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IAI Actuarial Core Principles · Business Management · Sources of Indian law and valid contracts

Meera, a Pune resident, promises to give her neighbour Arjun her old scooter free of charge next week. Arjun, relying on nothing in particular, accepts the promise but gives nothing in return, and there is no registered document. Meera later changes her mind. Under the Indian Contract Act, 1872, what is the legal position?

The promise cannot be enforced. Indian law requires consideration for a valid contract, and a gratuitous promise with no payment, no registered document and no other statutory exception is a void agreement, however voluntarily Meera made it.

  1. AArjun can enforce the promise because Meera made it voluntarily and in clear words
  2. BArjun can enforce the promise because acceptance of a promise is itself valid consideration
  3. CThe promise is unenforceable as a contract because there is no consideration and it falls under no exceptionCorrect
  4. DThe promise is void only if Meera was in financial difficulty when she made it
  5. The promise is voidable at Arjun's option because it was made without payment

Explanation

Under Section 2(d) and Section 25 of the Act, an agreement without consideration is void unless an exception applies, such as a registered agreement made out of natural love and affection, a promise to pay a time-barred debt, or compensation for past voluntary service. None applies here, so Arjun cannot enforce the promise. A voluntary promise alone does not create a contract.

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