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

Sunil, in writing and signed by him, promises to pay Rs. 500 towards a debt of Rs. 1,000 that he owes Tara, which is barred by the law of limitation. Tara gave nothing new in return. Which statement is correct?

The promise is a contract. Section 25 lets a promise without consideration stand if it is in writing, signed by the person to be charged, and promises to pay wholly or partly a time-barred debt. Registration is not needed for this exception, only for the love and affection exception.

  1. AThe promise is void because there is no fresh consideration
  2. BThe promise is a contract, as Section 25 covers a written, signed promise to pay a time-barred debtCorrect
  3. CThe promise is a contract only if registered
  4. DThe promise is voidable at Sunil's option

Explanation

Section 10 excludes agreements expressly declared void, and Section 25 makes an agreement without consideration void unless it falls in listed exceptions. Exception (3) covers a written promise signed by the person to be charged to pay wholly or in part a debt that is barred by limitation. Registration is required only for the natural love and affection exception, so registration is not needed here.

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