◦ Edington v Fitzmaurice

◦ A company was in great financial difficulties and need funds to pay some pressing
liabilities.
◦ The company raised the amount by issue of securities.
◦ While issuing the prospectus, the directors stated that the amount was needed by the
company for its development, purchasing assets and completing buildings.
◦ It was held that the directors had commited fraud.
◦ Derry v Peek
◦ It was held that
◦ There was a mere misrepresentation but no fraud as the statement had been made
without any intention to deceive.
mistake
◦ A.A. Singh v Union of India
◦ There was lease of right of fishery. One party thought it to be three years, while it was
actually for one year.
◦ It was held that there was unilateral mistake of fact.
◦ Agreement was not void, not voidable contract, it was valid.
◦ Hazi Abdul Rahman Allarakha v Bombay and Perisa Steam Navigation Co. Ltd.
CONSIDERATION

◦ Consideration constitutes the very foundation of the contract.

◦ It is a price paid for the promise made, and is referred to as quid pro quo which
means “something in return”.
◦ It is the price agreed by the promisee to be paid to the promisor for the
obligation undertaken by him.
◦ It is the incentive received for the promise made.
◦ Consideration is the cause of the promise and its absence would make
the promise a gratuitous or bare promise (nudum pactum).

◦ The fact that a promise has been made for consideration goes to show
that parties contemplated the creation of a legal obligation.

◦ Offer and acceptance bring the parties together and constitute the
outward semblance of a contract but most systems of law require
further evidence of the intention of the parties which is provided by
consideration.
◦ Consideration is a cardinal necessity of the formation of a contract but
no consideration is necessary for the discharge or modification of a
contract.

◦ Consideration is a price of the promise.

◦ The price for which the promise of the other is bought and the promise
thus given for value is enforceable.

◦ Consideration is a return or quid pro quo (something for something).

◦ For example – A agrees to sell his immovable property to B for Rs.
One lakh.
◦ A’s promise to sell - consideration
◦ B’s promise to pay – consideration.
◦ For example
◦ A promises to deliver 10 kg of sugar to B and B promises to pay Rs. 200 upon
delivery, the sum of Rs. 200 upon delivery.
◦ The sum Rs. 200 paid by B is the consideration for A’s promise.
◦ Similarly A’s promise to deliver 10 kg of sugar is the consideration for the
promise made by B.
◦ An agreement not supported by consideration is void.
◦ In other words consideration is essential for contract to be valid.
◦ Consideration must be real, competent and believable. It should not be illegal
or illusory.
◦ It must be lawful.
◦ Consideration must have a value but need not be equal value or magnitude
with the promise it was exchanged.
◦ Consideration defined under Indian Contract Act –
◦ 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 something such act or abstinence or promise is called a
consideration for the promise.
◦ This definition is more wider and comprehensive.
◦ The three ingredients of this definition of consideration are –
1. That the act or abstinence which is to be a consideration for
the promise should be done at the desire of the promisor.
2. That it should be done by promisee or any other person
3. That the act or abstinence may have been already executed
or in the process of being done or may still be executory, i.e., it
is promised to be done.
1. At the desire of the promisor (Promissory Estoppel)
◦ An act shall not be a good consideration for a promise unless it is done
at the desire of the promisor.
◦ Durga Prasad v Baldeo
◦ D had built at his own expense a market at the request of the collector
of the District. The shopkeepers of the market promised to pay D a
commission on the articles sold by them in the market. But later on
refused. When D sued the shopkeepers for the commission , it was held
that the promise to pay commission did not amount to a contract for
want of consideration, because D (the promisee) had constructed the
market not at the desire of the shopkeepers but at the desire of the
collector to please him.
1. 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.
◦ Chinnya v Ramaya
◦ ‘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
brothers (plaintiff). On the same day daughter made promise with A’s
brother that she would pay annuity as directed by A. daughter failed to
pay the stipulated sum.
◦ In an action against her by A’s brother she contended that since the
A’s brothers themselves had furnished no consideration they had no
right to action.
◦ The Madras High Court held that in this agreement (between the
daughter and A’s brothers) the consideration has been furnished
by A and that is enough consideration to enforce the promise
between the daughter and A’s brothers.
◦ PRIVITY OF CONSIDERATION
◦ PRIVITY OF CONTRACT
◦ Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co. Ltd
◦ An agreement without consideration is void but there are few exceptions – and
agreement without consideration has been made valid and enforceable.
i. Natural love and affection – Raj Lucky Dabee v Bhootnath Mookerjee
ii. Past voluntary service – A finds B’s phone and gives it to B. B promises to
pay Rs 500 to A.
iii. Time-barred debt – A owes B Rs 1000, but the debt is barred by the
Limitation Act. A signs a written promise to pay B Rs 500 on account of the
debt.
iv. Completed gift