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

Vijay owes Rs. 20,000 to Hari, but the debt is barred by the law of limitation. Vijay now signs a written promise to pay Hari Rs. 8,000 towards the debt. Hari sues on this promise. What is the outcome?

Hari succeeds for Rs. 8,000. A written promise, signed by the debtor, to pay wholly or partly a time-barred debt is a valid contract under Section 25. It needs no registration, and liability extends only to the part promised, not the full Rs. 20,000.

  1. AHari fails, because a time-barred debt can never support a fresh promise
  2. BHari succeeds for Rs. 8,000, because it is a written, signed promise to pay part of a time-barred debtCorrect
  3. CHari succeeds for Rs. 20,000, because the original debt revives in full
  4. DHari fails, because the promise lacks registration

Explanation

Under Section 25(3), a promise made in writing and signed by the person to be charged to pay wholly or in part a debt that the creditor could have enforced but for limitation is a contract. Registration is not required. The promise covers only Rs. 8,000, so the liability is limited to that amount. Distractor C wrongly treats the whole debt as revived.

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