Literal Meaning
No action arises on a contract without a consideration.
Origin
Consideration is a necessity under English Law as well as Indian Law for entering into contracts. Almost every contract requires consideration except a deed. To render any contract as binding, consideration is a necessary element. The words nudo pacto in the maxim ‘Ex nudo acto actio no oritur’ comes from the latin term ‘nudam pactum’. The latin term ‘Nudam Pactum’ in its literal sense means ‘A naked Promise’. The reason for rendering a contract in which no consideration is provided as non-binding is that, without consideration it is very hard to prove that the contract was formed in the first place. Consideration seems to mean that gratuitous promises are not enforceable unless they are made by deed.[1]
Explanation
The literal meaning of this maxim clearly shows the essence and importance of this principle in the formation of any contract. This maxim highlights the importance of ‘Consideration’ in any contract. Consideration is based on ‘Quid Pro Quo’, which in its literal sense means ‘something for something’. Consideration is one of the most basic pillars of any contracts. Consideration can be anything which holds some value in the eyes of law. The examples of different kinds of consideration can be – goods, money, services, or promise.
Illustration
‘B’ asked ‘A’ to deliver 25 bottles of Coca-Cola on 1st June 2018. However, there was no mention of the money which ‘B’ would pay to ‘A’ for these bottles. ‘A’ failed to deliver the bottles on 1st June 2018. On 3rd June 2018 ‘B’ sued ‘A’ for nonperformance of the contract. The court held that there was no contract in the first place due to the absence of any consideration for ‘A’.
Indian Law Position
Section 25 of the Indian Contract Act, 1872 –
“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”.[2]
Section 25 of the Indian Contract Act, 1872 renders contracts which lacks consideration as void. The exceptions allowed are:
1. It is in writing and registered
2. It is a promise to compensate for something done in the past
It is a promise to pay a time barred debt
Cases Referred
S. Parameswari v. Balasubramanian[3]
In the above mentioned case it was provided that “At this juncture, it would be more useful to look into the well-known Latin maxim “Ex nudo pacto non oritur actio”. It means, from a bare contract – i.e. a contract without consideration – an action does not arise.”[4]
Mrs.Suseela & Others v. P.M.Veeraragavan & Ors.
In the above mentioned case, following interpretation of the maxim “Ex nudo pacto non oritur action” was provided by the Madras High Court.
“Out of a nude or naked pack that is, a bare parol agreement without consideration, no action arises. Out of a promise neither attended with particular solemnity such as belongs to a specialty nor with any consideration no legal liability can arise.”[5]
White v. Bluett
When, Bluett was sued by the executors of his father for an outstanding debt of his father, Bluett claimed that his father had promised to discharge him from it in return for him to stop complaining about property distribution. It was held by the court that the cessation of the complaints was of no economics value. Thus, Bluett’s father had received no real consideration for the promise, and the debt was enforceable at law.[6]
Edited by Vigneshwar Ramasubramania
Approved & Published – Sakshi Raje
Reference
[1] Consideration is essential to validity, LAW TEACHER (May. 16, 2019), https://www.lawteacher.net/free-law- essays/contract-law/consideration-is-essential-to-validity-contract-law-essay.php.
[2] Indian Contract Act, § 25, 1872 (India).
[3] S.Parameswari v. Balasubramanian, Civil Apple No.881 of 1997.
[4] Brakes India Ltd. v. BIC Logistics Ltd., [2010] 6 MLJ 153.
[5] Brakes India Ltd. v. BIC Logistics Ltd., [2010] 6 MLJ 153.
[6] White v. Bluett, (1853) 23 LJ Ex 36.
