LAW 113

THE LEGAL PROVISION,

INGREDIENTS, ILLUSTRATIONS AND
CASE LAWS OF CONSIDERATION

SUBMITTED TO: DR. VARINDER KAUR

SUBMITTED BY: SAGORIKA BASU (RL2002A22)

 ACKNOWLEDGEMENT

At the outset, I would like to express my heartfelt gratitude and thank my

Course Instructor, DR.VARINDER KAUR, for instilling confidence in me. I
am indeed privileged having been taught in a prestigious institution like
LOVELY PROFESSIONAL UNIVERSITY. I would also like to express my
gratitude to my other Course Instructors and Mentor, family, and friends for
their help and support.

-SAGORIKA BASU
RL2004A22
 Introduction to Consideration

Section 25 of the Indian Contract Act, 1872 openly declares that “an agreement
made without consideration is void”. In other words, the presence of
consideration is essential for a contract to be valid. In England too “promises
without consideration are not enforced, because they are gratuitous”. In
England, the contracts are divided into two categories:

1. Contracts under seal, or contracts in the form of a deed. Such contracts

are valid even without consideration.
2. Simple contracts or parole contracts. For the 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 be no doubt that for a valid contract, there must be a
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 in 1915 as “An act or forbearance of one party or the promise thereof is
the price for which the 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 accepted and as

follows; “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…
 Legal Provisions of Consideration

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 from doing something, such act or abstinence or promise is
called a consideration for the promise.”

Essential Ingredients of Consideration

According to Section 2(d) of the Indian Contract Act, 1872, the follows features
are essential for a valid consideration:

1. Consideration must be given 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. The personal benefit of the party other
than that of a promisor is not necessary and also voluntary contribution
does not form a valid consideration.

Illustration
Annie is going back home from work. On his way, he sees that his neighbor
Jazz’s house is on fire. She immediately arranges for a water hose and manages
to douse the fire. Annie cannot claim any reward for her effort because it was a
voluntary act and was not done at the desire of Jazz (promisor).
Case Law----Kedarnath Bhattacharji v/s Gorie Mohammed

In this case, the defendant had agreed to subscribe to Rs. 100 towards the
construction of a Town Hall at Howrah. The Secretary, called for plans and
entrusted the work to contractors, and undertook liability to pay them. The
Defendant refused to pay the promised amount.

It was held though the promise was for a charitable purpose and there was no
benefit to the Defendant, yet he is liable for the promise made by him.

2. Consideration may be given by the promisee or any other person

(Privity of Consideration):-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.

Case Law ----Chinnaya v. Ramayya

Lady X gifted his son, Ramayya, an apartment in the city with a condition that
he pays a fixed amount of money to his uncle, Chinnaya, every year. On the
same day, Ramayya executed a deed to pay a fixed amount of money to John
every year. However, Ramayya failed to pay and Chinnaya filed a suit for
recovery. Oliver pleaded that he was not liable since no consideration had
moved from John. However, the court held the words ‘promisee or any other
person…’ and allowed John to maintain his suit for recovery.
3. Consideration may be past, present, or future:- Section 2(d) of the Indian
Contract Act, 1872, recognizes three types of consideration, namely, Past,
Executed, and Executory. It says that when at the desire of the promisor, the
promisee or any other person:

1. Has done or abstained from doing, (the consideration is Past.)

2. Does or abstains from doing, (the consideration is Executed or present.)
3. Promises to do or abstain from doing, (the consideration is Executory or
future.)
a. Past Consideration:-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 instead of the promise. According to
Indian Law, ‘past considerations’ is ‘good consideration’ if it was given
at the desire of the promisor.

EXAMPLE- My relative gives me work to do before. And I have been done it at

that time. Right now my relative gives me some money now which I am not
expecting.

CASE LAW---- Lampleigh v Barthwait

A past act done at request will be good consideration for a subsequent promise.
The defendant, having committed a murder, requested the plaintiff to labour and
to obtain King’s pardon. The plaintiff did his best to obtain the King’s pardon,
riding and journeying at his own expense. Afterwards, the plaintiff was refused
£100 which was before promised by the defendant. He was, however, held
liable.
 b. Present Consideration: Present consideration is which promise is done
by the present.

EXAMPLE- Peter goes to a shop, buys a bag of chips, and pays for the same on-
spot.

c. Future Consideration: 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.

EXAMPLE-Peter promises to create architectural plans for John’s new house.

John promises to pay Peter an amount of Rs 50,000 provided the plans are
approved by his wife.

4. Consideration must be enforceable by 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
or there is any coercion, undue influence, or fraud.

EXAMPLE- A’s wife agrees to withdraw the suit she has filed against him in
return for his promise to pay her a monthly maintenance amount. This is a good
consideration and holds value in the eyes of law and is enforceable.

5. Consideration cannot be Unlawful: -A consideration that is forbidden by

law, fraudulent in nature or implies injury to the person or property of another is
declared to be immoral or against the public policy and hence, is void in nature.
EXAMPLE- X offers Rs 10,000 to Z to beat up his business rival. Z beats him
up but X refuses to pay him. Z cannot file a suit for recovery since the
consideration is against the law.

Case Law-----Amrit Banaspati Co. Ltd. v. State Of Punjab

6. Consideration 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
promisor.

EXAMPLE- D receives a summons from the Court to appear before it as a

witness for X. X promises to pay him Rs 10,000 to appear in the Court. This
contract is not valid because D is obligated by law to appear in the Court on
receiving a summons.

CASE LAW----- Ramchandra Chintaman v Kalu Ram

The plaintiff accepted a vakalatnama from the defendant to act for him in
a certain suit on receiving his usual fee. Subsequently the defendant agreed to
pay him a certain sum as special reward (inam), if the suit is decided in his
favor. The suit was decided in favor of the defendant, who, however, did not
pay the amount. The plaintiff, therefore, brought the present suit action against
him.
Rejecting the action, Westroppe CJ said: “The plaintiff, having accepted a
Vakalatnama was already bound to render his best service as a pleader. There
was no fresh consideration proceeding from the plaintiff when he obtained the
agreement.”
 Conclusion

Consideration is one of the essential elements of a valid contract. For a contract

to be valid, it must be backed by some sort of consideration. Whether there is no
consideration, there is no contract. Generally, consideration means to get and to
give something. In other words, both the parties involved in the contract must
get something and must give something. This something, is for which the
contract is made, is called consideration. For making a contract valid, it must be
supported by some consideration. An agreement to do something for nothing is
usually not enforceable by law.

It is also not necessary that consideration should always be tangible in nature

depending upon the situation. An intangible consideration is also an equally
valid consideration. For Example, ‘X’ promises to pay Rs. 5000 to ‘Y’ for the
services rendered by the latter. Here, for the promise of ‘X’, he gets services
from ‘Y’, which is intangible in nature. Nevertheless, the contract is valid.
Thus, consideration is a technical term used in the sense of Quid Pro Quo which
means something in return and may be either a benefit to the promisor or
detriment to the promise of both.
 Bibliography

Books Referred

Singh, Avtar
Contract & Specific Relief, 10th Ed.
Eastern Book Company (Lucknow), 2008

Bangia, R.K.
Law of Contract Part I, 6th Ed.
Allahabad Law Agency (Faridabad), 2009

Furmston, Michael
Cheshire, Fifoot & Furmston’s Law of Contract, 14th Ed.
Lexis Nexis Butterwoths, 2006

Kumar, P.N.
Sanjiva Row’s Commentary on The Indian Contract Act, 1872 and Tenders,
10th Ed.
Delhi Law House, 2007