with the third party, then this has to be acknowledged. This
acknowledgement could be expressed or implied. This exception covers the areas
where the promisor either expressly or by conduct has posed himself to be an agent.

Past consideration
It is the consideration which is made before the agreement. It is something which the promisee
has already done at the desire of the promisor.

For example- A rescues B. B promises to give him Rs. 1000 for the same. Here it is a past
consideration as the act of rescuing happened before any agreement.

In English law past consideration is no consideration. If A saves B and B promises him to pay
but later refuses to do so, then under English law, A cannot enforce it in a court of law. B can
give him the money, but that would not be considered as a past consideration but it would be by
way of gratitude. This, however, causes a lot of inconveniences, as if a person would pay for the
past act then he shall have to recognise the past consideration which is not valid under English
Law. the report of the law commission of England proposes to remove this rule.

In India however, there is no compulsion to follow the English law and past consideration is
regarded to be valid.

Past act at request good consideration

The past act done for consideration would be a good consideration. In the case of Lampleigh vs
Brathwait, in which the defendant requested the plaintiff to help him get a pardon from the king.
The plaintiff put in efforts, travelled up to the king etc.his request was not sanctioned. The
defendant promised to pay him for the same. Later he refused to do so. Plaintiff sued him in a
court of law. The court held that the defendant must pay the plaintiff because he has himself
requested him to help him. Hence the act of the plaintiff, although done in the past, would still be
regarded as a valid consideration.

Past voluntary service

If a person renders voluntary services without any request or promise from another and the
person receiving the services makes a promise to pay for the services, then such a promise is
enforceable in India under Section 25(2) of the Indian Contract Act, 1872 which states: ‘‘An
agreement made without consideration is void unless it’s 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 compellable to do; or unless.’’

For Example- Peter finds Noah’s wallet on the road. He returns it to him and Noah promises to
pay Peter Rs 500. This is a valid contract under the Indian Contracts Act, 1872.

Past service at request past and executedAn act done before the giving of a promise to make a

payment or to confer some other benefit can be a consideration for the promise. The act must

have been done at the promisor’s request, the parties must have understood that the act was to be

remunerated either by a payment or the conferment of some other benefit, and payment or the

conferment of a benefit must have been legally enforceable had it been promised in advance.

Executory Consideration

Consideration may be something which is done or in the process of being done. It also consists
of an act which is promised to be done in the future. There may be promises which form the
consideration for each other. Before the completion of a promise which forms a part of the
consideration of the other promise, then such consideration is called executory consideration.

For example- if A promises to pay B when he will sell the goods to him. Until time A does not
get the goods, the consideration is executory, when he got the goods and paid for the same, the
consideration is executed. If B does not sell the goods then A could also breach for the suit.

Value need not be adequate

Consideration is defined as an act of abstinence from doing something, at the desire of the
promisor. The consideration should be of some value in the eyes of law, but the courts have been
very liberal in interpreting and anything of value by the parties is regarded as a valid
consideration.

The value need not be adequate for the promise made. The court will not enquire whether the
value of the consideration is equivalent to the promise that is made. If the parties agree to the
value of the consideration then it is sufficient. This rule is applicable as per Indian and English
law.

Inadequacy as evidence of imposition

The inadequacy of consideration is regarded to check whether the consent is freely given. For
example- A agrees to sell his property worth Rs 1 crore to B for Rs 10,000. denies that his
consent for the sale of the property was not freely given. A party seeking to set aside the
transaction based on the inadequacy of the consideration must show that he was unable to
understand it or was by way of some imposition. If the court is satisfied that the contract was
freely entered into then it would not matter whether the consideration was adequate or not.

Where the consideration is inadequate it could be because of fraud, coercion, mistake etc. the
same would be the case when the consideration is so low that it shows some serious inequality of
the bargaining power.

Forbearance to sue

The most usual form of forbearance is the forbearance to sue within a reasonable time. This
promise to forebear can be expressed or implied from the circumstances. Sometimes it is very
difficult to construe from the fact whether it was an agreement to forbearance (which is not a
good consideration until not backed by the request of the promisor) or actual forbearance. Hence
to clarify in the case Bittan Bibi vs Kuntu Lal, it was held that the promise of forbearance should
move at the desire of the promisor.

Forbearance to sue on a claim which is void is not a consideration. Moreover, abstaining to sue
could be valid consideration only when the person who is abstaining, has a valid right to sue.
Also, it is not necessary to specify the time for such abstinence. A request for forbearance
without specifying the length is understood to be a forbearance for a reasonable time.

Compromise good irrespective of merits

It is an important kind of forbearance which is undertaken by way of a compromise of a doubtful

claim. The important element here is to ascertain the limits of which the compromise will
function and will still be a good consideration. The difference between forbearance and
compromise is that in the latter claim is not admitted and the claimant promises to abandon the
claim.
The abandonment of a doubtful or disputed claim is a good consideration even if it later turns out
to be unsustainable. The test is to find whether the person thought in good faith and he has a case
which he was abandoning. A compromise of a claim arising out of an illegal contract is
insufficient as a consideration unless the compromise arises out of a dispute of fact as to whether
the contract is illegal.

Performance of existing duties

Performance of legal obligations

The performance of what one is already bound to do, either by general law or by a specific
obligation to the other party, is not a good consideration for a promise, because such
performance is not a legal boundation a person. Moreover, on the performance of a legal
obligation, a reward from the private organisation is taken then it would be against the public
policy. It should be ensured that the legal duty actually exists. But if a man who already has a
legal obligation undertakes to do something or to do something in any of the admissible way i.e.
the person has forgotten the choice that the law allows him to take is a good consideration.

Moreover, the actual performance of an existing duty may confer a factual benefit, because on
actual performance the promise is saved of pursuing a legal remedy for its breach.

Performance of contractual obligations

Pre-existing contract with the promisor

Usually, the performance of a duty already owed under the contract to the promisor is not good
consideration. Even in terms of public policy, it is necessary to discourage a tendency to use
improper pressure or threatening to break one’s contract unless another party complies by paying
or promising to do so. The promisee must find it beneficial to perform the promise immediately
rather than paying for its breach which may not fully compensate the promisor.

Promise to pay less than the amount due

A promise to pay less than what is due in the contract cannot be regarded as consideration. This
rule was given in Pinnel’s case. The court held that a smaller amount cannot in whole satisfy a
larger sum. However, a gift of the horse, robe etc can be considered as a good satisfaction
because under certain circumstances it is considered to be more beneficial than money,
otherwise, the person would not accept it.
This holding was criticised in a way wherein several cases the jurist held that if the party is
content to receive any amount be it less than the sum and he is satisfied by the same, then it
should be considered to be a valid consideration. However, in spite of all this criticism, the
Pinnel’s Case was applied unanimously in various circumstances.

Exceptions to the rule in Pinnel Case

Part-payment by the third party

The part payment by the third party may be a good consideration for the whole debt.

Composition

Payment of a lesser amount would be a good consideration for the larger sum where this is done
for some already entered compromise.

Payment before time

Payment of a lesser sum before the time or in a different mode, a different place than agreed by
the parties or the gift of a horse or robe etc is a valid satisfaction of the goods.

Promissory estoppel

The doctrine of promissory estoppel is considered to be a departure from the doctrine of

consideration. A promise that was made in future is estoppel. If the promise is made with the
intention that it would be acted upon and it was in actuality acted on, then the promisor cannot be
allowed to back out and it could be enforced in a court of law as well.

Promissory estoppels differ from traditional contract theory. It protects reliance. This doctrine
was developed to prevent injustice if the promisee suffers from any injustice due to the reliance
on the promise of the promisor, even though it was not required a consideration. However, in
English law, the doctrine of promissory estoppel is used only as passive equity and is invoked
only in the cases of defence.

Position under the Indian contract act is different than under English Law

Under English Law

It is an established rule under English law that the third party cannot sue a contract made for his
own benefit. Apart from special circumstances. A person who is not a part of the contract cannot
enforce or rely for protection on its provisions. Such right can be conferred to a property by way
of trust but it cannot be on a stranger to a contract as a right to enforce the contract.

Under Indian Law

It is established that the consideration can move from a third party but it cannot sue for its own
agreement. However, there was lots of confusion on this point. Although the definition of
“consideration” is wider in the Indian than in the English law since common law is applicable,
therefore it is generally applied that the third party cannot enforce the contract.

Law Commission of India in one of its reports mentioned that the contract must be enforceable
by a third party if it expressly for his benefit but the defences of the party to the contract must
also be considered. It is also proposed that the parties cannot alter the terms of the contract once
the third party takes over the contract.

Pre-existing contract with the third party

A promise to perform a pre-existing contractual obligation with a third party can be a valid
consideration for another contract. The point of conflict in these kinds of arrangements is
regarding the presence of consideration for the promisor. This conflict was settled in the case
of Shadwell vs Shadwell, where the plaintiff got engaged and his uncle wrote him a letter
promising him to pay 150 pounds throughout his lifetime.

The jurists in the above case held that there was adequate consideration for the contract as it
could be construed from the fact that it was made because of the engagement of his nephew.
Moreover, marriage is of great interest to the near relatives. Also, the contract is binding on the
uncle as it is possible that the plaintiff has undertaken many liabilities on account of the promise
given by the uncle and if the payment is withheld then the plaintiff could face a lot of
embarrassment.

Under these provisions, the person should be safeguarded from any further payment which is not
enforceable as per the contract. Like in the case of Syros Shipping vs Elaghil Trading co. a
vessel which was prepaid had to deliver tractors to Yemen. The charters defaulted their payment
to the shipowner because of the congestion in the ports. During this period the shipowner asked
for extra payment, the consignees agreed to pay but later refused. The court held that since there
was no consideration for the promise, moreover no estoppel was created hence the contract is not
enforceable.

Consideration and motive

Consideration is not the same thing as motive or a mere desire. The requirement of consideration
is vital and the contract could not be satisfied with just a moral obligation. Consideration for a
promise is always a motive for the promise, unless it is nominal or invented, while a motive for a
promise may not always be a consideration for it. Motive induces a promise to be given. Similar
holding was given in the case of Dwarampudi Nagarathnamma vs Kuruku Ramayya, where the
Karta of a Hindu Undivided Family gifted his concubine a portion of the property beyond the
cohabitation was a motive and not a consideration, and it should be considered as invalid because
it was motivated by the desire to compensate for his past services.

Absence of consideration
If the promissory note is neither genuine nor fraud then it is recoverable under the provision of
this code, with interest. The court said that mere denial of the passing of consideration does not
make any defence. Something which is probable has to be brought on record.

Exceptions under Section 25, Indian Contract Act

In English law, a contract which 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.

Fiduciary relation

In case of a contract entered into between the relatives or on account of natural love and
affection is enforceable without consideration. The meaning of love and affection is not
judicially construed but parties who are nearly related would have instinctive love and affection.
However, this could be overruled with regards to some external circumstances, like between the
wife and husband who are compelled to live separately because of quarrelling. But a settlement
to be given to a man by the wife by way of maintenance could be enforced without any
consideration because it will result in peace and family harmony.

The term “family” (in this context) should be understood as a group of people living together and
possessing a right of succession, inheritance etc., but the family could be construed as a people
who are bonded by natural love and affection.

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 which 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.

In Case of a Minor

In Karam Chand vs Basant Kaur, the court held that even where the promisor after attaining
majority, promises to pay for the goods attained in minority will also fall under this provision.
The court said that although the promise made by a minority is void but is the promise is made
by a person of full age to the promisee who has done something for him voluntarily when the
promisor was a minor, then it will also attract this exception.

Time barred debt

A promise to pay a time-barred debt is enforceable and it should be signed by the person or his
agent. It could be to pay for the whole debt or in part. The debt to be enforced could be paid
except for the law of limitation. However, the person who is under no obligation to pay to
another person is under no obligation under this clause.

The promise to pay the debt must be expressed, it is not sufficient if the intention to pay could
not be gathered from the circumstances.

Acknowledgement of the debt is different from the promise to pay the debt. The
acknowledgement of the person should be done before the period of limitation. Promise to pay a
time-barred debt is a new contract. It is not just merely an acknowledgement of the existing
liability.

Gift actually made

The provisions of “Consideration” do not affect the gift actually made. Under this Section, 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 but it was made in the case of Midland Bank trust vs
Green.
CASE LAWS

In Dutton v. Poole, the court observed that the stranger was having very close relations
to the promise. He could, therefore, maintain an action on a contract as a beneficiary. In
this case the father of the defendant wanted to sell some timber trees. The defendant
promised (in consideration that his father would refrain from cutting down the trees) to
pay to his sister Grizil pounds 1000 Grizil (as Mrs. Dutton) with her husband sued from
breach of the promise. It was held that the action was maintainable.

Analysis

In this case the reason to ignore the doctrine of privity of contract was that there were
very near and affectionate relation between the plaintiff and her father who was the
promisee under the contract. The court was of the opinion that natural love and affection
could constitute consideration. Therefore, the consideration and promise to the father
could extend to the children for there exists natural love and affection between them.
The plaintiff was, no doubt, a stranger to the contract, but not a stranger to the
consideration, she was deemed to have furnished consideration, so she was held entitled
to sue.

Exceptions to the doctrine of privity of contract

a. Beneficiaries in the case of trust: A beneficiary under an agreement to create a

trust can sue upon the agreement, though he was not a party to the contract
between the settler and the trustees.Example: A creates a trust for the benefit of
B, and appoints X, Y and Z as trustees. B can sue for benefits available to him
under the trust though he is not a party to the contract.

Nawab Khawaja Muhammad Khan v. Nawab Hussaini Begum, the Privy

Council firmly established an exception to the doctrine of privity of contract and
allowed an action by a stranger to the contract. In this case the appellant executed
an agreement with the respondent’s father. By this agreement he agreed that in
consideration of respondent’s marriage with his son (both, bride and bridegroom
were minor at the time) he would pay to the respondent ` 500 per month in
perpetuity for her kharch-e-pandan (betelbox or betel leaf expenses) from the date
of marriage. He also charged his property in Agra and Dholpur with this money
and mentioned that in case of his death his heirs or representative would pay the
money out of these properties. The arrear of the money was claimed by the
 plaintiff after separation from her husband. In this case it was held that she could
enforce the promise in her favour. Although she was not a party to the agreement
but as the contract is entered for her benefits only so she was clearly entitled to
proceed in equity to enforce her claim.

The Privy Council observed that it might occasion serious injustice to apply the
common law doctrine of privity of contract in a country like India where
marriages are contracted for minors by parents or guardians.

b. In case of provision in marriage settlement of minors: A child in a contract of

marriage is treated as a party who has given consideration, and he is entitled to
enforce any contract to settle property, which a marriage settlement may contain.

c. In case provision is made for the marriage or maintenance of a female member of

the family on the partition of Hindu Undivided family: The female members
though not parties to the contract, possess an actual beneficial right which places
them in the position of beneficiaries under the contract, and can, therefore,
enforce the promise.

d. Assignee of a contract: An assignee under an assignment made by the parties, or

by the operation of law, e.g., in case of death or insolvency, can sue upon the
contract for the enforcement of his rights and interests. A debt can be assigned by
a creditor to a third person without the consent of the debtor. But a mere nominee
cannot sue e.g. the person for whose benefit another has insured his own life
cannot sue.

e. Where a charge is created on certain specific immovable property in favour of

certain person: Such charge is enforceable at the instance of the beneficiary
entitled, though he may be a stranger to the document creating the charge.

f. Estoppel : Where one party has by his words or conduct made to the other a
promise or assurance which was intended to affect the legal relations between
them, then once the other party has taken him on his words and acted upon them,
the party who gave the promise shall be estopped from denying his liability
arising from the promise.

g. Contracts which are entered into through an agent, can be enforced by the
principal.

When no consideration is necessary (Exception to Section 25)

Agreement without consideration, void, unless

it is in writing and registered or is a promise to compensate for something done or is a

promise to pay a debt barred by limitation law.—An agreement made without
consideration is void, unless—

1. It is expressed in writing and registered under the law for the time being in force
for the registration of [documents] and is made on account of natural love and
affection between parties standing in a near relation to each other; or unless.

2. It is 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 compellable to do; or unless.

3. It is expressed in writing and registered under the law for the time being in force
for the registration of [documents] and is made on account of natural love and
affection between parties standing in a near relation to each other; or unless.

4. It is a promise, made in writing and signed by the person to be charged therewith,

or by his agent generally or specially authorized in that behalf, to pay wholly or
in part a debt of which the creditor might have enforced payment but for the law
for the limitation of suits. In any of these cases, such an agreement is a
contract. Explanation 1.—Nothing in this section shall affect the validity, as
between the donor and donee, of any gift actually made.Explanation 2.—An
Agreement to which the consent of the promisor is freely given is not void merely
because the consideration is inadequate; but the inadequacy of the consideration
may be taken into account by the Court in determining the question whether the
consent of the promisor was freely given.

Illustrations

a. A promises, for no consideration, to give to B ` 1,000. This is a void agreement.

b. A, for natural love and affection, promises to give his son, B, ` 1,000. A puts his
promise to B into writing and registers it. This is a contract.

c. A finds B’s purse and gives it to him. B promises to give A ` 50. 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.
e. A owes B ` 1,000, but the debt is barred by the Limitation Act. A signs a written
promise to pay B ` 500 on account of the debt. This is a contract.

f. A agrees to sell a horse worth ` 1,000 for ` 10. A’s consent to the agreement was
freely given. The agreement is a contract notwithstanding the inadequacy of the
consideration.

g. A agrees to sell a horse worth ` 1,000 for ` 10. A denies that his consent to the
agreement was freely given.

h. The inadequacy of the consideration is a fact which the Court should take into
account in considering whether or not A’s consent was freely given.

Explanation

The general rule is that contracts made without consideration are void. But
Section 25 of the Contract Act lays down the undermentioned exceptions which
make a promise without consideration valid and binding.

1. Promise made on account of natural love and affection

0. When a contract is made on account of natural love and affection between

the parties.

i. The parties are standing in a near relation to each other, and

ii. The contract is in writing and registered under the law for the time being in
force for the registration of documents.

0. Examples: A, out of his love and affection, promises to give his

wife, ` 10,000. This promise is put into writing and is registered. It
will be a valid contract without consideration.

a. After persistent quarrels and disagreement between husband and his

wife, the husband promised in writing to pay his wife, a sum of
money for her maintenance and separate residence. The agreement
was also registered. It was held that the promise was not enforceable
because it was not entered out of natural love and affection.
(Rajlusmi Dabee v. Bhootnath) (1900).

2. Promise to compensate for voluntary services:When a contract is made to

compensate a person, who has already done something voluntarily for the
promisor, or done something which the promisor was legally compellable to do.
 Here two conditions must be fulfilled. First, the act must have been done
voluntarily and for the benefit of the promisor, secondly, the intention of
promisor must have been to compensate the promisee. This contract may be oral
or written. Thus, services voluntarily rendered but not with gratuitous intention
can form valid consideration for a promise given to compensate him.

3. Promise to pay a time barred debt:According to section 25(30), a promise by a

debtor to pay a time barred debt is enforceable it is made in writing and is signed
by the debtor or by his agent generally or specially authorised 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 limitation of
suits.For example, A owes B ` 2,000 but the debt is barred by the Law of
Limitation. A sign written promise to pay B ` 1,000 on account of the debt. This
is a contract.

4. Agency: Consideration is not necessary to create an agency.

5. Complete gift: The rule ‘no consideration, no contract’ does not apply to
completed gifts. According to Explanation to section 25, nothing shall affect the
validity, as between the donor and donee of any gift actually made.

Exceptions to the doctrine that Stranger to Contract cannot sue:

According to general rule of law only parties to a contract my sue and may be sued on
the contract. This rule is based on the doctrine of the privity of contract. This means
relationship subsisting between the parties to a contract. It means mutually of will and
creates a legal bond or tie between the parties to a contract. The consequences of the
doctrine of privity of contract are:

1. Any person who is not a party to a contract cannot sue upon it even though the
contract is for his benefit and he supplied consideration.

2. A contract cannot give rights or impose obligations arising under the contract on
any person other than the parties to it.

But there are certain exceptions to the rule that a stranger can sue, i.e., a stranger can sue
in certain cases. This is possible in cases of trust or charge. Similarly, a stranger may sue
in case of marriage settlement, partition or other family arrangements. A stranger can
also be sued in case of acknowledgement or estoppel. Where the promisor by his
conduct, acknowledge or otherwise constitutes himself as an agent of the Third party, a
binding obligation is thereby incurred towards him. Similarly, in case of assignment of a
contract, the assignee of rights and benefits under a contract not involving personal skill
can enforce the contract subject to the equities between the original parties.
BIBLIOGRAPHY

 www.indiankanoon.org
 Ministry of Law and Justice website
 National Digital Library of India
 Indian Contract act, 1872
 RK Bangia: Law of Contracts