Introduction

This case deals with Section 25 of the Indian Contract Act, 1872 (ICA) which states agreement without consideration is void and consideration must be given at the desire of the promiser.

Facts

• In this case, the Town hall was planned to be built in Howrah.
• The plaintiff was the trustee and Municipal Commissioner at the Howrah Town Hall Fund. After gaining enough membership the funds were required to build a Town Hall.
• The plaintiff, including the commissioner, made an agreement with the defendant to build a Town Hall.
• The structured plan was passed but the membership list was expanded. Therefore, the cost also increased from Rs. 26,000 to Rs. 40,000, which increased the membership cost also.
• The defendant made a subscription to pay Rs 100 for the construction of the Town hall but later he refused to pay. The Municipal Commissioner sued the defendant for the same.

Issue Involved

• Whether defendant was liable to pay the amount?

Observation

• The Calcutta High Court observed that if people were subscribing to the amount and knew the purpose for which they were subscribing then it would be considered as valid agreement.
• The Court held that “the agreement contains all the essential elements of a contract which can be enforced in law by the persons to whom the liability is incurred”.
• The Court further said that the agreement of subscription was a contract for good consideration, which can be enforced by the proper party.
• Hence, the plaintiff had the power to sue on behalf of himself and all persons having interest and holding the suit maintainable.

Conclusion

• The judgement concluded once the promise is made, the promiser has to perform the duty and cannot take it back.

Notes

Section 25 of ICA: 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 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.