BUSINE KISALAY COMMERCE CLASSES__— CHAPTER - 3 | 5 LAW| B.COM. PART, LAWFUL CONSIDERATION & OBJECT i MEANING OF CONSIDERATION 2 (D) , $n, lterally, means something in return. Itis used in a technical sense of ‘quid pro, ice paid by one party s gives som for the promise of the other. An thing and gets something, Consideratior Consideration has been defined as the pri enforceable only when each of the parties 1 the promise and is called ‘consideration’. thing) or forbearance (not doing something) ora esent or future. But only those consideration agreement is legally ‘The something given or obtained is the price for ‘The ‘consideration’ may be an act (doing some! promise to do or not to do something. It may be past, pr are valid which are Tawfull’ Example- Ritik agrees to sell his horse to Deepak for © for Deepak’s consideration to pay % 10,000, Similarly, consideration to sell his horse to Deepak 10,000. Here Ritik's promise to sell his horse is Deepak’s promise to pay % 10,000 is for Ritik’s DEFINITION “When, at the desire of the promisor, the promise or any other person had done or Section 2(d)- to do or abstain from doing, abstained from doing or does or abstained from doing, or promise something, such act or abstinence of promise is called a consideration for the promise.” Section 2 (d) of the Indian Contract Act defines consideration as- a) when at the desire of the promisor b) the promise or any other person ©) has done or abstained from doing, or does or abstains from doing, or promises do or abstain from doing 4) something, such act or abstinence or promise is called a consideration for the promise. ESSENTIALS OF VALID.CONSIDERATION ' 1. Consideration must move at the desire of the promisor: nicl : The first important rule of conside- vation s peat ie at eens must be done at the desire or request of the promisor. If itis ae eee fone the request ofa third party, it will not be a valid consideration. It is 5 a person offer to d , tee ‘0 do something, how can another, be made liable to pay for 2. Consideration may move from the promisee or any other person: forbearance may be done by the promisee him: # It means that the act oF ¢ himself or any other pers words, consideration may be given by the promisee or any pel ‘on on his behalf. In other behalf. person on his (promisee’s) Example: A father gifted the whole of his prope rty to hi m4 is daughter on condition that she should = 0b, 9451506506, 9451070072 Ta) Me ‘V4T-ANY, Near Banshi Bhawan, Tagore Town, Prayer Scanned with CamScannerKISALAY COMMERCE CLASSES BUSINESS LAW| B.COM. PART-1 Pay an annuty (annual payment) to her uncle (father’s brother). On the same day, the daughter eee ie ‘oan agreement with her uncle agreed to pay the annuity. Later on, the daughter pea 0 Pay on the ground that the uncle did not give any consideration to her. They could held leration was paid by the father on behalf of her uncl le. entitled to recover the annuity. Thee hence wes Leading Case - Chinayya vs. Ramayya (1882) Thus from the above discussion, it should be clear that a stranger to consideration can file a suit to enforce his right. 3 Consideration may he past, present or future : The words, “has done”, "does" or "promises to do" indicate respectively that the consideration may be past, present or future. i. Past Consideration : Where the act was done in the past or the promisor had received the consideration before the date of the promise, itis called a past consideration. Example - A found B's purse. After a month B promised to pay %5 to A as reward for the service rendered. B is paying 5 for past consideration. Under English Law, a pat consideration is no consideration. ii, Present Consideration : Where the act is done in the present or the promisor receives the consideration along with his promise, the consideration is present consideration. It is also called an executed consideration. Example - A purchases goods by paying money in cash. Here, the consideration is present consideration. ifi, Future consideration : It is also called executor consideration. of future consideration. It should be noted that consideration for one party may be past, and for the other, it may be present or future. 4. Consideration must be real and not illusory : Consideration must be real, i. it has some value in the eye of law. It should not be illusory. Example- A promised to pay % 100 extra to a doctor for performing a successful operation. The promise of paying @ 100 extra in this case is illusory as the doctor is already bound to do his best for the patient. The following have been regarded as good consideration ¢ 5. Considerati thin ic ris legally bot : A promise to do something which a person is legally bound to do is not a good consideration. As such, pre- existing legal and contractual obligations cannot be regarded as good consideration. Example- A promised to pay €100 extra to a lawyer for winning the suit. A is not bound to pay 2100 even iflie wins’ the’case as the lawyer was duity bound to do his best to win the case. Payment of one hundred rupees extra in this case is not a good consideration as it was a promise to do something which the lawyer was legally bound to do. 6 iderati tT policy : The law does not compel anybody to do so opposed to public policy. immortal or opposed to public policy: it ms which is prohibited by law. it al lot mething illegal, impossible, immortal or ‘On the contrary, the law punished a person who does something illegal, ideration : Illegal consideration means doing an act pay B% 500 ifhe kills C. Its illegal. ion : Impossibly may be physical or legal. In both the cases, the r Example- A promises to ossi consideration would not be a good consideration. Example- (1) A promises to pay B €500 if two parallel straight lines meet each other. It physically impossible and therefore void. iii, incor rati promises to pay an uncertain amount is not a good consideration. Mob, 9451506506, 9451070072 (19) TaT-A/T, Near Banshi Bhawan, Tagore Town, Prayagra- Scanned with CamScanner___ BUSINESS LAW I B.COM. PART KISALAY COMMERCE CLASSES s Itis not certain ag Example- A promise to pay B an amount to his satisfaction if he cures his son. to what amount is payable. tis void. iv. InmottaL_consideration + Immortal consideration an act against positive morality as recognized by law. Example- A lets out his house to a gambler. A cannot recover the rent as consideration is mortal, 7. Consideration need not be adequate : It is not necessary that there must be full return for the promise. There must be something rather than nothing, For example, A agrees to sell his watch worth %100 only for £10, A's consent to the agreement was given freely. The agreement is enforceable even though the watch is being sold for just one-tenth of its price. The law has left the quantum of consideration to be decided by the respective parties. Hence the law will not object to the inadequacy of consideration. The law will not enforce a promise only if it is without considerati "NO CONSIDERATION, NO CONTRACT" The general rule of law is "No consideration, no contract’, i.e, in the absence of consideration there will be no contract. However, the law recognizes the following exceptions to the rule of consideration. The exceptions have been given in Sec. 25 of the Indian Contract Act. In these cases, agreements are enforceable even if these have been made without consideration. 1. A promise made out of natural Jove and affection [Sec. 25(1)] : An agreement expressed in writing and registered under the law for the time being in force for the registration of documents and is made on account of natural love and affection, between parties standing in a near relation to each other, is enforceable without consideration. An agreement made without consideration is enforceable. Ifit i Expressed in writing ii. Registered under the law for the time being in force for the registration of documents iii, Is made on account of natural love and affection iv. Between parties standing in a near relation to each other. mn. Thus there are four essential requirements which must be complied with to enforce an agreement made without consideration, as per Section 25(1). Example- A agreed to pay % 5000 to his younger brother out of natural love. This promise is in writing and registered. If a refuses to pay ¥ 5000 to his younger brother, the latter can enforce the promise in the Court and A cannot refuse payment on the ground of absence of consideration. It should be noted that all the four conditions must be satisfied only then it will be valid without consideration, otherwise not. It should be noted that nearness of relation does not necessarily mean that the agreement has been made out of natural love. 2. A promise made to compensate for voluntary services [Sec, 25(2)]: A promise to compensate, wholly or in part, a person who has voluntarily done something for the promise, or something, which the promisor was legally compellable to do, is enforceable without consideration. This rule, in fact, recognizes past consideration which was given without request or desire of the promisor. Example- A found B's purse and gave it to him. B promised to pay a reward of £50 to A. Later on, B cannot refuse payment on the ground that there was no consideration, 3. 2 A promi wri debt barred by the Law of Limitation is enforceable even withour. aa mango ny: Example- A owes ¥ 1000 but the debt is barred by the limitation Act. A signs a written promise to (20) Mob. 9451506506, 9451070072 "WTA ea Bana Bhawan, Tage Town Pyaar Scanned with CamScannerKISALAY COMMERCE CLASSES pay B the sum of € 1000. This is a valid contract. 4, Completed gift [Exp. 1 to Sec. 25]: A gi i pleted _gi : A gift (which is not an agreement) does i consideration in order to be valid. The gift must, however, be complete. , er eae Aaave a a Fe a gift (which is not an agreement) does not require demand his watch ground that iderati i as 8 at there was no consideration (as A did not get anything in return for 5. To create agency : Under Sec. 185, no consideration is necessary to create an agency. Actually speaking, consideration is there even in an agency in the sense that the principal has agreed to be bound by the acts of the agent. Thus he undertakes the responsibility of the agent. 6. Donation_or Gift: A promise to contribute to charity, though gratuitous, would be enforceable, if on the faith of the promised subscription, the promise takes definite steps in furtherance of the object and undertakes a liability, to the extent of liability incurred, not exceeding the promised mount of subscription. 7. Guarantee [Sec 127]: A contract of guarantee is made without consideration. 8. Remission [Sec. 63] : No consideration is required for an agreement to receive less than what is due. This is called remission in the law... BUSINESS LAW | B.COM. PART-I EXPECTED QUESTIONS. 4. Define and explain consideration defined in the Indian Contract Act. [5 Marks} 2. Explain the essential elements of consideration. \“ [5 Marks] 3. Define and explain consideration as defined in the Indian Contract Act. [20 Marks] 4, (a) Define consideration as defined in’ the! Indian Contract Act..Is existence of consideration " , [20 Marks] essential for the validity of a contract? (b) A's neighbor B saves A's property from destruction. Can B claim compensation for the help [20 Marks} given by him? 5. "No consideration, [20 Marks] 6. Define consideration. [5 Marks (A.U.2018)] No contract.” Explain this statement with its exception. Scanned with CamScanner