Section 25 of the Indian Contract Act, 1872: Agreement Without Consideration

Section 25 states the general rule that an agreement made without consideration is void, while recognising specific exceptions in which such an agreement becomes an enforceable contract.

Meaning of consideration: Under Section 2(d) of the Indian Contract Act, consideration broadly refers to an act, abstinence or promise done or made at the desire of the promisor by the promisee or any other person. Section 25 deals with cases where consideration is absent.

What Section 25 provides

The statutory rule is that an agreement without consideration is void. Section 25 then creates three principal exceptions. In any of those cases, the agreement is a contract.

1. Natural love and affection between near relations

An agreement without consideration can be valid when it is expressed in writing, registered under the law in force for registration of documents, and made on account of natural love and affection between parties standing in a near relation to each other. The statutory requirements are cumulative.

2. Promise to compensate for something already done

A promise is enforceable where it is made to compensate, wholly or partly, a person who has already voluntarily done something for the promisor, or has done something which the promisor was legally compellable to do.

3. Written promise to pay a time-barred debt

A promise to pay wholly or partly a debt that could have been enforced but for the law of limitation is enforceable when the promise is in writing and signed by the person to be charged, or by an agent generally or specially authorised for that purpose.

Gifts already made

Explanation 1 preserves the validity, as between donor and donee, of a gift that has actually been made. Therefore, Section 25 does not invalidate a completed gift merely because it was made without consideration.

Inadequate consideration

Explanation 2 makes an important distinction between absence of consideration and inadequacy of consideration. An agreement to which consent is freely given is not void merely because the consideration is inadequate. However, inadequacy may be considered by a court when deciding whether the promisor's consent was freely given.

Section 25 illustrations explained

  1. A bare promise to give another person money without consideration is void.
  2. A promise motivated by natural love and affection between near relations can fall within the exception when it is put in writing and registered as required.
  3. If a person finds and returns another's purse and the owner later promises a reward, the promise illustrates compensation for a voluntary act already performed.
  4. A promise to reimburse a person who supported the promisor's infant child illustrates compensation for an act the promisor was legally compellable to perform.
  5. A signed written promise to pay part of a debt barred by limitation falls within the third exception.
  6. A contract is not void merely because the price is substantially below value where consent was freely given.
  7. If free consent is disputed, a serious inadequacy of consideration may be relevant evidence when the court examines whether consent was in fact free.

Practical effect of Section 25

The section should be read with the Act's provisions concerning consideration and free consent. The first question is whether legally recognised consideration exists. If it does not, the agreement is ordinarily void unless the facts satisfy one of Section 25's statutory exceptions. Where consideration exists but appears inadequate, inadequacy alone does not invalidate the agreement if consent was freely given.

Official text

For the current official text of the Indian Contract Act, 1872, refer to India Code - Indian Contract Act, 1872.