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

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

The agreement is void. Under Section 25 an agreement without consideration is void unless it is a registered written promise made out of natural love and affection between near relations, a promise to compensate past voluntary service, or a written promise to pay a time-barred debt. A bare oral gift promise fits none.

  1. AIt is void, as it is made without consideration and falls under no exceptionCorrect
  2. BIt is a valid contract, because a promise to give a gift is binding on the promisor
  3. CIt is voidable at the option of Suresh
  4. DIt is valid, because Ramesh made the promise of his own free will

Explanation

Section 25 says an agreement without consideration is void unless it fits one of the listed exceptions. An oral promise of a gift between friends is not made in writing and registered on account of natural love and affection between near relations, and it is not a promise to compensate or to pay a time-barred debt. It is therefore void, and free will alone does not supply consideration.

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