ICFAI UNIVERSITY DEHRADUN

ICFAI LAW SCHOOL

ACADEMIC SESSION 2019-20

A Project Work

On

Consideration

Of

Indian Contract Act,1872

ASSIGNMENT SUBMITTED

IN PARTIAL FULLFILLMENT OF ODD SEMESTER

INTERNAL EVALUATION

Submitted to: Submitted by:-

Ms. Divya Morandani Shivam singh

Asst.Professor 19FLUCDDNO1008

LLB 1st year

 ACKNOWLEDGEMENT

In preparation of my assignment, I had to take the help and guidance of some

respected persons, who deserve my deepest gratitude. As the completion of this
assignment gave me much pleasure, I would like to show my gratitude Ms. Divya
Morandani mam, at ICFAI UNIVERSITY for giving me a good guideline for
assignment on principles of general contract. I would also like expand my gratitude
to all those who have directly and indirectly guided me in finalizing this project
within time frame.
Many people, especially my classmates have made valuable comment suggestions
on my paper which gave me an inspiration to improve the quality of the
assignment.
 TABLE OF CONTENTS:

1.INTRODUCTION
2.CONSIDERATION (SECTION 2d)
3.What considerations and objects are lawful and what
not.(SECTION 23)
4.EXCEPTIONS WHEN AGREEMENT WITHOUT
CONSIDERATION IS VALID. (SECTION 25)
5..CONCLUSION
6.BIBLIOGRAPHY
INTRODUCTION:
Enforcing any legal contract requires it to have an element of consideration
included in it. In simple words, it is nothing but a price that the promisee agrees to
pay to the promisor. Now, this price can be paid as a benefit to the promisor and/or
a loss or detriment to the promisee.
For instance, for a contract for a sale of goods such as apples, the party receiving
the apples needs to exchange something of value for the apples
DEFINATION OF CONSIDERATION (SECTION 2d OF INDIAN
CONTRACT ACT ,1872)

According to Section 2(d) of the Indian contract act, 1872, consideration is defined
as follows:

“When at the desire of the promisor, the promisee or any other person has done or
abstained from doing, or does or abstains from doing, or promises to do or abstain
from doing something, such act or abstinence is called a consideration for the
promisee.

Thus, at the desire of the promisor if the promisee either

• Does something (in the past, present or future) OR

• Abstains from doing something (in the past, present or future)
Then, this act of doing or abstinence is called Consideration. Now, it has two
aspects, either doing some act or abstaining from doing something. Let’s look at
some examples:

Essential features for a valid consideration:

(i) Consideration must move at the desire of the promisor
Consideration can be offered by the promisee or a third-party only at the request or
desire of the promisor. If an action is initiated at the desire of the third-party, it is
not a consideration
(ii) Consideration may move from the promisee to any other person
If you look at the definition of consideration according to section 2 (d) of the
Indian Contract Act. 1872, it explicitly states the phrase ‘promisee or any other
person…’ This essentially means that in India, consideration may move from the
promise to any other person. However, it is important to note that there can be a
stranger to consideration but not a stranger to the contract.

a.Past

Since consideration is the price of a promise, it is normally given to induce the

promise. However, it can be given before the promise is made by the promisor.
This is past consideration. It is important to note that past consideration is not
considered for a new promise since it is not been given in lieu of the promise.
According to Indian law, ‘past considerations’ is ‘good consideration’ if it was
given at the desire of the promisor

a.1. Past Voluntary services

At times, a person might render voluntary services without any request or promise
from another. If the person receiving the services makes a subsequent promise to
pay for the services, then such a promise is enforceable in India under Section
25(2) of the Indian Contract Act.

b. Present

If the promise and consideration take place simultaneously then it is present or

executed consideration. An example is Peter goes to a shop, buys a bag of chips
and pays for the same on-spot.

c. Future
When the consideration for a promise moves after the contract is formed, it is a
future or executor. It is also valid if it depends on the condition.
(iii) It must have value in the eyes of the law
While the law allows the parties to decide an ‘adequate’ consideration for them, it
must be real and have value in the eyes of law. While the Court will not consider
inadequacy, it will look at it to determine if the consent was given by the party
with free-will or not.

(iv) It should be over and above the Promisors’ existing obligations

If the promisor is already obligated either by his promise or law to perform or

abstain from a certain act, then it is not a good consideration for a promise.

(v) It cannot be Unlawful

A consideration that is against the law or public policies is not valid.

Section 23 in The Indian Contract Act, 1872

23. What consideration and objects are lawful, and what not.—The consideration
or object of an agreement is lawful, unless— The consideration or object of an
agreement is lawful, unless—" it is forbidden by law; 14or is of such a nature that, if
permitted, it would defeat the provisions of any law; or is fraudulent; or involves or
implies, injury to the person or property of another; or the Court regards it as
immoral, or opposed to public policy. In each of these cases, the consideration or
object of an agreement is said to be unlawful. Every agreement of which the object
or consideration is unlawful is void. Illustrations
(a) A agrees to sell his house to B for 10,000 rupees. Here, B’s promise to pay the
sum of 10,000 rupees is the consideration for A’s promise to sell the house and
A’s promise to sell the house is the consideration for B’s promise to pay the
10,000 rupees. These are lawful considerations. (a) A agrees to sell his house to B
for 10,000 rupees. Here, B’s promise to pay the sum of 10,000 rupees is the
consideration for A’s promise to sell the house and A’s promise to sell the house
is the consideration for B’s promise to pay the 10,000 rupees. These are lawful
considerations."
Section 25 in The Indian Contract Act, 1872
25. 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—
An agreement made without consideration is void, unless—"
(a)it is expressed in writing and registered under the law for the time being in
force for the registration of 1[documents], and is made on account of natural love
and affection between parties standing in a near relation to each other; or unless
(b) 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.
© 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

Case laws:
1. Durgapur’s v. Baldeo
In this case , at the request of the collector of the district , the plaintiff spent
money and constructed some shops. The defendant occupied one of the
shops ,promise to pay commission on the sale of goods made by him as
consideration to plaintiff’s for the money he has spent on the construction.
The planting sued defend for the recover the promised commission. Since
the plaintiff had not constructed the shops at the desire of the defendant(
who is the promisor in this case ) was not valid consideration as required by
section 2 (d).
 Thus the agreement is void and the defendant was not held liable to pay the
promised commission.

2. Chinnaya v. Ramaya
In this case , an old woman gave away certain immovable property to her
daughter through by a registered deed . she also directed her to pay the sum
of annuity to Y. Subsequently , the daughter failed to pay annuity and Y
sued the daughter. The daughter pleaded that she was not guilty because no
consideration has been moved from Y. The court held that the words “the
promisee or any other person “ in section 2d of Indian contract act ,1872
made it clear that consideration need not only move from the promise only
and Y was entitled to maintain the suit for recovery.

3. Pinnel’s case
In this case it was held that a promise to pay less than what is due under a
contract can not be regarded as consideration .
Conclusion :
When forming a contract consideration is needed in order to make the agreement a
formal, valid contract. This is one of the three main requirements besides mutual
assent and a valid offer and acceptance. Consideration basically refers to the
exchange of items or services. This usually comes in the form of monetary
payment. The consideration can also be other products or even services. The point
is that the parties must exchange something of value.

If there is no consideration offered in a contract, courts will likely call the

contract unenforceable in a court of law. This generally means that one
neither party can sue the other if there is a dispute over contract terms.
This is because a contract generally is not valid from the beginning if there
is no consideration exchanged. Thus, it’s important for both parties to be
aware of consideration in a contract, especially at the beginning during
contract drafting.

Consideration is needed so that both parties incur some sort of burden or

obligation in the agreement. Without consideration, the exchange would
likely be classified as a gift
Bibliography

1. R.K.Bangia
2. https://www.legalmatch.com/law-library/article/why-is-
considerationneeded-in-a-contract.html