Consideration

Consideration means the exchange price in ordinary sense. Consideration even may be
termed as burden discharged. In other words, it can be explained as ‘suffering’ in the sense of
loosing something, may be that is one’s energy, service, money or anything.

The concept ‘Consideration’ has been defined in section 2(d) of The Contract
Act, 1872. It says: 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 to
abstain from doing something, such act or abstinence or promise is called a consideration for
the promise.

According to the famous English case Currie Vs Misa. A valuable consideration in

the sense of law may consist either in some right, interest, profit or benefit accruing to one
party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by
the other.

Justice patteson’s observation is also remarkable. Consideration means something

which is of value in the eye of the law, moving from the plaintiff: it may be some detriment
to the plaintiff or some benefit to the defendant.

‘Law of Contract’ written by the professor Treite l. The traditional definition of

consideration concentrates on the requirement that ‘something of value’ must be given and
accordingly states that consideration is either some detriment to the promisee (he may give
value) or some benefit to the promisor (in that he may receive value). Consideration is the
benefit that each party receives, or expects to receive, when entering into a contract.
Consideration is often monetary, but it can be a promise to perform a specific act, or a
promise to refrain from doing something. In order for a contract or agreement to be legally
binding, every party to the contract must receive some type of consideration. In other words,
a contract is a two-way street, so each party must receive something of value from the other
party or parties. Illegal or immoral acts are not legally considered to serve as consideration.
Example 1: A landlord and a prospective tenant meet to discuss the rental of a condo. At the
meeting, they go over the terms of the lease, and agree to enter into the lease, which is signed
by both the landlord and the tenant. In this type of contract, the landlord agrees to provide
tenant with housing, and the tenant promises to pay rent in return.
Example 2: Brittney agrees to sell her car to Bill for $1,000. Bill’s payment serves as
consideration for Brittney’s promise to sell the car to him. Brittney’s consideration is her
promise to sell him the car.

“No Consideration No Contract”

Elements of consideration:
 It is an act or abstinence. That means it may be positive or negative
 It is done at the desire of the promisor. So, if it is done at the desire of any third person
that will not be a consideration. Conversely, if anything is done at the desire of the
promisor, then that will be a good consideration irrespective of the nature of the thing
done, even that may be legal or illegal, adequate or inadequate.
 It may be three forms, i.e. has been done or is being done or is promised to be done at
future time
 The contract must include a bargain for the terms of the exchange. This means there must
be something that is worth bargaining over to both the parties
 There must be a mutual exchange between the parties. In simple terms, all parties
involved must benefit from the contract.
 The exchange in the contract must be something of value.
 An intent by both parties to enter into the agreement
 One party must make an offer
 The other party must accept an offer

Consideration may move from the promisee or any other person : From the
definition of consideration we cleared that there is no such requirement that consideration
1
1(1875) LR 10 Exch 153
2 In Thomas V. Thomas (1842) 2 QB 851
3 10th edn, sweet & Maxwell, 1999, at P. 64.
4 3rd edn, law of contract, Dr Muhammad Ekramul Haque, 2016
5 https://legaldictionary.net/consideration/
must move from promisee rather it may be furnished by the promisee or any other person and
as such an only material thing to be considered is that whether there is any consideration or
not. So a promise is enforceable if there exists any consideration and it is immaterial that by
the whom the consideration has been furnished.

According the reputed case Chinaya Vs. Ramaya2: An old lady, by deed of gift, made
over certain landed property to the defendant, her daughter. By the terms of the deed, which
was registered, it was stipulated that an annuity of Rs. 653 should be paid every year to the
plaintiff, who was the sister of the old women. The defendant of the same day executed in
plaintiff’s favour an Iqranama (agreement) promising to give to the stipulation. The annuity
was, however, not paid and the plaintiff sued to recover it.

Kinds of consideration:

Executory consideration

Executed consideration

Past consideration

1.Executory or future consideration: Executory consideration is one that takes the

form of a promise to be performed in the future. It is the price promised by one party in
return for the other party’s promise. For instance, an engagement to marry someone, or a
promise to deliver goods, or to render services at a future date.

2. Executed or Present Consideration:

Executed or present consideration is one which takes place simultaneously with the
promise. The act constituting the consideration is wholly or completely performed. For
instance, if A buys a book from a book-seller and pays the price and the book-seller delivers
the book to A there and then, the consideration in this case is executed or present, since it is
performed by both the parties simultaneously.
3. Past Consideration:

Past consideration is one, which took place and is complete before the promise is made. If the
service is rendered in the past at the request or desire of the promisor the subsequent promise
is regarded as an admission that the past consideration was not gratuitous and which is
evidence of the amount of the reasonable remuneration on the faith of which the services
were rendered.2

The rule has sprung that if there is no consideration there is no contract according to the
section 25
2
6 https://accountlearning.com/consideration-contract-meaning-need-kinds/
 An Agreement made without consideration is void

1. Agreement made out of natural love and affection Section 25(1):

while laying down the first exception says that- 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.

I. The parties stand in near relation to each other and the agreement is made out of
natural love and relation. Example: Mother and son, husband and wife
II. It is written
III. It is registered

2. Compensate past voluntary service which is section 25(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.

I. To compensate wholly or in part person who has already voluntarily done something
for the promisor for instance, A find the dog of B and then B promises to give A TK.
1000, the promise made is enforceable by law without consideration.
II. To compensate wholly or in part a person who has already voluntarily done
something for the promisor which he was legally compellable to do. Suppose, if A
pays the gas bill of B and then B’s subsequent promise to compensate A is
enforceable without any consideration

3. the promise regarding the payment of time barred debt which is section
25(3) lays down that: 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 limitations of suits.

Following conditions must be satisfied to enjoy the privilege of contract without

consideration according to the above mentioned sub-section, these are:

I. The promise must be about payment of time barred debt. So, if there is any claim
which is barred by the law of limitation for the time being in force, then the
subsequent promise made to pay the debt is enforceable without consideration if the
next condition is satisfied.
II. It should be written and signed.

Adequacy of consideration: Adequacy of consideration means that for a lawful

agreement to be made, the offeree must give a price that is equal measure to the value given
by the offeree. In law, adequacy of consideration means that for a lawful agreement to be
made between two parties, the offeree, also known as the beneficiary, must give in return, a
fair price, that is either in equal measure or reasonably proportional to the value given by the
offeror, also known as the benefactor. The price, however, may come in several forms:

 An act
 A promise to perform or not to perform an act
 Property
 Money

For example, if you offer to sell off your house to someone at $50,000, and in exchange, he
offers services to you worth this amount, then the consideration is deemed to be adequate.
In addition to a consideration, an agreement to the terms of a contract, a valid offer, and
acceptance are necessary for a contract to be enforced by any court. Consideration, in
essence, ensures the enforcement of promises made by one party to another, in a manner that
is acceptable by the law. In a written contract, even though inadequate consideration is not
void, it can make a contract unenforceable.
Some contracts do not necessarily require considerations in order to be enforceable. If the
court determines that one party deceived the other and they got into a contract that does not
meet the minimum requirements for a consideration, the court may allow for a substitute of
consideration, considering that the deceived party greatly relied on the promises made by the
other party. Even though both adequate and sufficient considerations involve a given value
for a contract to be legal, there is a slim difference between them. Whereas adequate
consideration demands that a contract constitutes a fair value, sufficient consideration only
considers the value as a factor — irrespective of whether it is fair or not. The law further
provides that as long as a consideration for a contract has some value, it is legal, even though
the value may not be fair. In this case, the consideration is sufficient but not adequate.

37
Mulla, the Indian Contract Act, 10th ed. P. 11.
8 39 DLR 243
9 Ibid
10https://www.upcounsel.com/adequacy-of-consideration-means