Consideration : Sn. 25
The legal maxim "Ex nudo pacto non oritur actio", means "Agreement without consideration is void". This principle is embodied in Sn. 25 contract act.
1. Section 25 declares that an agreement made without consideration is vod. Sn. 2 Cl. (d) defines consideration. When at the desire of the promisor, the promisee or any other person
has done or abstains from doing, or does or abstains from doing, or promises to do or abstains from doing, something, such act or abstinence or promise is called a consideration for the promise.
1. A promises for no consideration to give to B, Rs.1,000/- this is a void agreement.
2. A agrees to sell his house for Rs.50000/- to B. For A's promise the consideration is Rs.50000/- and for B's promise the consideration is the house. Consideration must be clear, specific and not illusory. The rule is "no consideration, no contract". The consideration may be inadequate if the parties agree. Consideration should not be illegal, immoral or opposed to public policy. The basis of all contractual obligations, is consideration and without consi-deration, the contract becomes void and unenforceable in the courts.
Section 25 provides for certain exceptions :
i) If an agreement is made on account of natural love and affection between parties related to each other, then the agreement is valid only if it is expressed in writing and registered duly. Gifts are valid under this section.
Ex : A for natural love and affection to give his son Rs.5000/-duly executes a document (Gift deed) and registers it. This is a contract.
ii) Compensation for voluntary service done by one person to another. In such a case, promise to compensate wholly or in part for service done is a contract valid and enforceable.
Ex : A supports B's infant son, B promises to pay A's expenses. This is a contract.
iii) A promise to pay a time barred debt is valid if it is made in writing and signed by the debtor.
Ex : A owes B Rs.1000/- 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.
3. According to English law past consideration is no consideration at all. A promise to provide maintenance for past illicit cohabitation is void according to English law. But according to Indian law past consideration is a good consideration under particular circumstances. A promise made by D, on account of past cohabitation with P, was held valid. Namperumal V. Veera-perumal. However, if the cohabitation amounts to adultery, the consideration is illegal and hence, the contract is void.
4. Section 25 provides that if the consent is freely given then inadequacy of consideration will not make the contract void. But the court may take into consideration the inadequacy .to find out whether the consent was freely given.
Leading cases are :
1. Beswick Vs. Beswick
2. Kenney Vs. Brown
3. Thomas Vs. Thomas
In Thomas Vs. Thomas there was an agreement to pay pound one per year as annual rent for a big house. Though this rent was nominal and inadequate, by itself it did not make the contract invalid.
5. Consideration must be lawful: Section 23 provides that if the consideration is unlawful the agreement is void. It is unlawful when it is forbidden by law or it is of such a nature that if
permitted it would defeat the provisions of any law, or, is fraudulent or involves injury to a person or property or when the court regards the transaction as immoral or opposed to public policy.
Eg. 1 A, B and C agreed to divide the amount got by fraud. This is void and unlawful.
2. A promises to B to pay Rs.1,000/- if B provides A a job in Govt. service. This is void.
3. A leases out his house for immoral purpose. The lease is void.
Ch. 5.2. Executory and Executed consideration : (Past, present and prospective consideration). If the consideration is past or present, it is called executed con-sideration. But, if the consideration consists of a promise to be done in future, it is called Executory Considera-tion. In executed consideration, one party is yet to perform his part of the
promise but, in executory consideration, both the parties are to perform their
promises. A places an order for 500 bags of rice with B. A, is to pay when goods
are delivered. Rice is in the form of a heap. This is executory. B must fill to bags, weigh, stitch, etc., and appropriate to the contract, by giving notice to A. Goods are delivered. The value is not paid. This is executed contract. B has done his job. A is yet to pay.
Agreement in restraint of Marriage :
Sn. 26 of the contract act states that every agreement in restraint of marriage is void. The exception is the case of a minor. The objective of the legislature is that husband and wife should live together by selecting each other voluntarily. The consideration must be love, affection and welfare and not 'money consideration'.
The leading case is Lowe V Peers.
In this case, there was a promise to the effect that P would not marry anybody except Catherine. P had also agreed that he would pay 2000 pounds, is he marries somebody else. In fact, P married B, Catherine sued P. Held, there was a restraint on marriage and hence, the contract was void. Marriage Brokerage' contracts are also void. In Venkatakrishna V. Venkatachalam, a sum of money was agreed to be paid to the father in consideration of his giving his daughter in marriage. The Madras High Court held, that this amounted to "brokerage" of (Commission for) marriage and hence void. Sn. 7 of the Dowry prohibition act 1961 has prohibited such offers and has made taking or giving a dowry an offence. Similarly, an agreement to separate husband and wife is void. An agreement by a husband to marry K, after the death of his wife W, is also bad and void. These are opposed to public policy.
Agreement in restraint of trade :
Contract Act Sn. 27, states that every agreement in restraint of lawful trade, profession or business of any kind is void to that extent. One exception is provided when the goodwill of a business is sold, conditions may be imposed to restrain doing any similar business within certain specified local limits. This limit must be reasonable, depending on the nature of the business. The restraint should be in no way injurious to public interest. The test of reasonableness is applied by courts in England. Nordenfelt V. M. Nordenfelt Co. N sold his business of manufacturing guns and ammunition to M for a sum and agreed that for 5 years, he would not carry a similar business or any other to compete with that business. Held, that the restraint was reasonable under the circumstances of the case. Agreement to sell goods at a particular rate fixed by the company is not a restraint on trade. Combination by traders to fix up the selling price of ice, is valid. Monopolies and Restrictive Trade Practices Act (MRTP Act) aims at declaring as offences acts which restrict or distort certain trade practices.
Agreement in restraint of legal proceedings. Sn. 28.
Every agreement which absolutely restricts any party his right to move the court, is void. Similarly, restricting the time limit to enforce is also void. Any agreement which purports to oust the jurisdiction of the court is void. Further, any time limit in violation of the limitation act is also void. For pronote the time is 3 years. Hence, agreeing for 6 years to sue on a pronote is void.
Exception : Any agreement to settle disputes by arbitration is valid. Similarly, any contract to recover only the award of the arbitrator is valid. An agreement between the parties, that the suit shall be filed in a particular place is valid. A in Calcutta and B in Mysore agree that any
dispute should be settled in the courts of Calcutta. This is valid.