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Consideration in the Indian Contract Act, 1872

Consideration in the Indian Contract Act, 1872



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Published by: ankit_chowdhri on Jan 28, 2011
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Introduction to Consideration
The section 25 of the Indian Contract Act, 1872 openly declares that “an agreement madewithout consideration is void…”
In other words the presence of consideration is anessential for a contract to be valid.
 In England too “promises without consideration arenot enforced, because they are gratuitous”.
In England the contracts are divided into twocategories:1.Contracts under seal, or contracts in the form of a deed. Such contracts are valideven without consideration.2.Simple contracts or parol contracts. For validity of such contracts the presence of consideration is needed.Consideration in simple words means something in return of a promise which may either  be benefit gained by one party or something lost by the other. So generally there can beno doubt that for a valid contract, there must be consideration, and also free consent.
Definitions of Consideration
According to Blackstone
:“Consideration is the recompense given by a party contracting to the other.”Or the price of the promise.Sir Fredrik Pollock summarized the position of words adopted by the House of Lords in1915: “An act of forbearance of one party or the promise thereof is the price for whichthe promise of the other is bought, and the promise thus given for value is enforceable.”
The definition given in
Curre v Misa
  by Lush J is widely accepter and stated onthe next page:“A valuable consideration in the sense of the law may consist either in some right,interest, profit or benefit accruing to the one party, or some forbearance,determent, loss, or responsibility given, suffered or undertaken by the other…”
Definitions of Consideration under Section 2(d)
Section 2 (d), The Indian Contract Act, 1872 defines consideration as given under:“When, at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing or promises to do or abstain fromdoing something, such act or abstinence or promise is called a consideration for the promise.”
The section also provides some exceptions to the rule.
Section 10
See HEATH J in Lee v Muggeridge, (1813) 128 ER 559
Sunitibala Devi v Manindra Chandra Roy, A.I.R. 1930 P.C. 217
Pollock On Contracts (13
Ed.) p. 133
(1875) LR 10 Ex 153, 162
Essentials of Consideration
The definition of consideration highlights the following essentials to be fulfilled for the presence of a valid consideration:1)Consideration to be given “at the desire of the promisor”2)Consideration to be given “by the promise or an other person3)Consideration may be past, present or future, in so far as definition says that the promisee:a)Has done or abstained from doing, or  b)Does or abstains from doing, or c)Promises to do or to abstain from doing, something.4)There should be some act, abstinence or promise by the promisee, which constitutesconsideration for the promise.These essentials have been discussed in detail in the project.
Consideration at the Desire of the Promisor 
The definition of consideration under section 2(d) clearly emphasizes that theconsideration must be given at the desire of the promisor, rather than merely voluntary or at the instance of some third party.In the case
 Durga Parsad v Baldeo
 The plaintiff, on the order of the Collector of the town, built at his own expense,certain shops in a bazaar. The shops came to be occupied by the defendants who,in consideration of the plaintiff having expended money in the construction, promised to pay him a commission on his articles sold through their agency in the bazaar. The plaintiff’s action to recover the commission was rejected. It was held because as the construction had not been done as per the desire of the defendants, but the order of the collector. Hence, the consideration was not valid and thedefendants not liable for the same.
Consideration by Promisee or any other Person(Privity of Consideration)
According to the Indian Law
,consideration may be given by ‘the promisee or any other  person’. It means that as long as there is a consideration for a promise, it is immaterialwho has furnished it. It may move from the promisee, or, if the promisor has noobjection, from any other person. But in English Law the position is different, here theconsideration must move from the promisee himself.
For example, A promises to givehis watch to B and a consideration of Rs.5000 for the same is given to A by C and not Bhimself. This will not be a valid contract in England but in India it will be valid as the
(1880) 3 All. 221, Oilfield J at p. 228
Section 2(d); Indian Contract Act, 1872
Thomas v. Thomas, (1842) 2 Q.B. 851; Tweedle v Atkinson, (1816) 1 B.&S. 393
section 2(h) clearly states that “…at the desire of the promisor, the promisee or any other  personmay provide consideration. This can be further understood in the case of 
Chinnaya v Ramaya
In this case A, an old lady granted her estate to her daughter (thedefendant) with a direction that the daughter should pay an annuity of Rs.653, to A’s brothers (the plaintiffs). On the same day, the defendants made a promise with the plaintiffs that she would pay the annuity as directed by A. The defendant failed to pay thestipulated sum. In an action against her by the plaintiffs she contended that since the plaintiffs themselves had furnished no consideration, they had no right of action. TheMadras High Court held that in this agreement the consideration had been furnished bythe defendant’s mother and that it was enough consideration to enforce the promise between the plaintiff and the defendant.In the above case it can be seen that A enters in a contract with B, but A himself has notgiven any consideration to B, but the consideration has been provided by third party i.e. Cto B. Although A is a stranger to consideration, he can still enforce the contract against B.One has to remember that this is only true under Indian Law and the situation is differentunder English Law where the consideration can only move from the promisee and astranger to the consideration in no condition can maintain any action.
Privity to Contract
The Doctrine of Privity of Contract in simple words means that only those persons whoare parties to the contract can enforce the same. A stranger to the contract cannot enforcea contract even though the contract may have been for his benefit. To explain it with anexample, if there is a contract between A and B whose benefit has been conferred uponC, C cannot file a suit to enforce the contract because only A and B are the parties to thecontract and C is a stranger to the same.This rule has to be differentiated from the rule stated earlier according to which inIndia a person who is a stranger to the consideration can sue. This does not affect the ruleof Privity of Contract.
English Law
Tweedle v Atkinson
the plaintiff was to be married o the daughter of one X and inconsideration of this intended marriage X and the plaintiff’s father entered into a writtenagreement by which it was agreed that each would pay the plaintiff a sum of money. Xfailed to do so and the plaintiff sued his executors. Whitman J considered it to be anestablished principle “that no stranger to the consideration can take advantage of acontract, although made for his benefit.” Thus, although the sole object of the contractwas to secure a benefit to the plaintiff, he was not allowed to sue as the contract wasmade with his father and not with him.This rule was further affirmed in the case of 
 Dunlop Pneumatic Tyre Co. Ltd. v Selfridge & Co. Ltd.
 by the House of Lords in the following words:
(1882) 4 Mad. 137
(1861) 1 B.&S. 393
(1915) A.C. 847, at 853, per Lord Haldane

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