University Of Petroleum and Energy Studies

School of Law

BBA.LLB(Hons.)

SEMESTER 1

ACADEMIC YEAR- 2017-2018 SESSION- JULY-

DECEMBER

Project on

CONSIDERATION

Under the Supervision of: Ms Charu Shrivastava

NAME: Drishti Tiwari

SAP ID: 500060562

ROLL NO: 36

NAME: Eshan Singh

SAP ID: 500060608

ROLL NO: 37
Contents

 Introduction

 Kinds of Consideration
 Past Consideration
 Executed Consideration
 Executory Consideration

 Essential elements of valid consideration

 Exceptions of consideration

 Past Consideration

 Comparison of Indian Laws with UK’s

 Conclusion

 Bibliography
Introduction

Consideration is one of the essential elements for an agreement to become

a Contract. It is a requisite for all contracts other than those made by deed.
Consideration is something that moves from the promisee to the promisor, at the
implied or express request of the latter, in return for his promise. The item that
moves can be a right, interest, profit, loss, responsibility given or suffered,
forbearance or a benefit which is of some value in the eyes of law.

With Reference to Section 2(d) Contact Act 1950,

“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 so or
to abstain from doing something, such act or abstinence or promise is called
consideration of the promise”

Consideration may be viewed as a sort of bargain, or price which one party pays
to buy the promise or act of the other. When the promisor promises to do or to
abstain from doing something, the promisee must pay a price for it. This price to
be paid may be an act or abstinence or a price to perform a future act or
abstinence.

Example:

A lost his car and offered a reward of Rs 25000/- to anyone who finds it and
returns it to A. B finds the car and returns it to A. Here B pays the price for A
promise by performing the act which by Sec 2(d) is the consideration of the
promise.
Kinds of Consideration:

1. Past Consideration
2. Executory Consideration
3. Executed Consideration

Past Consideration

Past consideration is not a valid consideration and has no legal value. Past
consideration therefore cannot be used as a basis when claiming damages.If the
act has been done before any promise is made is called Past Consideration and a
Past Consideration is no consideration. Consideration, being the price for the
promise, should be given in response to and as an inducement for the promise.
If the act has been done before any promise is made, it is called Past
Consideration. When you enter into an agreement to buy a car, you need to
promise to pay for the car. The car dealer will give you the car once you pay for
it. If you tried to tell the car salesmen that you would use your payment from
five years ago on your old car that clearly would not constitute the appropriate
payment for the transaction. That older payment would be considered past
consideration which is not permitted in contracts. Rather, contracts require
present consideration.
In every contract, there must be consideration in order for the agreement to be
legally binding; it is a critical part of contract formation. Therefore, past
consideration is the benefit that you get as a result of making the contract. In
other words, each person who signed the contract promised to do something. In
contrast, the person may have promised not to do something. If there was no
past consideration in an agreement, the agreement can be rendered invalid and
unenforceable.

Executory Consideration

It is when one promise is made in return for another or a promise in return of

promise. Consideration is called "executory" where there is an exchange of
promises to perform acts in the future.
Executed Consideration

It is when a promise is made in return for the performance of an act.

Consideration is executed when the consideration is provided at the time the
contract is made.  Thus, executed consideration will exist when the promisor’s
promise is bought by the performance of an act.

Basic components of a valid consideration

The basic components of a valid contract are as per the following.

1. Offer and acceptance: There must a 'lawful offer' and a 'lawful

acceptance' of the offer, in this way bringing about an assention. The
descriptive word 'lawful' infers that the offer and acceptance must fulfill
the requirements of the agreement demonstration in connection thereto.

2. Intention to create legal relations: There must be an intention among the

parties that the understanding ought to be joined by legal results and
create legal commitments. Understandings of a social or local nature don't
mull over legal relations, and all things considered they don't offer ascent
to an agreement. A consent to feast at a companion's home in not an
understanding planned to create legal relations and along these lines isn't
an agreement. Assentions amongst husband and spouse so do not have
the intention to create legal relationship and in this manner don't bring
about contracts.

3. Lawful consideration: The third basic component of a substantial contract

is the nearness of 'consideration'. Consideration has been characterized as
the cost paid by one gathering for the guarantee of the other. An
understanding is legally enforceable just when each of the parties to it
gives something and gets something. The something given or got is the
 cost for the guarantee and is called 'consideration' subject to specific
exemptions; gratuitous guarantees are not enforceable at law. The
'consideration' might be a demonstration (accomplishing something) or
restraint (not accomplishing something) or a guarantee to do or not to
accomplish something. It might be past, present or future. However, just
those considerations are substantial which are 'lawful'. The consideration
is 'lawful'. unless it is prohibited by law; or is of such a nature, to the
point that, if allowed it would crush The arrangements of any law; or is
fake; or includes or infers damage to the individual or property of
another; or is corrupt; or is against open strategy

4. Capacity of parties: The parties to an understanding must be skilled to

contract. However, the question that emerges now is that what parties are
able and what are definitely not. The contracting parties must be of the
period of lion's share and of sound personality and must not be excluded
by any law to which they are subject. On the off chance that any of the
parties to the understanding experiences minority, lunacy, ineptitude,
intoxication etc. The assention isn't enforceable at law, with the exception
of in some extraordinary cases e.g., on account of necessaries supplied to
a minor or maniac, the provider of products is qualified for be repaid
from their home.

Exceptions to Consideration (No Consideration No Contract)

1. A promise made out of material love and affection. [Sec. 25]:

An agreement communicated in composing and enrolled under the law

for the time being in force for the registration of records and is made on
account of natural love and affection, between parties standing in a near
relation to each other, is enforceable without consideration.

2. A promise made to compensate for voluntary services [Sec. 25]:

A promise to compensate, completely or in part, a man who has
voluntarily helped out the promisor, or something which the promisor
was legally compellable to do, is enforceable without consideration.

This control, in fact, perceives past consideration which was given

without demand or want of the promisor.

3. Written promise to pay a time-barred debt [Sec. 25(3)]:

A promise made in writing to pay a debt barred by the Law of Limitation

is enforceable even without consideration.

4. Gift, etc. actually made:

Explanation to Section. 25 provides that any gift actually made is valid.

5. To create agency:

Under Sec. 185, no consideration is necessary to create an agency.

Actually speaking, consideration is there even in an agency as in the
principal has agreed to be bound by the acts of the agent. Hence he
undertakes the duty of the agent. We have seen earlier in Currie v. Misa's
case that anguish duty is a decent consideration.

6. Guarantee (Sec 127)

a contract of guarantee is made without consideration.

7. Remission (Sec 63)

No consideration is required for an agreement to get less then what is

expected. This is called remission in the law.
Currie v Misa (1875) LR 10 Ex 153

Facts:
A company named lizard & Co, then in good credit in the City, sold four bills of
exchange to Mr Misa, drawn from a bank in Cadiz. Mr Currie was the owner of
the banking firm and the plaintiff bringing the action. The bills of exchange
were sold on the 11th of February, and by the custom of bill, brokers were to be
paid for on the first foreign post-day following the day of the sale. That first day
was the 14th of February. Lizardi& Co. was much in debt to his banking firm,
and being pressed to reduce his balance, gave to the banker a draft or order on
Mr Misa for the amount of the four bills. This draft or order was dated on the
14th, though it was, in fact, written on the 13th, and then delivered to the
banker. On the morning of the 14th the manager of Misa's business gave a
cheque for the amount of the order, which was then given up to him. Lizardi
failed, and on the afternoon of the 14th the manager, learning that fact, stopped
payment of the cheque.

Judgment
Exchequer Chamber
Lush J, Archibald J, Quain J held that the banker was entitled to recover its
amount from Mr Misa. Lord Coleridge CJ dissented.
House of Lords
The House of Lords upheld the decision of the majority in the Exchequer
Chamber. Lord Chelmsford gave the opinion, with which Lord Hatherley and
Lord O'Hagan concurred.
 PAST CONSIDERATION

Consideration is the price for a promise and thus, it is usually given in

response to and as an inducement for the promise. If the consideration is
given earlier than the date of promise by the promisor, then it is known as
past consideration.
Sec 2(d) covers only those acts which are done at the request of the
promisor and for which a promise to pay is given subsequently.

Example:

If K finds and returns M’s pen and in gratitude, M promise to pay K RM200/-
the promise is made in return for a prior act.

Under English law the general rule is that past consideration is insufficient to
support a contract

Reference Case:

In Eastwood v Kenyon, the guardian of a young girl raised a loan to educate the

girl and to improve her marriage prospects. After her marriage, her husband
promised to pay off the loan. It was held that the guardian could not enforce the
promise as taking out the loan to raise and educate the girl was past
consideration, because it was completed before the husband promised to repay
it.
Furthermore, where a contract exists between two parties and one party,
subsequent to formation, promises to confer an additional benefit on the other
party to the contract, that promise is not binding because the promisee's
consideration, which is his entry into the original contract, had already been
completed (or "used") at the time the next promise is made.
Exceptions of past consideration:
1. Where it was paid at the request of the offeror.
2. Where both parties had earlier on contemplated payment.

Past voluntary services. A person may render voluntary services to

another without any request or promise. In some cases, the receiving
party may subsequently make a promise to pay for the services rendered.
Such a promise in enforceable in India under Section 25(2) that provides
that “a promise to compensate, wholly or in part, a person who has
already voluntarily done something for the promisor” is enforceable.
Illustration: X found Y’s purse on the road. He returns the same to Y who
promises to give Rs 100 to X for his services. This is a valid contract.

• Section 25(2) also covers acts done at request and for which a promise to
pay is given later. Every request for an act carries an implied promise to
pay.
• In Sindha Shri Ganpatsingji vs Abraham, it was held that services
rendered to a minor at his request and also continued after his majority at
the same request were good consideration for the minor’s promise to pay
 Comparision of Indian and English Laws

Past consideration is good consideration under Indian Law as long as it

was given at the desire of the promisor.
Illustration: X renders service to Y during months of agricultural
harvesting. Y promises to pay Rs 1000 to X for his past services when the
new crop is being sown in the fields. The past services of X constitute
valid consideration.

English law does not recognize past consideration. However, the English
law treats an act done at request to be good consideration for a
subsequent promise.
In the case of Lampleigh vs. Brathwait, X – guilty of committing murder,
requested Y to try and get him a pardon from the King. Y travelled at his
own expense and put in effort to secure a pardon. X promised to pay him
a certain sum of money but refused subsequently. It was held that Y had a
right to enforce the promise.

Conclusion:

Consideration is the backbone of contract. It is one of the most essential

elements of the Contract it deals with the understanding and the acceptance
of both the parties and in Contract; the most important thing is Acceptance
and mutual understanding between both the parties.

Bibliography:

Electronic media:
1. https://en.wikipedia.org/wiki/Currie_v_Misa
2. http://law.justia.com/cases/kansas/supreme-court/1977/48-106-1.html
3. www.wikipedia/consideration.
Books Referred:
1. The Indian Contract Act,1872 (Bare act no. 9)
2. Contract and specific relief by Avatar Singh, 11th edition.