TOPIC NAME:- EXPLAIN THE TERM CONSIDERATION WITH

EXCEPTIONS

SUBJECT NAME:- CONTRACT- I

1 SEMESTER 3 YEAR (LL.B)

PROJECT SUBMITTED TO:- PROF. SHOBHA PATIL

STUDENT NAME:- SANJANA RAVINDRA MANDLIK

ROLL NO : 31

DATE : 08/06/2021

SIGNATURE OF INTERNAL FACULTY:-

SIGNATURE OF EXTERNAL FACULTY: -

 ACKNOWLEDGEMENT
This project would not have been possible without the fruitful guidance of PROF. SHOBHA
PATIL, in charges of subject CONTRACT-I, her sincere efforts in explaining the subject
and related topic helped us to be familiar with the subject.

I am thankful to madam to give clear guidance on the vast subject and important pillar of the
law and make ability to clear knowledge about it.
 CONTENT

NO. CONTENT PG. NO. REMARK

1 INTRODUCTION 1

2 JUSTIFICATION/ DETAILS OF TOPIC 2-3

3 CASE LAW 4

4 CONCLUSION 5

5 REFERENCES 6
 INTRODUCTION

Definition of Contract Act

According to Section 2(h) of the Indian Contract Act,1872 the term contract is defined as “an
agreement enforceable by law”.

Essential elements of a valid contract

 Proper offer and Proper acceptance with intention to create legal relationship.
 Lawful consideration and Lawful object.
 Capacity to contract.
 Free consent.
 Possibility of performance of an agreement.
 Agreements not declared void or illegal.

These are the some of essentials of valid contract. Out of these elements, we are going to
discuss on one element i.e. CONSIDERATION.

Definition of Consideration
According to Section 2(d) of the Indian Contract Act, 1872, “ 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 abstain from doing something, such an act or
abstinence or promise is called consideration for the promise”.

Concept of Consideration
Consideration’ means “something in return”, i.e. quid pro quo that is an essential element to
find out the genuine intention of the parties of the promise to create legal relationship.
Consideration is an essential component of a valid contract. Consideration is the price for the
contract. An agreement without consideration is void and thus not enforceable by law except
under certain circumstances. According to Sir Frederick Pollock. Consideration is the price for
which the promise of the other is bought, and the promise thus given for value is enforceable.”
An agreement without consideration is a bare promise and exnudo pacto non aritio actio,
i.e., cannot be held to binding on the parties. Consideration is the price of the contract and it
can be right, interest or responsibility etc.

When we say that consideration is an act it acquires an affirmative tone. For example:A promise
to pay ` 10,000 to B if B will sell his mobile to him. When we say that consideration is
abstinence or forbearance it acquires negative tone. It means one party agree not to do
something in lieu of the promise of other party of the contract. Thus one party may be able to
benefit due to the abstinence of another who refrains from some gain.

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Example:

A offers to sell his car to B for a sum of ` 1,00,000. B accepts the offer. In this contract,

i. A is the promisor and it is his desire to sell his car for ` 1,00,000
ii. B is the promisee and on the desire of A he is purchasing the car for ` 1,00,000.

The consideration for A’s promise, is a sum of ` 1,00,000 while consideration for B’s promise
is the car.

Exceptions of Consideration

The general rule is that an agreement made without consideration is void (section 25).
i.e. No Consideration, No Contract.

In every valid contract consideration is very important. A contract may only be enforceable
when an adequate consideration is there. However, the Indian Contract Act contains certain
exceptions to this rule. In the following cases, the agreement though made without
consideration, will be valid and enforceable.

 Natural love and Affection:

a. It must be made out of natural love and affection between the parties.
b. Parties must stand in near relationship to each other.
c. It must be in writing.
d. It must also be registered under the law.
A written and registered agreement based on natural love and affection between
the parties standing in near relation (e.g., husband and wife) to each other is
enforceable even without consideration.
Example : A husband, by a registered agreement promised to pay his earnings to
his wife. Held the agreement though without consideration, was valid.

 Compensation for past voluntary services:

A promise to compensate, wholly or in part, a person who has already voluntarily
done something for the promisor, is enforceable under Section 25(2). In order that
a promise to pay for the past voluntary services be binding, the following essential
factors must exist:
a. The services should have been rendered voluntarily.
b. The services must have been rendered for the promisor.
c. The promisor must be in existence at the time when services were rendered.
d. The promisor must have intended to compensate the promisee.

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Example : Mr. X had helped his nephew Mr. Y to fight a case in the court of law
using his knowledge and intellect. After Mr. Y won the case, he promised Mr. X
to pay Rs. 10,000. Held, this is a valid contract as it is compensation to past
services.

 Promise to pay time barred debt:

Where a promise in writing signed by the person making it or by his authorised
agent, is made to pay a debt barred by limitation it is valid without consideration
[Section 25(3)].
Example : A is indebted to C for `60,000 but the debt is barred by the Limitation
Act. A sign a written promise now to pay `50,000 in final settlement of the debt.
This is a contract without consideration, but enforceable.

 Agency:
According to Section 185 of the Indian Contract Act, 1872, no consideration is
necessary to create an agency.

 Completed gift:
In case of completed gifts, the rule no consideration no contract does not apply.
Explanation (1) to Section 25 states “nothing in this section shall affect the
validity as between the donor and donee, of any gift actually made.” Thus, gifts
do not require any consideration.

 Bailment:
No consideration is required to affect the contract of bailment. Section 148 of the
Indian Contract Act, 1872, defines bailment as the delivery of goods from one
person to another for some purpose. This delivery is made upon a contract that
post accomplishment of the purpose, the goods will either be returned or disposed
of, according to the directions of the person delivering them. No consideration is
required to affect a contract of bailment
Example : Mr. A hand over the keys of his godown to Mr. Y as Mr. Y had
deposited his goods in the same. Mr. Y gets possession of godown but not the
ownership. As soon as Mr. Y lifts his goods from godown he is liable to hand
over the keys back to Mr. A.

 Charity:
If a promisee undertakes the liability on the promise of the person to
contribute to charity, there the contract shall be valid.

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 CASE LAW

Currie v Misa (1874) LR 10 Ex 153

Facts

Lizardi & Co. sold a number of bills of exchange to Mr. Misa, drawn from a banking firm
owned by Mr. Currie, and were to be paid on the next day. However, Lizardi was in substantial
debt to Mr. Currie’s bank and was being pressed for payment. A few days later, upon paying
in the cheque, Mr. Mirsa learned of Lizardi’s stopped payments and outstanding debts,
instructing his bankers not to honour the cheque. The question arose as to whether the cheque
was payable, particularly as to whether the sale of an existing debt formed sufficient
consideration for a negotiable security, so as to render the creditor to whom it was paid, Mr.
Currie, a holder for the value of the cheque.

Issue

The question arose as to whether the existing debt constituted sufficient consideration for the
security so as to constitute a legally-enforceable contract for the creditor.

Held

The Court held that consideration must “consist either in some right, interest, profit, or benefit
accruing to the one party, or some forbearance, detriment, loss, or responsibility, given,
suffered, or undertaken by the other.” (p 162). Thus, there can be no legal contract unless there
is consideration in the form of a benefit gained, or detriment suffered arrangement by the
parties. On the facts, the Court held that the title of a creditor to a negotiable security on account
of a pre-existing debt and transferred to him, bona fide, without any notice of infirmity of title
by the debtor is indefeasible. The pre-existing debt did not in and of itself form a sufficient
consideration for the negotiable security. Accordingly, there was an absence of any
consideration or the making or payment of the cheque by Mr. Mirsa.

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 CONCLUSION

Overall under Indian Contract Act 1872, Consideration is an essential element in contract act.
Without consideration parties cannot entered in to contract. Agreement without consideration
is void as per section 25. There are certain exceptions to consideration
 Love and affection.
 Bad debt promise to pay.
 Compensation for past voluntary services.
In all above cases Consideration may not take place.

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 REFERENCES
 Mercantile laws
 https://advocatespedia.com