Consideration

 Section 25: An agreement without consideration is void. Consideration is the cause of

the promise and its absence would make the promise a gratuitous or bare promise
(NUDUM PACTUM).

Definition:
 Blackstone defined consideration as the recompense given by the party contracting to
the other. In other words, it is a price of the promise.
 Section 2(d) of ICA defines consideration as follows:
o When at the desire of the promisor, the promisee or any other person has done
or abstained from doing, or does or abstain from doing or promises to do or to
abstain from doing, something, such act or abstinence is called a consideration
for the promise.
o The three ingredients of this definition are:
 That the act or abstinence, which is to be consideration for the promise,
should be done at the desire of the promisor
 That it should be done by the promise or any other person.
 That the act or abstinence may have been already executed or is in the
process of being done or may still be executor i.e. it is promised to be
done.
I. At the desire of the Promisor (Promissory Estoppel)
 An act shall not be a good consideration unless it is done at the desire
of the promisor.
 In DURGA PRASAD v. BALDEO:
 The plaintiff built a shopping complex n the order of the
collector.
 The shops came to be occupied by the defendants who,
in consideration of the plaintiff having expended the money in
the construction, promised to pay him commission on articles
sold by them.
 The plaintiff’s action to recover the commission was
rejected on the ground that plaintiff’s act was the result not of
the promise but of the collector’s order.
 In KEDAR NATH v. GORIE MOHD.
 A town hall was to be constructed for which
subscriptions were invited from the public by the
commissioners of Howrah municipality.
 The defendant was a subscriber to this fund for Rs. 100.
It was found that the subscriptions were received or promised
to the required amount of Rs. 40,000.

1  On the faith of the promised subscription, the plaintiff

entered into a contract with a contractor for the purpose of
building the hall.
 The defendant failed to pay the amount and contended
that there was no consideration for his promise.
 Consideration

 Holding the defendant liable, the court observed:

 That the persons were asked to subscribed knowing the
purpose for which money was applied; they knew that
on the faith of their subscription an obligation was to be
incurred to pay the contractor for the work.
 The plaintiff’s act in entering into contract with the
contractor was done at the desire of the defendant so as
to constitute consideration with meaning of section 2(d).
II. Promisee or any other person:
 A promise is enforceable if there is some consideration for it and it is
quite immaterial that it moves from the promisee or any other person.
 This is sometimes called as ‘Doctrine of Constructive Consideration’.
 In VENKATA CHINNAYA RAU v. VENKATA RAMAYA GARU:
 A, an old lady, granted an estate to her daughter
(defendant) with the direction that the daughter should pay an
annuity of Rs. 653 to A’s brother (plaintiff).
 The defendant made a promise with the plaintiff that
she would pay the annuity as directed by A.
 The defendant failed to pay the stipulated sum.
 The Madras HC held,
 That in this agreement, the consideration had been
furnished by the defendant’s mother and is enough
consideration to enforce the promise between the
plaintiff and the defendant.
 The court ruled that ‘plaintiff can only sue if the
consideration move indirectly from him wholly or
partly’, which is so in the present case.
III. Has done or Abstained from doing:
 Under section 2(d), consideration is an act, which has already been
done at the desire of the promisor (past consideration), or is in progress
(executed or present consideration i.e. consideration is provided
simultaneously with the making of the contract) or is promised to be
done in future (executory or future consideration i.e. simple exchange
of promises).
 Thus consideration may consist of past, present or the future act.
 PAST CONSIDERATION:
 If the act has been done before any promise is made, it
is called past consideration.
 In India, section 25(2) adequately covers a past

2 
voluntary service i.e. a service rendered without any request or
promise and there is subsequent promise to pay for the same.
Past service at request is no adequately convered by
section 2(d) and section 25(2).
 Consideration

 Section 2(d) requires that the act should be done at the

desire of the promisor. This presupposes the existence of a
promise to pay for the act.
 EXECUTED CONSIDERATION:
 In case of executed consideration, the consideration is
provided simultaneously along with the making of the contract.
 It is the act which forms the consideration
 EXECUTORY CONSIDERATION :
 There may be a simple exchange of promises and each
promise is a consideration for the other.
 Unlike executed consideration, in executory
consideration, the liability is outstanding on both sides.
IV. Such Act, Abstinence or Promise is called consideration:
 Consideration must be real and not illusory:
 Where consideration is physically impossible, illegal,
uncertain or illusory, it is not real.
 In KULASEKARAPERMUMAL v. PATHAKUTTY:
 The court observed,
 Though the ICA does not in terms provide that
consideration must be good or valuable to
sustain a contract is has always been accepted
that consideration means something which not
only the parties regard but the law can also
regard as having some value.
 It must be real and not illusory, whether
adequate or not.. So long as the consideration is
not unreal it is sufficient if it be of slight value
only.
 Consideration need not be adequate:
 Explanation 2 of section 25 lays down, an agreement to
which the consent of the promisor is freely given is not void
merely because the consideration is inadequate.
 The adequacy of the consideration is for the parties to
consider at the time of making the agreement, not for the court
when it is sought to be offered.
 Explanation 2 further lay down that ‘inadequacy of
consideration may be taken into account by the court in
determining the question whether the consent of the promisor
was of the promisor was freely given’.

3  Once a court is satisfied that a person has into an

agreement freely and with knowledge of its support and effect
the agreement will be valid notwithstanding the inadequacy of
consideration.
 Consideration

 Abstinence etc:
 Forbearance to sue has always been regarded as
valuable consideration. It is kind of abstinence.
 Forbearance to sue means that the plaintiff has a certain
right of action (bona fide, not a fabricated claim) against the
defendant or any other person and on a promise by the
defendant he refrains from bringing the action.
 Thus in KASTOORI DEVI v. CHAIRANJI LAL:
 The withdrawal of a pending suit by a wife against her
husband was held to be good consideration for his
promise to pay her maintenance.

Exception to consideration:
 Indian law, however, does not recognise any such exception. But section 25 of the
contract act lays down a few exceptions, when an agreement made without
consideration is not void.
 Section 25 An agreement made without consideration is void unless:
o It is expressed in writing and registered, is made on account of natural love
and affection between parties standing in near relation to each other, or unless
o It is 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.
o It is a promise, made in writing and signed by the person to be charged
therewith, or by his authorised agent, to pay a debt of which the creditor might
have enforced payment but for the law of the limitation of suits.
 Exception 1 :NATURAL LOVE AND Affection:
o A written and registered agreement based on natural love and affection
between near relatives is enforceable without consideration.
o The expression ‘near relative’ wills include parties related by blood or
marriage.
o Love and affection has to be the basis of the promise because otherwise such
emotional expressions and such human sentiments cannot take place of
consideration the material sense of the word.
o In RAJLUCKY DABEE v. BHOOTNATH MOOKERJEE:
 Held, that near relation between the two parties does not necessarily
imply natural love and affection between them.
 In this case, the defendant promised to pay his wife a fixed sum of
money every month for her separate residence and maintenance.
 The court could find no trace of love and affection between the parties

4 whose quarrels had compelled them to separate.

 The agreement was held to be void for lack of consideration.
 Consideration

 Exception 2: PAST VOLUNTARY SERVICE:

o A promise to compensate a person, who has already voluntarily done
something for the promisor, or something which the promisor was legally
compellable to do, is enforceable without consideration.
o However, such service should have been rendered voluntarily (and not at
request, which is covered by past consideration under 2(d)) and without
promisor’s knowledge for the promisor only.
 Exception 3: TIME-BARRED DEBT:
o A mere acknowledgement of the debt is not sufficient. There must be a
promise to pay debt. The promise referred to in section 25(3) must be express.
o In R. SURESH CHANDRA RAO & CO v. VADNESE CHEMICAL WORKS:
 Held,
 That a statement in the balance sheet of a firm signed by a
partner showing that the firm was indebted to the plaintiff in
respect of the stated sum became an implied promise to pay.
 Thus the Bombay HC, has given a new turn to this exception.
 Other instances:
o Some other instances where a consideration is not required to make a contract
valid are:
 A contract of agency
 Remission by the promisee of performance of the promise
 An agreement to extend time for performance of a contract
 A promise to contribute to charity in certain circumstances.