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

Under the Indian Contract Act, 1872, an agreement that is made without consideration, and does not fall under any of the statutory exceptions, is best described as:

An agreement without consideration, outside the exceptions in Section 25, is void. It has no legal effect from the start. It is not voidable, because neither party has an option to enforce it, and it is not illegal, since no prohibited act is involved.

  1. AVoidable at the option of the promisee
  2. BVoidCorrect
  3. CIllegal and punishable
  4. DValid but unenforceable until registered

Explanation

Section 25 states that an agreement made without consideration is void unless it is in writing and registered and made out of natural love and affection between near relations, or it is a promise to compensate for a past voluntary act, or it is a written promise to pay a time-barred debt. Outside these exceptions the agreement is void, not voidable. It is also not an illegal agreement, since no law is broken by making it.

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