No Consideration, No Contract – Indian Contract Law Explained with Exceptions (2025)
- Legal Amenity
- Jul 4
- 4 min read
What Does "No Consideration, No Contract" Mean?
The Latin maxim “Ex nudo pacto non oritur action” translates to: "A bare promise creates no obligation." In simple terms, this means that a promise without consideration is not enforceable in a court of law.
According to Section 10 of the Indian Contract Act, 1872, for an agreement to become a valid contract, consideration is essential. Without it, the agreement is considered void, except in specific legal circumstances
Definition of Consideration – Section 2(d)
The Indian Contract Act defines consideration as:
“When, at the desire of the promisor, the promisee or any other person has done or abstained from doing something, such act or abstinence or promise is called a consideration for the promise.”
In essence, consideration is the price paid (not necessarily monetary) for the promise of the other party.
Essentials of a Valid Consideration
Must be at the desire of the promisor
Can move from promisee or any other person
Can be past, present, or future
Must be lawful
Must have some value in the eyes of law
Why No Consideration Means No Contract
A contract implies a mutual exchange of value. If one party is giving something, the other must return something in value – this is the essence of a binding contract.
An agreement without any benefit or detriment on either side is considered a gratuitous promise, which is not legally enforceable.
Landmark Case Laws on Consideration
Abdul Aziz v. Mazum Ali (1914)
A person promised to donate ₹500 to rebuild a mosque. The court held the promise unenforceable because there was no consideration – mere moral obligation is not enough.
Durga Prasad v. Baldeo (1880)
The plaintiff built a market at the request of the collector. Defendants promised to pay him commission, but the court ruled there was no valid consideration, as the act was not done at the defendants' desire.
Exceptions to the Rule – Section 25 of the Indian Contract Act
While “no consideration, no contract” is a fundamental rule, Section 25 provides key exceptions where a contract without consideration is still valid:
1. Natural Love and Affection
If a written and registered agreement is made out of natural love and affection between parties standing in near relation, it is enforceable even without consideration.
Example: A father gifts a house to his son through a registered deed.
2. Compensation for Past Voluntary Service
When a person voluntarily does something for another, and the other person later promises to compensate, such a promise is valid.
Example: A saves B’s goods from fire. Later, B promises to pay ₹5,000. This is enforceable.
3. Promise to Pay Time-Barred Debt
If a debtor promises in writing to repay a time-barred debt, such a promise is legally enforceable.
Example: A debt of ₹10,000 is time-barred, but the debtor agrees in writing to pay ₹6,000. This is valid.
4. Completed Gifts
A gift once made and accepted is valid even without consideration.
5. Agency
Under Section 185 of the Indian Contract Act, no consideration is required to create an agency relationship.
6. Charitable Subscriptions (with reliance)
If a promise for donation leads to the promisee acting on it (like starting construction), the promisor may be estopped from denying it.
Commercial Relevance of Consideration
In business contracts, valid consideration ensures enforceability. Common examples include:
Sale agreements (price vs. product)
Employment contracts (salary vs. service)
Service agreements (fees vs. performance)
Lease agreements (rent vs. possession)
Failure to include valid consideration in commercial agreements can result in them being declared void or unenforceable in court.
Consideration vs. Motive
It is crucial to distinguish between consideration and motive:
Motive is the reason behind entering into the contract.
Consideration is the actual act or promise exchanged.
The law is not concerned with motives—only whether there was a valid consideration.
Key Differences: Agreement vs. Contract
Feature | Agreement | Contract |
Consideration | May or may not exist | Must have lawful consideration |
Enforceability | Not enforceable | Legally enforceable |
Legal Obligation | Not mandatory | Mandatory |
Section | General term | Defined under Section 2(h) of ICA |
Conclusion
The legal maxim “No consideration, no contract” is a cornerstone of Indian contract law. It ensures that contracts are based on mutual exchange, not just one-sided promises. However, as we’ve seen, the Indian Contract Act also recognizes certain exceptions to ensure fairness, especially in cases involving love, gratitude, or pre-existing obligations.
For both individuals and businesses, understanding the role of consideration is essential to drafting enforceable agreements and avoiding legal pitfalls
FAQs – "No Consideration No Contract"
Q1: Is a promise enforceable without consideration in India?
Generally no, unless it fits one of the exceptions under Section 25 of the Indian Contract Act.
Q2: What is a gratuitous agreement?
An agreement made without consideration – for example, a free promise – is called a gratuitous agreement.
Q3: Can past considerations be valid in India?
Yes, past voluntary service done at the promisor’s request is recognized under Indian law