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A took an education loan without interest of Rs. 1,00,000 from his uncle Z. Impressed with A's…

Z's release of the existing repayment obligation is valid under Section 63 of the Indian Contract Act. A creditor may dispense with or remit repayment without fresh…

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A took an education loan without interest of Rs. 1,00,000 from his uncle Z. Impressed with A's educational progress and being affectionate with him, Z enters into a written agreement with A that he does not need to return the money. Subsequently, Z is in need of money, and demands Rs. 1,00,000 from A. However, A refuses to pay, while relying on Section 25 of the Indian Contract Act, 1872, which provides: “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”. Z is angry with A. Which of the following is true?

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Correct answer A

Z's release of the existing repayment obligation is valid under Section 63 of the Indian Contract Act. A creditor may dispense with or remit repayment without fresh consideration, so Z's statement that A need not return the money discharges that obligation. Section 25's rules for a new agreement based on natural love and affection do not control this remission. Z's later anger or need for money does not by itself revive the released debt.

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