Name – Darshil Bhansali Roll Number - HFBMS030

Subject – Business Law

No Consideration, No Contract

Contracts have long been a crucial component of our daily lives. We engage in contracts
hundreds of times a year, whether we recognize it or not. Even when we purchase candy, we are
making a deal with the store owner. We sign a contract each time we go to a restaurant or order a
cab. The jurisprudence of contracts remains the same even when the law of contracts is evolving
throughout time. We are aware of what a contract entails, yet new circumstances pop up every
day, raising the question of whether or not this particular agreement qualifies as a contract.

A legally enforceable oral or written agreement that transfers any combination of commodities,
services, money and property is referred to as a contract. Contrary to popular belief, contracts are
not required to be in writing and can be formed orally or by conduct. A contract is special in that,
barring specific circumstances, parties are free to agree to any terms they like. This concept of
"freedom of contract" is what makes contracts unique.

For consideration to be essential it must be

There are 3 types of considerations-

1) Past Consideration:
In the event of past consideration, the promisor received the consideration before the promise
date.

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2) Present Consideration:
Present consideration refers to a situation in which one of the contracting parties has fulfilled his
obligation under the promise, which serves as a payment for the promise made by the other
party.

3) Future Consideration:
Future consideration refers to a decision that will be made at a later time.

A pledge without consideration cannot create a legal obligation. A contract entered into hastily is
frequently void. The Indian Contract Act, which contains Section 25, provides that an agreement
made without consideration is null and invalid. This indicates that every circumstance calls for
consideration. Nevertheless, a few circumstances are listed in this Section when an agreement is
still enforceable even in the absence of consideration. Here are the situations:

1) Affection and love:

Even in the lack of consideration, a written, registered agreement between two parties nearby
(such as spouses or blood relatives) that is based on natural love and affection is enforceable.

2) Past Voluntary Activities:

If the beneficiary agrees to pay for prior volunteer service under the following terms, the contract
is enforceable. The service was previously gladly rendered to the promisor. When the promisor is
an organization, it is essential that they were present when the service was rendered. The
promisor showed that he was willing to pay for the volunteer work.

For instance, Rahul's wallet could be found by Rahul on the street and given to him. Rahul offers
to pay Rahul Rs. 2,000 as thanks for helping him find his misplaced wallet. No compensation
and no contract is not applicable in this instance either. This agreement is enforceable in court.

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3) Promise to pay a Time-Barred Debt:

A written promise to pay a time-barred obligation made by the maker or his authorized
representative and signed even though there was no consideration paid is nonetheless
enforceable. The commitment to repay the debt in full or in part is possible.

Rahul, for instance, owes Rahul Rs. 100,000. He had gotten the loan five years before. But he
never gave back even one rupee. He promises in writing to make the last loan payment of Rs.
50,000 to Rahul. The adage "no consideration, no contract" does not hold here either. This
agreement is enforceable.

4) Creation of an Agency:
The Indian Contract Act, 1872's section 185 states that no consideration is required to establish
an agency.

5) Gifts:
Gifts are exempt from the "no consideration, no contract" rule. According to Explanation (1) of
Section 25 of the Indian Contract Act, 1872, gifts given by a donor and accepted by a done are
not subject to the rule that an agreement without compensation is unlawful.

6) Bailment:

The delivery of commodities from one person to another for a specific purpose is referred to as a
bailment in Section 148 of the Indian Contract Act, of 1872. This delivery is made under a
contract that states that after the goal has been achieved, the products will be either returned or
disposed of by the instructions of the person making the delivery. A bailment contract can be
executed without the need for consideration.

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 Case Study

Kedarnath VS Gorie Mohammad

Introduction:

The case of Kedarnath VS Gorie Mohammad is a well-known example of consideration. In this

Facts:

In this case, Kedarnath Bhattacharji was the plaintiff. He served as Howrah's Municipal
Commissioner and a trustee for the Howrah Town Hall Fund. If the required monies could be
gathered, he wished to erect a town hall in Howrah. How many people might be interested in it
and willing to pay was something he tried to ascertain. This was endorsed by some. He made
arrangements to have the structure constructed when this number reached a specified threshold.
Following that, a contract was made for the aforementioned reason by the commissioners, which
also included the defendant and other subscribers like him. The building plans were then
submitted and approved. The plans, which were initially planned to cost Rs. 26,000, have
escalated in price along with the membership list for paying members, and now cost Rs. 40,000.
All of the commissioners, including the plaintiff, approved the modifications to the building's
original blueprints, therefore the commissioners were also in charge of compensating the
contractors for the added expense. The conflict started when the respondent, Gore Mohammad,
agreed to pay Rs 100 by signing his name in the subscription book, also known as the
membership register. He did not, however, provide this sum. To obtain payment from the
defendant, the plaintiff filed a lawsuit.

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Conclusion:

Gorie Mohammad, the defendant, was aware of the reason for his payment when he decided to
subscribe. When he chose the subscription, he was fully aware that he was contributing to a
worthwhile cause, therefore that should be enough consideration. The commissioner was ordered
by the court to pay the contractor for the work based on the contributions selected by individuals
like Gorie Mohammad. As a result, the consideration for the commissioner was the subscribers'
faith, and for Gorie Muhammad it was his willing agreement to donate money to the cause.
Therefore, a legal contract with proper consideration exists. The plaintiff, Kedarnath
Bhattacharji, won the case because the defendant, Gorie Mohammad, was unable to withdraw
from the subscriber list after promising to do so. He was therefore responsible for the
commitment he had made.

REFERENCES

1) https://classroom.google.com/u/0/c/NDk3ODAyNjkzNDAy

2) https://llbmania.com/2022/04/28/kedarnath-bhattacharji-v-gorie-mohammad-1887-ilr-14-cal-
64/

3) https://www.juscorpus.com/kedarnath-vs-gorie-mohammad-a-case-study/