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CMA Foundation · Fundamentals of Business Laws and Business Communication · Consideration and Legality of Object

Ramesh promises to give his friend Suresh Rs. 5,000 as a gift, without receiving anything in return. The promise is oral and Suresh has done nothing for Ramesh. What is the legal status of this promise under the Indian Contract Act, 1872?

The promise is a void agreement. Under Section 25 an agreement without consideration is void unless it fits an exception. An oral promise to a friend, with no past service and no time-barred debt, fits none, so Suresh cannot enforce the promised Rs. 5,000.

  1. AIt is a valid contract because Ramesh made the promise voluntarily
  2. BIt is a void agreement because it is made without consideration and fits no exceptionCorrect
  3. CIt is a voidable contract at the option of Suresh
  4. DIt is a valid contract because the amount is small

Explanation

An agreement made without consideration is void unless it falls within one of the exceptions in Section 25: registered writing for natural love and affection between near relatives, a promise to compensate past voluntary service, or a written promise to pay a time-barred debt. Ramesh and Suresh are friends, the promise is oral, and no past service exists. So none of the exceptions applies. The promise is void, not voidable.

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