Section 25 in The Indian Contract Act, 1872
Title: Agreement without consideration, void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law.
An agreement made without consideration is void, unless
(1) it is expressed in writing and registered under the law for the time being in force for the registration of 1[documents], and is made on account of natural love and affection between parties standing in a near relation to each other ; or unless
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless;
(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.
In any of these cases, such an agreement is a contract.
Explanation 1.Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.
Explanation 2.An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.
(a) A promises, for no consideration, to give to B Rs. 1,000. This is a void agreement.
(b) A, for natural love and affection, promises to give his son, B, Rs. 1,000. A puts his promise to B into writing and registers it. This is a contract.
(c) A finds Bs purse and gives it to him. B promises to give A Rs. 50. This is a contract.
(d) A supports Bs infant son. B promises to pay As expenses in so doing. This is a contract.
(e) A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract.
(f) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. As consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration.
(g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies that his consent to the agreement was freely given.
The inadequacy of the consideration is a fact which the Court should take into account in considering whether or not As consent was freely given
1. Subs. by Act 12 of 1891, s. 2 and the Second Schedule, Pt. I, for "assurances."
Title: Agreement in restraint of marriage, void.
Every agreement in restraint of the marriage of any person, other than a minor, is void.
Title: Agreement in restraint of trade, void.
Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.
Exception 1.Saving of agreement not to carry on business of which good-will is sold.One who sells the good-will of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the good-will from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business.
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1. Exceptions 2 and 3 rep. by Act 9 of 1932, s. 73 and the Second Schedule.
Title: Agreements in restraint of legal proceeding void.
(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to the extent.
Exception 1.—Saving of contract to refer to arbitration dispute that may arise.—This section shall not render illegal a contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.
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Exception 2.—Saving of contract to refer questions that have already arisen.—Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration3.
4Exception 3.—Saving of a guarantee agreement of a bank or a financial institution.—This section shall not render illegal a contract in writing by which any bank or financial institution stipulate a term in a guarantee or any agreement making a provision for guarantee for extinguishment of the rights or discharge of any party thereto from any liability under or in respect of such guarantee or agreement on the expiry of a specified period which is not less than one year from the date of occurring or non-occurring of a specified event for extinguishment or discharge of such party from the said liability.
Explanation.—(i) In Exception 3, the expression "bank" means—
(a) a "banking company" as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(b) "a corresponding new bank" as defined in clause (da) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(c) "State Bank of India" constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955);
(d) "a subsidiary bank" as defined in clause (k) of section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);
(e) "a Regional Rural Bank" established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976);
(f) "a Co-operative Bank" as defrined in clause (cci) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(g) "a multi-State co-operative bank" as defined in clause (cciiia) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); and
(ii) In Exception 3, the expression "a financial institution" means any public financial institution within the meaning of section 4A of the Companies Act, 1956 (1 of 1956).
1. Subs. by Act 1 of 1997, s. 2, for certain words (w.e.f. 8-1-1997).
2. The second clause of Exception 1 to section 28 rep. by Act 1 of 1877, s. 2 and Sch.
3. Cf. the Arbitration Act, 1940 (10 of 1940) and the Companies Act, 1956 (1 of 1956), s. 389.
4. Ins. by Act 4 of 2013, s. 17 and the Sch. (w.e.f. 18-1-2013).
Title: Agreements void for uncertainty.
Agreements, the meaning of which is not certain, or capable of being made certain, are void.
(a) A agrees to sell to B "a hundred tons of oil". There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.
(b) A agrees to sell to B one hundred tons of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void.
(c) A, who is a dealer in cocoanut-oil only, agrees to sell to B "one hundred tons of oil. The nature of A"s trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of cocoanut-oil.
(d) A agrees to sell to B "all the grain in my granary at Ramnagar". There is no uncertainty here to make the agreement void.
(e) A agrees to sell B "one thousand maunds of rice at a price to be fixed by C". As the price is capable of being made certain, there is no uncertainty here to make the agreement void.
(f) A agrees to sell to B "my white horse for rupees five hundred or rupees one thousand". There is nothing to show which of the two prices was to be given. The agreement is void.