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CMA Foundation · Fundamentals of Business Laws and Business Communication · Void and Voidable Agreements, No Consideration No Contract

A debt of Rs. 20,000 owed by Dinesh to Eshwar became barred by limitation. Later Dinesh signs a written promise to pay Rs. 8,000 towards the debt. Which statement is correct?

The promise is a valid contract for Rs. 8,000. Section 25(3) enforces a written promise, signed by the person to be charged or his authorised agent, to pay wholly or in part a debt that is barred by limitation. Registration is not needed, and liability is limited to the part promised.

  1. AThe promise is a contract for Rs. 8,000, since it is a written, signed promise to pay part of a time-barred debtCorrect
  2. BThe promise is void, as the debt is barred by limitation
  3. CThe promise is a contract only if it is registered
  4. DThe promise is enforceable only for the full Rs. 20,000

Explanation

Section 25(3) validates a written promise, signed by the person to be charged or his authorised agent, to pay wholly or in part a debt the creditor could have enforced but for the law of limitation. Illustration (e) shows a part promise of Rs. 500 on a Rs. 1,000 debt being a contract. Registration is not required, and the promise binds Dinesh only to what he promised, Rs. 8,000.

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