f

Consideration

t opens with the d .

. 25 of the Indian Contract Ac is void "t In E eel1ardat1oln that "an
Sect1ont made wi thout consideration .. . . ng an a so ."Prom-
eemen . . , bec aus e the
agr . 1out cons1d erat1on are not enforced Yare gradtuitou
b
s" 2
·
. es winv Hughes Lor 3 d Ch · f B
n SK YN NE R ob served · "It ·
1e aro . is un ou tedly
1s
In Rannt every man 1s . by the Iaw of nature bound to fulfil his· engagements
rrue tha tha t t
h I
e aw o
f h
t e co un try supplies no means , nor af't10rds·
qually tru e
It 1s. e com pel t
h
e pe
c
rio rm an ce of an agreement made w·1thout su -
f
any remedy,
to . ,,
.
ficient consideration.
DE FI NI TI ON AND ITS RE
QUIREMENTS
n is by
y defined. The simplest definitio
Consideration has been variousl contract-
recompense given by the party
Blackstone: "Consideration is the
4

. . ·
ing to the other." mise. In the words of PoUock,
rds , it is a pri ce of the pro
In other wo
n is the pri ce for wh ich the promise of the other is bought, and
"Consideratio inition
forceable." Another simple def
5
e thu s giv en for va lue is en
the promis of some
tice SO N: 6
"C on sid era tion means something which is
is by Jus PA TT ER

Questions of considera-
on to pro vid e certain exceptions to the rule.
1. The sect ion then goe s emas (P) Ltd v Umri
ess the re is an agr eement. Associated Bombay Cin
tion do not aris e unl , an agreement to form
199 6 SC C On lin e Born 319: (1997) 2 Born CR 257
Develop ers P Ltd , e partnershi~ property
g the lan d of the owner; the land to becom
partners hip for dev elopin d, held, no que~tton _of tbe
5 cro re to the owner; consideration not pai
on pay men t of Rs 1.2
ty. Kampa Prasad v Addi Dis st
trict Judge, Ma,np•n, ~IR
nd omi ng par tne rsh ip pro per all ow 7
la bec
1~97 All 201, judgment-debtor agreeing to pay dec
retal amount by iPUlated ~ate th0 ut culao~
ent, agreem~ nt wi
no benefit under the agreemom
dismissal of objections but getting , b f pliance wit . Reg hOD
. h U.P R AIR
Th
erat1 on, voi·d. e agreement was also
6 Jup udi
v01 d y reason o non -c
Venkata Vijaya BhaskaIdr v JupIud, ·m
Kbisa11t1"'!:..ary
t e coparc"4 ...
0 Len din g Act 197
fM
1994 A
one y ' •
-be ado ptee tha t he wou . not cdail d0 es not involve
. h P 134, agreement by
a would f ·d ration an aUdh so oBaivA111bilta
r1g ts of h' s is not voi d for wa nt o const e 190 8
is would- be par ent · of h m alone sold
an 17 of the Regi 5tration Act,
T: Ysurrend
:•
er of righ ts so as to attr act S
136, a piece of J~nd b~longe~ of Rs '
to five ~t~~~, t~~esalet .:.s held to be
0 j~~ A~R 200 7 Pat
d for a single cons1derat1on
'
" 1·d . entire chunk of lan
°
2, See H
b •
, it could not e specifically enforced.
e, (1813) 128 ER 599.
3. liou seE;;H Jin Lee v Muggeridg ·
4. Co1.u,1 Lords, (1778) 7 Ter
m Reports 350n (HL).
S s· ENTARIES 3 h Edn) 133,
Frederi k pO1·lock, PO LLO CK ON CONTRACTS (1 t
6.· InIrTho ,n c
, 859.
as v Thomas, (1842) 2 QB 851

103]
1)4 Cha pte r 3 Con side rati on
[S. i(d)j
.
value in the eyes o f t 11e ]·.iw · · · · It may
·
be som e ben efit to th e plaintiff
d trim ent to the defendant." <>r sol))
e ly acc ept ed . · h h . h
def init ion ts t at w tc. Was att e
But the mo st co.mmon .
. C . Misa·7 "A valuable cons1 erat10n 'd . . h c etnpt
by LusH J m . "t"r~,t~1:r in s~me righ t, in t e sense ed
law, may cons1s et inte res t, pro fit or benefit accru?f the
· . . . tng t
t he one par t y, O r some for bea ran ce, ,,det rim ent , 1oss , or responsibil ity g· o
suffered or und erta ken by the ~ther. tven
The definition of considerat10n as a "pr~. . ,, ,
ce of the pro mis e has_ been corn.
mend ed bY Ch eshire and Fifoot. Ac cor dm g to the lea rne d wn ters ,, . .
h .
mo re . app t 1y to t he nor ma l e~ch
easier to und ers tan d, it co_rresponds ' It ts
·ses ange
o f prom 1 and it emphasises• the .com me rcia l cha rac ter of the English c
trac t. It reveals the ess ent ial s1mph~,1ty . f h ,,
o. t e c_onc~pt. 8 Th.e Calcutta 1-Iig on.
h
Co urt has observed in a cas e tha t con
sid era tion 1s the pnc e of a prornj
a retu rn or qui d pro quo, som
eth ing of val ue rec eiv ed by the promis
ind uce me nt of the pro mis e." 9 ee s:~
·
In Section 2(d) of the Ind ian Co ntr
act Ac t con sid era tion is defined as
follows:
When, at the desire of the promisor,
the pro mis ee or any oth er person
don e or abstained from doi ng or doe has
s or abstains from doi ng, or promis
ort o abstain from doi ng, som eth ing es to do
, such act or abs tine nce or promise
a consideration for the promise. is called

Thi s is rath er a pra ctic al def init ion . Th

e pur pos e is to em pha sise the sim-
ple fac t tha t con sid era tion is som e act
, don e or pro mis ed to be don e, at the
desire of the pro mis or. It als o avo ids
the pra ctic al diff icu ltie s cau sed by the
the ory of con sid era tion as con sist ing
of som e act wh ich is beneficial to one
par ty or det rim ent al to the oth er. Th
is ant ithe sis has bee n des crib ed to be
not alto get her hap py. Th e Ac t sim plif
ies the ma tter by say ing tha t any kind
of act or abs tine nce wh ich is don e or
und ert ake n to be don e at the desire
the pro mis or is a suf fici ent con sid era of
tion .
Th e def init ion of con sid era tion in Sec
tion 2(d ) req uir es, in the first place,
tha t the act or abs tine nce , wh ich is
to be a con sid era tio n_for the promise,
sho uld be don e at the desire of the pro
misor; sec ond ly, tha t it sho uld be done
by promisee or any oth er person and
, last ly, tha t the act or abs tine nce may

7. (1875) LR 10 Ex 153, 162.

8. LAW OP CON TRA CT (8th Edn, 1972) 60.
9. Fazal~ldin Manda/ v Panchanan Das
, AIR 1957 Cal 92. The sam e cou rt had
Nar~,n Roy v Kachhemen Bibi, AIR 191 held in Fani,,~ra
8 Cal 816: ILR (1917) 45 Cal 774 that
~ec :v1h ~y two mortgagors was goo d considerauo:
eno ugh to bind all the four who exe cute
. ~e . is _was followed in And hra Ban d the mortga~
Jomt prom1sors executing a k v Ana ntna th AIR 1991 AP 245 so as
· . to hold all t e
only one of them. Prakash '
P&H 13 d t •
w p~om_1ssory n?te liable thou gh_ con side rati on was han ded over to
2012
fl at, Jain v Pun1ab State Ind ustr ial
, e nme su 1ered by th Dev elop men t Corpn, AIR to
consideration) wasntheld as o · f
e ~rom1~or or the benefit of ano ther ( t partY
the sure ty for the benefit o1 t~d co?s1~er pers on. no red by
at1on. Acc ordi ngly , the coll ater al secu
mak e it enforceable. e prin cipa l deb tor was rega rded as suff ritf off~ion to
icie nt considera .
 Definition and its requirements
105
[S, 2(d)l
proc Of b .
been already executed or is in the to y be still
h;,1ve orY that is to say, it is pro mised b edssone . eing done or ma
· e
execut '
issory estof,pel)
''.At the desire of the promisor " (prom .
Section l(d )
The definition of consideration in siderat' fc1earh1y emp~as1ses that
ct or abstinence which is ·to be a
con
ion or t e promise must be
an a or pronus · d to e one m accordance with th d . f the prom1.sor
b d
e e e es1re o . ·
don d an act10 sh a11 not be a good con 'd . f
I other wor s, t10n doc a promi11se
promisor In Ds1 erap
n less it is done at the desire of the · urga rasa v Ba/deo:
un b . h.
The plaintiff, on the orderb of the Collector of atown, ut1t at 1s owhn
b
· h
expense, certain s· ops m'da aza
· r. The shops came to be occup1.ed y t e
• d
defendants who,. m consi era tion of the .plaintiff havin g expende money
. d · I Id
.I n the constru ct1 0n, pro mi se to pay him a commi·ss1·0 n on art1c es so
. . r the
10 th e bazar. The plaintiff's action to recove
thr oug h _th etr age n_c y
commission was re1ected.
o~l ~ gr_ oun d fo~ t~e ma kin g of the promise is the expense incurred
"The
mt 1ff m est abh sh1 ,ng the Ga ~j (:narket) but it is clear that anything
by th~ pla sti-
m tha t wa y wa s no t at the des ire of the defendants so as to con
done the
con sidera tio n."
12
Th e act wa s the result not of the promise but of
tute
Collector's order. ·

Acts done at request

er ha nd , an act don e at the promisor's desire furnishes a
On the oth
eration for his promi se eve n though it is of no personal sig-
good consid
ben efit to him . Th e dec ision of the Calcutta High Court in
nificance or 13 become well-known in
Kedarnath Bh attacharji v Gorie Mahomed has
CASE PILOT
this connection.
~
a town hall at Howrah provided suf
It was thought advisable to erect
ether for the purpose. To this end the
ficient subscription could be got tog es-
mm issioners of Ho wr ah mu nic ipality set out to work to obtain nec
. Co this
y fun ds by public subscr iption. The defendant was a subscriber to
sar
Rs 100 having signed his nam e in the subscription book for that
fund for
pos e of this defi niti on, includes "abstinence" also. Bank of Bar 1a
0

10. The word "act", for the pur of ov~rdra~t facil-

ay Age ncie s, (20 03) 1 BC 59 (Del), in connection with the grant
v Kay enk Stder~tion. K.
Rs 500 0 for exe cution of doc uments was held to be a valuable con
ity, fee of a~d builder_ for
v Sta te, AIR 200 8 NO C 998 (Del), contract between lan?owner
S. Bakshi
the own till c~mpl~t1on,
er agreeing to block his assets conS
of mu ltist oreyed buildin g, 1derat1on.
construction
. . . that connection · was presumed to be for
. ISSu ed m
good cons1derat1on, cheque 1948 PC
ll. ILR (1881) 3 All 221 , OLD FIE LD J at p. 228 . 8 61 545 : tIR i d
d
12 · See also Raia of Venkatagiri v Rao Bahadur Krishnayya, 369
(194 ) L~
nd Mo nda /, AIR 1929 C~I · In t~is cat: ~e e iv;ne~o : ;
150; Adaitya Das v Pre m Cha ertl the gdinner was
plaintiff's house to preside over a dmn
promised to bring a Thakur to the
plaintiff's gue sts. The def end ant faile d Th;kt
to bring th e ~~d t:s;i~~~aTntiff's action for
e fa hu · .
of it in the. absenceh d t ·re
O
wholly wasted as no guest partook mg on t e esi O t e prom1sor
.
damages was dismissed as he had don e noth
13 (1886J H Gal 6:4.
l Chapter 3 Consideration
[S. i(cl)]
amou nt . On t he faith of the promised subscriptions the plaintiff ent
into a co ntr ac t wi th a co ntr ac
tor for the pu rpo se o f bm'ld 'mg
the defendant failed to pay the the hall,ere
B
d
. am ou nt an d co nte nd ed tha t there Was llt
consideration for h1s .
promise. no
He was, however, held liable
: Persons were as_ked to subscr
the purpose for which the mo ibe knowin
ne~ wa_s to be ap ph e~ , the y kn
faith of their subscription an ew tha t on th!
obligation was to be mc urr ed
tra cto r for the work. Th e pro to pay the c
mise is: "In co ns ide rat ion of
enter into a co ntr ac t to erect, yo ur ag ree in; n-
I un de rta ke to supply mo ne y
of the plaintiff in entering int for it." The ato
o co ntr ac t wi·t h t he co ntr ac ct
the desire of the defendant (th
e pro mi.so r ) so as to co ns tit. tor was done at
wi thi n the meaning of Section ute consideration
2(d).
It was indeed a promise to .
pa y for the pe rfo rm an ce of
co uld no t have been revoked an act and .t
once the pro mi see en ter ed
England also "th e law for ce ntu performance. ~
rie s ha s be en tha t an ac t do ne 1
of an oth er, express or implied at the request
, is sufficient co ns ide rat ion to
ise".1 4 Writing in an article DE su pp ort a prom.
NN IN G LJ says: "N ow
gro un ds for suggesting tha t an ad ay s the re are some
ac t ma y be go od co ns ide rat ion
it is no t a benefit to the pro mi even though
so r no r a de tri me nt to the pro
promises a ch ari tab le ins tit uti mi see . If a man
on tha t he wi ll pa y £ 10 0 int
pro cu res nine oth er pe rso ns to o its funds if it
do the sam e, justice req uir es
sh ou ld be held bin din g on him tha t his promise
as so on as it ha s pr oc ur ed the
pa y£ 100 each; bu t the ac t do ne nin e others to
by the ins tit uti on is no t a bene
a de tri me nt to the ins tit uti on ." fit to him nor
A tre nd of thi s kin d is ob ser va
of the Supreme Co ur t. 15 On the ble in a decision
de ath of the ir fat he r, his tw o
a clash. Th eir mo the r int erv so ns picked up
en ed wr iti ng to the jun ior so
elder bro the r did no t pa y the n tha t in case his
su m of rup ee s fifty lak hs wh
ou t of the family assets, she wo ich wa s due to him
uld pa y the sam e. Th e br oth
the am ou nt. Th e mo the r su pp er pa id a pa rt of
lem en ted the pa ym en t to a ce
she ha d still to pa y the ba lan rta in extent, but
ce am ou nt an d for tha t sh e cla
in the co mp uta tio n of he r ne t im ed a reduction
we alt h. Th e Co ur t all ow ed the
co ntr ac t wa s a pa rt of the fam de du cti on . The
ily arr an ge me nt. It wa s ~o t
as pu rch ase of family pe ac e in hit by Section 25
su ch cir cu ms tan ce s is go od
A loa n given to the so n at the consideration.
ins tan ce of his fat he r wh o ex
essential do cu me nts wa s held ec ute d all the
to be en for ce ab le ag ain st the
fat he r. 16
Promises of charitable nature
Th e decision of the Ca lcu tta
Hi gh Co ur t in the Kedarnath
low ed by the M ad ras Hi gh ca se was fol-
Co ur t in tw o ca ses in bo th
of wh ich the court
14. R(1t9. Ho n. Sir ALF RED DE
NN ING , Rec ent De vel
52) 15 Mo der n Law Review opm ent s in the Do ctr ine of
, p. 1. Consideration,
15. CW Tv f!er Hig hne_ss Vij
ayaba, (1979) 2 SCC 213: AIR
16. Ra dha krt shn a Joshi v Syn 197 9 SC 982 .
(Kant). dic ate Ba nk, (2006) 1 AIR
Ka nt 692 · (20 06) 2 All LJ (NO
· C) 403
 [S . 2(d)] · n and its requirements 107
Dc6n,·t,o

promise to p ay a subsc · · e a8
laid do w n thdatfi "a· t k _rip t1 on becomes enfo rceabl
te steps have been ce of the object an
d
soon as an y e m ipti~ n~ ~ 7,~ nf ur th er an
e promised su bscr one of these cases:
on the faith of th ro m is ed b
A sum of R s 50 0 0
was p contri •
tr u t ' y th e
b ~e fe ndant as a personal
p ose o f cons c mg a ri d . He Was held liabl e to pay
bution fo r th e p ur ge
o n t h e co m pl et io n of th e brt'dge,1s
the am ou nt A
se , Doraswami 1 laAyyar19, t~e Madra
s
In a subs equ en t ca pl ey :; vK e~ un ac ha
ne ~ the princi arnath Bhatta. charJt
v Corie
High C ou r t ex pl ai m g th at there CASE PILOT
ot not a bar e promise to su bscribe,
Mahomed on th e fo was ld
sh d
so a re qu es t th at the promisee .
0
an act (constru ction of
the
but al he re t: u
case), an d th at w ac t the
sue~ requ~st fo r an cts of
town hall in th at d w it h ;: : ts no
re promise an any considerat10n.
The fa
promise will be a ba
the case were:
pl e w as in pr og ress A th e work proceeded m·ore
T he re pa ir o f a· te
m · ss b · · · ·'
d to ra is e th is m on ey u scnpt10ns were mv1ted
qu ir e . an . d 1·
money w as re . . de fe nd an t pu t h · se1£ d own on th e 1st
11st raised. The . 1m
b
an d a su scnpt1.0n su m th at th e su it was filed.
co ve r th is
was to re
for Rs 125 an d 1t J pr oceeded like this:
"The plaint
. C O R N IS H
as allowed s: That plaintiffs re
lying on
But no re co :e ry ~ pr om is e as fo llo w
at10n f? r t~e in repairing the tem
ple. The
found th~ cons1der cu rr ed lia bi lit ie s
e su bs cn be r m The definition of co
nsidera-
the pr om is e o f th co ns id er at io n?
question is, do es
th is am o u n t to
e de si re o f th e pr omisor the prom-
at th
t A ct is th at where ng, such act or ab
stinence is
tion in th e C o n tr ac do in g so m et hi
ab st ai ne d from promisee
isee ha s do ne o r , th e de fi ni tio n postulates that the
io n. Therefore more than a bare
promise.
called co ns id er at am ou nt in g to
o n so m et hi ng ideration
m us t have ac te d tw ee n th em in re spect of which cons
m e ba rg ai n be or to the
There m u st be so ve be en so m e re quest by the promis
T he re m us t ha e promised subscr
iption."
has been given .. .. in co ns id er at io n of th
re
20
d o so m et hi ng ca se o f Hud so n,
promisee to d su pp or t in the
English
fo un yment
T he le ar ne d ju dg e
te a la rg e su m o f money for the pa
e w as to co nt ri bu
where th e pr om is ere are
a/
~iR
iar, AIR 1: ~8 ~~~/ mes re (1837) 13 TLR 439.
1933 Mad 524. Th
ha M ud
17. Perumal Mud
18. Distric t Bo ar
aliar v
d o f Ra
Se
m
nd
na
an at
d v D.K. Mahomed
iti es to th e same
eff~c t: Se
/bra ,m a / 's
i j~ ~~ x~ f~:
m:i~j ope~in~ of a school
ol which it was de
and its
ar they would
some English au th or pl am tif f:l . h d th :c ho
bequest. It wa s
is ca se S pr om is ed to leave th~ st a Bts eh ewi'll con;ained no such fo r
In th iately e mages
e plaintiffs immed ut er estate by way of da
bu t 1o r 1ss
'd
m ai nt en an ce . Th L M · soa ~e 's influence £ 30 00 from the
1 ct is Mountgarret, re, _(1913! 29 TL R 3~5. A
no t have do ne P: effe s mter-
th e pl aint iffs w ere entitled to be t'o ns in a Ch apel m which he wa
held th at case to the sam . 1 1 . Estimates we re obtained
breach of co nt ra ct . A no th er ad tera t in amount
st of certam ac er a d· t al
to a orm
to defray th e cod' cee e Chapel entere m
tesrator pr om is ed Id no t ex he Provost of th
executed but b~fo
, re
e total expense the work had been
ested, pr ov id ed th t~ er ea fre r tom e of
r's estate was h~ble
th e te st at or , an d Held that the testato been entered mto
an d submitted to e te st at or di ed af te r; . ra ct had
or k. Th a cont
co nt ra ct fo r th e w er ha d be en en _tere mt~~f which
re m ai nd
a co nt ra ct for th e on ly of the work resp
10 ec
of so m uc h
for th e co st
before th e te st at or
's de at h.
_ _ _ _ _ _ _ _ _ _J
19. AIR 1936 Mad
135.
,.Q J., Jt] ___ _ _ _ _
Chapter 3 Consideration
[S. 2(d)]
of Chapel debts, the promisor having died after paying a large insta\
ment, the balance could not ~e reco~ered from his executor~. The clai~
was considered to be unsustamable m as much as the prom1see had n
. .h h .
undertaken any liability as part of the bargain wit t e prom1so r. Applyi Ot
these principles to the present case, the learned judge_sa~d that there was ~~
evidence of any request by the subscriber to the plamuff to do the temple
repairs.

Unilateral promises
A unilateral promise is a promise from one side only and is intended to
induce some action by the other party. "A unilateral contract refers to a gra~
tuitous promise where only one party makes a promise without any return
promise." 21 The promisee is not bound to act, for he gives no promise from
his side. But if he carries out the act desired by the promisor, he can hold the
promisor to his promise. His act is at the same time an acceptance of and a
consideration for the promise. "An act done at the request of the offeror in
response to his promise is consideration, and consideration in its essence is
nothing else but response to such a request." 22
It should be noted that in all the above cases where liability arose it arose
only when the promisee had by doing some act, on the faith of the promise,
altered his position. It follows, therefore, that where the promisee has done
nothing, there is no consideration. Accordingly, in Abdul Aziz v Masum
Afi, 23 the defendant promised Rs500 to a fund started to rebuild a mosque
but nothing had been done to carry out the repairs and reconstruction. The
subscriber was, therefore, held not liable. Similarly, it has been pointed out
in other cases that a mere promise to subscribe to a charitab le institution
cannot be sued upon. 24 Thus where the defenda nt had agreed to pay from
time to time, out of his own pocket certain sums proporti onate to the value
of the goods imported by him, to a charitable society, the promise was held
to be not enforceable, being without consideration. 25

21. Aloka Bose v Parmatma Devi, (2009) 2 SCC 582: AIR 2009 SC 1527. The court added that
the observation in Mohd Mohar Ali case, AIR 1998 Gau 92 that an agreement of sale is a
unilateral contract is not correct. Every sale presupposes somebody to sell and some other to
buy.
22. C.J. Hamson, The Reform of Consideration (1938) 54 LQR 233 234
23. AIR 1914 All 22: JLR (1914) 36 All 268. , , .
24 · See, Copa/
v Tri~bak, ~IR 1953 Nag 195; Doraswami Iyer v Arunachala Ayyar, AIR
1936 Mad
13~; ]than Krishna Mullick v Nirupama Gupta ILR (1926) 53 Cal 922; CIT~
~ameshwar Singh, AIR l953 Pat 231. ln this case an assess:e purchased Government secur•·
ties and had agreed that the amount of interest on them would be paid to the Viceroy's War
Pur_po~es Fun_d for _the duration of war - held, the agreement was not legally enforceable,
7
~:eJ"d1c; nihts is essential for the representation to be actionable under this rule. Socie~
(1~;2)1 ~~eERo;;, Le Commerce et 1'Industrie v Palm & Veg Oils (Malaysia) Sdn Dh '
25. Jamuna Das v Ram Kumar, AIR 1937 Pat 358: 169 IC 396.
 [S. 2('1)1 ,1uirementt 109
Definition 3n,I it t re
tr,-a/ 1.,r<>1111.sr s
Revocation o f u11ila
'r prof I . <:o . h •
There is yet aI nor h< > < llJ
11 cc rn i, ,
.: urufot cral co
ntr;1 cr,. ft ;,
hi ch i~ '> g f
,i t~<
f It t · A promise w rn for an a,·t Ii• rcvr,-
no c <m' Jue t 1a tomisce h, . · gi ven in re. tu
a ltcr h. ' h
ca hl e .hcfo pr
nrcut thmeay it. he rcvokcgcu.Jrnasf tctor the is pw mron hy actin",., upr,n t e
. pe ,
prormse~ .If r. pr . . · Pr om ,sce ha s comm en. ced rT<Jr--
1,lc th e ey ,F th e prr,m
mancc r k , ro. r exa m , to Kom1se is to ~ay a ,c;um kofdmon f
. know can it h~ revo e a tcr th e promi~ee
1sce wal s from Luc anpur, de
he .· .
journey? T char,'i v
has em barked up26on theests th ,h _c,s, omn '" KedardnathhBhatta
Corie M ahomed sugg , oug t no t m so any wor s, t at such a revo-
. . dcfc nd a . h
. ible . T he e a.c; soon a~
~: case, was hc!d liabl
construction ;f ~~:
cation JS im po ss
~a
the contract for the from the d . . was entered rnto.
rrington v
The same ap pe ar s
tfSIO nh of D EN N IN G LJ in E
. 27 The ow neec d · Th e house
Errington and Woods r od ad ouhse ha.d mortgage 1t. em
. the occupation o f his son an aug ter-m-law. He told th that
was m .
ty if th .d Off h ortgage debt
Id b ec om e th eu pr op er t t em
t he house wou d ey pa ces the
st al m en ts an d th ey co m
ce pa ym en t. In th ese rcumstan
ci
· ·e
' is
in in
r. I h . men
if th e pr om · co u ld revoke th1s prom
ust 1s or
co ur.t reIt t at 1t w.
ould be un1·
"T he La th er 's pr om · e was a um·1atera1
is
Lordship sa • id · al-
act of paying the inst
1,
at h1s p easure. His •
in re tu rn fo r th eir
e of the house le entered on perfor-
contract .. . a promis hi m on ce th e co up
t be_ revoked by they left it incomplet
e
ments. It could no as e to bi nd him if
but 1t would ce
mance o f the act, ke,
and unperformed." ul ty . If th e pr om is or is at liberty to revo
some diffic the other hand, if he
has
Either way there is hi s pl ea su re . O n
e promisee at e promisee may stop
per-
he can frustrate th d ev en th ou gh th
will be boun , therefore, suggeste
d in
no such liberty, he H ou se of L or ds
eet will. The 28 that the mere commen
cement of
formance at his sw C ro w n
Co L td v ract in the sense that
the
Morrison Steamship e of fe r in to a co nt
no t convert th that if he revokes it,
he may
performance does hi s pr om is e, bu t
to stay with
promisor is bound qu an tu m m er ut
· 29
t.
r da m ag es or on a
be su ed fo
to pp el a n d G over nment agencies the
Promissory es of prom iss~ ry estoppeJ as against
e doctrine R ~ SA H A I J of the
The position o f th us su m m arised by
agencies is th
Government an d its anas pati C o L td v State o f Pun1ab:Jo
ri t B
Supreme C ou rt in Am
64.
26. IL R (1886) 14 CaJ LQR
(1952) 1 KB 29 0 at p. 295 (CA). nt racts an d Co nsideration, (1953) 69
27. . .l t I Co
anaswami Mudaliar
v LI AIR
C.
3.
28. (1924) 20 LJ LR 28 see J.C . Sm• th , UmJ a e~a Jd . Lakshm or rerenrio~ of
29. Fo r fu rth er re ad in
g
08 8; 8~8, th at the mere accepran,e recovering
preme Co ur t has ~; event the donor from
99 an d 106. Th e Su 1963 Supp (l) S d '. 50 as to pr where ~he
1963 SC 1185 1190
:
ns iN :a ;~o~ ah ap a/ilta, AIR 1984 All 228, no cons1d-
es no t am ou nt to co ,itenance of the gif
red property, heJJ,
do na te d mone~ do ash Ch andrah v
back his do na tio n.
Subb
d R5 100 on t e mam
sp e~
donee pr om ise d to
s onJy a gift. SC l075 1077.
er at io n; it wa '
sec
_1. 2 411: A IR 1992
Chapter 3 Consideration
[S. 2(d)]
Law of promissory estoppel wh
• u · n f India v lndo A"ghan ich
m nio Ag
fou_nd its ";i° st eloq~ent exposi
en cies Ltd ,- crystallised in AA 1_0 11
t'
o u
Padampat Sugar Mills v State
of U.P. as f ur~1s . h'
32
iv1o
to a citizen, enforceable in a mg cause of aqt1/i;I
co urt ~f law, a~ am st the Go
it or its officials in the course vernn-ient ~
of their au tho rit y ex ten de d
which created or was capable any Pro . 1f
of creating legal relationship,
acted upon by the promisee, and itfllise
irrespecti·ve o f any preJu · d.ice
erated in Union of India v Go . It Was Was .
dfrey Philips India Lt d 33 an d
further when it was held tha · wa s t rkeit-
t no dutby ~ f elxcd1~ e wah s ass ess
a en
rettes manufactured by the ass afb le on ciga.
essee y me u mg t e co st o
fibre bo ard containers when corrugated
it _was clearly represented _by_
Board of Excise an d Customs the Central
m response to the subm1ss1on
the Cigarette Ma nu fac tur ers made b
' Association an d the repres
approved an d accepted by the entation w~
Ce ntr al Go ve rn~ en t tha t the
tainers would no t be included cost of con.
in the value of cig are tte s for
of assessment of excise duty. the purpose
In Delhi Cloth and General
Union of lndia 34 it was held: 'Al Mills Ltd v
l tha t is no w req uir ed is th~
asserting the estoppel mu st hav t the party
e acted up on the ass ura nc e giv
Mu st have relied up on the rep en to him.
resentation ma de to him . It me
pa rty has changed or altered ans that the
his po sit ion by relying on the
or representation. Th e alt era assurance
tio n of his po sit ion by the pa
indispensable requirement of rty is the only
the do ctr ine . It is no t neces
fur the r any damage, de tri me sary to prove
nt or prejudice to the pa rty
estoppel.' asserting the
·
In Pournami Oil Mills v State
of Kerala the Go ve rnm en t wa
35
mi tte d to go back on its earlie s not per-
r promise of wi de r ex em pti on
pu rsu an ce of which cer tai n ind from sales tax in
ustries were set up. A sub seq
cu rta ilin g the exemption wa s ue nt notification
held to be applicable to ind ust
after the notification. A promi rie s established
se wh ich is ag ain st pu bli c po
tio n of a sta tut ory pro hib itio licy or in viola-
n ca nn ot be the fou nd ati on of
an estoppel. 36
Estoppel of licensee
Th e pa rty wh o was gra nte d a
liq uo r licence wa s held to be
saying aft erw ard s tha t some estopped from
of the res tri cti on s im po sed up
do m, pa rti cu lar ly the on e un on his trade fre~-
de r wh ich the Go ve rnm en t
reserved with it
31. AIR 1968 SC 718: (1968) 2 SC
R 366.
32. (1979) 2 sec 409: AIR 1979
SC 621: (1979) 2 SCR 641.
33. (1985) 4 sec 369, 370: AIR 198
6 SC 806.
34. (1988) 1 sec 86: AIR 1987 SC
241 4, 2419: (1988) 1 SCR 383.
35 · !
9.86 Sup
p SCC 728 : AIR 1?8 7 SC 590
wri t juri sdi ctio n is available I
1s ~nvolved but not oth erw ise
for enforcing a Go ver nm ent wh en promissory est
con trac t. Chamundi Roller flo
oPP;,
Mills v FCI, (1992) 1 Kan t LJ 579 in
ma tter ; Pra kas h v Un ion of Ind ia, (1994) 2 Born CR 53, even rit
. . s of
. con trac t, the Go ver nm ent mu
. . st act · 1y (G
fa 1r
pet mo n hes aga inst unfairn ess. ove rnm ent 1essee m· thi·s case), w
36. Amrit Banaspati Co Ltd v
State of Punjab, (1992) 2 SCC 411
refu nd sales tax am oun ts alre : AIR 199 2 SC 1075, promise to
ady pai d was held t b
o e not cap a ble o f cre atin
• g
an estoppel,
 tion 111
Privity of contract and of considera
[S, 2(d)J
bl .
er to vary issue prices, wereciunr. ea.. sona e. _Unrca_sonablcness has to
che po~ d red in the totality of the rest.
uc:cJins~ances including public intesuch
b~ const ~1sumpti on has to be red r1 an ' therefo re, free trade of
d
Liquor coannot be encourag e . ne po wer to vary issu .
. e prkes is a method
ao item c controI of tIus tra de. The cou rts w· 11 I
I on Y prevent a crush-
ercising • S h of ;he
of ex er do es not also offend Section 29
ing use of tlus power. uc .pow the rice
tra ct Ac t bec aus e the re ts no uncertainty about the nature of .
con
cla use . Its unr eas ona ble use can always be prevented un der pwnt
•"tion .
vart(l . . 37
. risd1ct1on.
wh o had acq uir ed title to the land of a counc1·1 by adverse
JU A per son , f
ssio n, agr ee d su bsequently to hold the same under a term 11·cence rom
poSse h .
.
il. On t. de expiry of h. the term the Council told him to hand over
e Co unc . s not
th
sessio n. H e tne to ass e~t is title by adverse possession. He wa
pos d under
he had acquired became substitute
allowed to do so. Whatev~r rights ement
unt_arily ~ccepted. The new arrang
the new arrangeme_nt which he vol inst him. 38 .
aga
constituted a promissory estoppel

OF CONSIDERATION
PRIVITY OF CONTRACT AND
"Promisee or any other person"
)
second notabl e fea ture of the definition of consideration in Section 2(d
The by "the
ute a consideration may be done
is that the act which is to constit there is
means, therefore, that as long as
promisee or any other person". It
tion for a promi se, it is im ma terial who has furnished it. It may
a considera any
from the pro mi see , or, if the promisor has no objection, from
move , hav-
genesis in the English common law
other person. This principle had its Dutton
King's Bench as early as 1677 in
ing been adopted by the Court of
39
v Poole:
son had a dau ghter to ma rry and in order to provide her a mar-
A per at
a wood of which he was possessed
riage portion he intended to sell for-
promised that if 'the father would
the time. His son (the defendant) er
pay the daughter £ 1000'. The fath
bear to sell at his request he would her
ant did not pay. The daughter and
accordingly forbore but the defend
amount.
husband sued the defendant for the s the
this promise to his father and it wa
It is clear that the defendant gave
o, by abs taining fro m selling the wood, had furnished con-
father alone wh nor
tion for the pro mise. Th e pla int iff was neither privy to the contra_ct
~idera ect of
t it is equally clear that the whole obJ
interested in the consideration. Bu ~ bee_n
rtion to the plaintiff. It would hav
t~e agreement was to provide a po his
inequi tab le to allow the son to keep the wood and yet to depnve
~•ghly
81ster of her portion. He was accordingly held liable.
-- -: -- --
::· Lekh Raj v State of Rajasthan,
(1987) 1 Raj LR 661.
540.
th, (1991) 2 WLR
· Colchester Borough Council v Smi
39 Lev inz 210: 83 ER 52 3,
· Court of King's Bench, (1677) 2
apter 3 cons,'dcrntmn
. I•s• 2(cl)j

Position of />r,tr{id.,,.,, who is n, ,t party

'!
Nrarly two hundn·d yc-ars lnh·r In l 86 l in 111~'ddfo v AtlliJ1.w,n n H1c
I · ·1 ·,,,le
1

Court of Qurcn's lknrh rdusrd to (o II ow t WI pr ,u.: •

. . t'ff
Th e pIam 1
w·•s t<l l,c mnrricd to the dnughtcr of
1 f and
.ff'8 (;
. one I
in c,in.
,1-
1
siJcration of this intc1Hkd nrnrri,1gc G ond r lC p ,aint·i , at' icr CJJtc:r<:d
into a written AgrC'c.'mcnt hy whid1 it. was ogf'cc<l that ca<.: h ~o~dd P~ty
811d th ~ plaJ11t1ff .~ll<:d
the plaintiff a sum of the money. G foil~d to do so
h1s. cxecu tors. WJ .."JTMAN J
considered 1t to be an cstahhshc<l priw,
, "1•P1c
·
'that no stranger to the considcrntion can take advantage of a contract
although made for his benefit'. '
Thus, although the sole object of the contract was to secure a hcnc:fit to
the plaintiff, he was not aJlowed to sue as the contract was made with his
father and not with him.
The case laid the foundation of what subsequently came to be known as
the doctrine of "privity of contract", which means that a contract is a con-
tract between the parties only and no third person can sue upon it even if it
is avowedly made for his benefit. 41 Referring to this in Drive Yourself Hire
Co (London) Ltd v Strutt 42 DENNING LJ suggested that the doctrine never
arose until 1861 and then observed:
For the last two hundred years before 1861 it was settled law that, jf
a promise in a simple contract was made expressly for the benefit of a
third person in such circumstances that it was intended to be enforceable
by him, then the common law would enforce the promise at his instance,
although he was not a party to the contract. 43
The principle was affirmed by the House of Lords in Dunlop Pneumatic
Tyre Co v Selfridge & Co Ltd. 44
Plaintiffs (Dunlop & Co) sold certain goods to one Dew & Co and
secured an agreement from them not to sell the goods below the list price
a~d tha.t i~ they sold the goods to another trader they would obtain from
him a similar undertaking to maintain the price list. Dew & Co sold the
motor tyres to t_he defendants (Selfridge & Co) who agreed not to sell the
tyres to any pnvate customer at less than the list prices. The plaintiffs
sued the defendants for breach of this contract .
. It was held that assuming that the plaintiffs were undisclosed prin·
c1pals, no consideration moved from them to the defendants and that
the chon_tract was unenforceable by them, Lord Viscount HALDANE n1ost
emp at1cally declared that: ·

40. 123 ER 762: 1 B&S 23 393 . 30 LJ Q

41. Kanta Devi Ber/lia v M~hit jh 'h B 218: 4 LT 468. ed
on the contract. uni unwala, (2006) 2 CHN 161, nor can such a person be su
42. (1954) 1 QB 250 at p. 272: (1953 ) 3 WLR
43. See a note by E.J.P. on Pri , 1111.
44. 1915 AC 847. v,ty of Contract, (1954) 70 LQR 467.
 Privity of contract and of con~ideration 111
[S· 2(d)1
r .•
th e faw of Eng.la nd certai n pri' ic1p1e, sa re f uncIamental. One is that
111 to a co nt ract can sue · 0 ut law know ,
ly a pers on w110 1s a. part y
on £ . S quaes1tu m te rtio arising b wa on ntit.ract. Such a righr
,wtl1i11g o a /U w ay of
of co
property' as, ;cot exYam I det a trust, bur
.,y be con ferr ed by P e un
l d on a stranger ro a ra ct as a · ht to enforce the
111 " co n1 er re co nt
. cannot .be in ci'pl . h . Ilg .h
1t ra ct m personam . A se cond pr e is t at if a p erson w it whom a
nt l e. b .-
cO ract not un der sea has been mad 1s to e able t0 enw
. cons1d
' rce 1t
nt ,
b . .
cO ion must h ave een given by him
erat

nd am en ta l pr op os itions o f English Law

fu ..
r w or ds the tw o fundamental opoSitwns of Engl ish law
Stated in othe ordship are: pr
referred to by his L
e d the prom1s .
us t mov e from th e pr om is
e an ee only· If
(1) Con h d bsi de ra tion m bee omes a stranger to the
· e y any other person, the promisee
it be form · s d h ert ore, cannot enforce the promise. 45 .
t er
considerat10n an ' be en fo rc ed by a pe rs on who Is· not a party to 1t even
ntract catnnot d
(2) A co · · ad e 1o h' b efit. He is a stranger to th e contract an can
m r · 1s46 en
though 1t 1s • hts under It.
claim no ng
ion
Privity of considerat at al l applicable in India. H
ere
ition s is no t
two propos ideration in Section
2(d):
The former of these _ in de fini ng co ns
languag~ used rnished by the prom
isee.
in view of the d ea r at 1o n sh ou ld be fu
at cons1der ation for it and it is
quite
it is not necessary th e is .so m e co ns id er
eable if ther ee or any other pers
on. The
A promise is enforc fr om th e pr om is
immaterial whether
it moves
M ad ra s H ig h C ou rt in Chinnaya v
the decision of the
leading authority is
Ramayya:
47
to the
ft , m ad e ov er ce rtain landed property
of gi ered,
An old lady, by deed e te rm s of th e de ed, which was regist
hter. By th y year to
defendant, her daug nu it y of R s 65 3 should be paid ever
it was stipulated th
at an an
e ol d w om an . The defendant on the
as the sister of th (agreement) prom-
the plaintiff, who w ur an lq ra rn am a
in plaintiff'~ favo , however, not paid
same day executed T he an nu ity w as
to the stipulation.
ising to give effect
ed to recover it.
and the plaintiff su n fo r th e defendant,s promis
e to pay
ns id er at io
It was d ea r that the
only co
by th e ol d w om an to the defendant.
gift of certain lands
the annuity was the 19 ) 71
(2 3rd Ed n by A.G. GueSr,
CONTRACT
ENGLISH LAW OF A h L C b'
45· See A nson, PR IN CIPLES OF THE
n, 1972 ) 64 · ,
fo ot LAW OF CONT RA CT (8 th Ed
at PP · 38 0- Sl_; rt. ul r h. 1orrnmd
e
89; Cheshire an d Fi fo ot , ibid this amc e r e ea
0· Cheshire and Fi JO) 46 LQR 12 · In h I ding authors on
rhe
46· See Anson ibid at p · 37 ' (19 .
' rsons,
nefit of ThirdisPeno c as r e ea
C0
_ntracts for thethBe e t after all as dogmati
at the do ctrin ha Pillai, (1883)
wnter maintains . I P'Ill •v Ananthanat
tract assert. er iUustrat10n: Samue a,
English Law of Con th
47· ILR (1876-82) 4 Mad 137. Ano
6Mad 351.
 [S. 2( I
apter 3 Consideration C)J
d herself on the ground that th
.J t
. tried to uc1cn . B . fl '
The defendant, there fo I e, . J1 d no considcrat10n. n c Y, the wh e
promisee (the plaintiff) had ~urn!s e omise was given to the plaintiff 6>le
situation was this: the _dcfen ban\s prJaintiff's sister. T he court could h lit
consideration was furmshed Y t ,e pthe annuity, as cons'idcration give abve
. d h J . tiff to recover hd h n y
easily alJowe t e ~in r, JI effective. The court reac. e t e same resuj
"any other person is equa Y d INNES J tried to equate the situaf1 t
but on a somewhat differe; g~ou7n ·that case the defendant 's sister Wo ~n
with the facts of Dutton ~ obo et. 1tor the defendant 's promise. In the pres ud
portion u ' f ent
have got h_er ma rriage
• .
he Jaintiff was already rece1vmg rom her siste
th
case als~ 1t ap~eared at t / f the estate and when the estate was hand dr
an annmty of hke amount ou o h h t t h 1. e
£ ndant it was stipulated t at t e paymen o t e p aintiff
over to t he dere d d' ly That mea h
ns t at the
should be continued and she promise acc?r mg · . .
£ ·1 t keep the promise would have deprived the plamt1ff of an amount
ah1 ~reh ho s already receiving and it is a legal commonp lace that if a
w 1c s e wa me loss to the promisee that 1s • ffi · 'd ·
c1ent cons1 erat1on for
promise • causes so . . , . su .
the promise. Thus the plaintiff had given considerat10_n.
Justice KINDERSLE Y also came to the ~ame conclusion , but ~n a dif~erent
ground. According to him the deed of gift and the defendant s promise to
pay the annuity were executed simultaneously an~, therefo~e, th~y should be
regarded as one transaction and there was sufficient considerat1~n fo~ that
transaction.
American judicial opinion is in favour of this rule. In the words of the great
American writer Williston: "The rule that considerat ion must move from
the promisee is somewhat technical, and in a developed system of contract
law there seems no good reason that why A should not be able for a consid-
eration received from B to make an effective promise to C. Unquestionably
he may in the form of a promissory note, and the same result is generally
48
reached in this country in the case of an ordinary simple contract."

Privity of contract
The rule of "privity of contract" which means that a stranger to contract
c~nnot sue has taken firm roots in the English Common Law. But the prin-
ciple has bee~ generally criticised. 49 In 1937, the Law Revision Committee,
0nd the c~a1rma~s~ip of Lord Wright, also criticised the doctrine and rec·
er
ommended its abolition. In its Sixth Interim Report the Committe e stated:
Where a contract by 1·t fit
d· 1 . s express terms purports to confer a bene
Ire~t _Y o~ aht_h1rd party, the third party shall be entitled to enforce the
prov1s10n m 1s own name provi'd ed that the promisor shall be enttt· Jed
. '

48. Samuel Williston, Contracts for the B . 1.

49. Professor Corbin, Contract for th ;nefit of a Third Person, (1901-02) 15 Harv L Re-V 76w
~ettenb?rn, _Third Party Contracts~ /nef,t of Third Person, (1930) 46 LQR 12. An~;2;
eter Km~a1d, Privity Reform in ragmat,sm from the Law Commission, 1996 JB~ f
Contract tn the Supreme Court of i::land, (2000) 116 LQR 43; M.H. Ogilvie, Pri111tY6~·
1
ada: Fare Thee Well or Welcome Back, 2002 JBL
 .n
. erat1o
[S, 2(d)] Privit y of contract and of cons1d 115

ainst the thi rd parry a ny defcnc.:e th t u Id have bee n valid

to raise ag . a wo
against the pro nus or ... .
criti · d 1 .
Lord Justic e DE NN ING has also :~~se t le rule in a number of cases,fo
wh ich his Lo rds hip ob ser ved
in one of
b bl
It (the privity principle) has never enla e entirely to supplant another
pee
rinciple whose roots go much dee r. mean the prmc · Ie that a man
· 1p
P .b pro mi se wh ich . .
who makes a del1 erate n that is
sider :~ tnte cled to be ?inding,
to say, under seal or for good con promise; and
t onlya ttonh, mu~t keep his
the Court will hold him to it ' no t of the p t h
• · but also at the suit ofa t e sui h ar Y w o gave
the cons1derat1on,d h .
'd one w fio wads not a par tY tO the
de for hi b
contract, provI e t· Iath'It was ma s jenet tan thaft he has as uffi -
· orce it sub
cient interest to entit e Im to enf the writs.'
1
ec a ways, 0 course, to any
defenc es tha t ma y be op en on

In the subsequent case of Be swick v Beswicks2 th C rt Of Appeal

that case: e ou
adopted the same approach. In
busi-
endant was assisting him in his
B was a coal_ merchant. The def
ere d mt o an agreem ent wi th the defendant by which the busi-
ness. B ent · 1·t as
s to be tra nsf err ed to the def endant. B was to be emplo yed m
ness wa h. 1.l. d to his
su I tan t
l
1or_ IS IIe an aft er his d~ath the defendant was to pay
a ~on iness.
ow an an nm ty of £ 5 pe r we ek, which was to come out of the bus
wid £5. The
paid B's widow only one sum of
After B's death, the defendant ears of the annuity and also to
ht an act ion to rec ov er the arr
widow broug
agreement.
get specific performance of the
d tha t she wa s en titled to enf orce the agreement. Thus the plain-
It was hel gh
allo we d to enf orc e the agr eem ent in her personal capacity, althou
tiff was a trust
s no t a pa rty to it an d it wa s considered not necessary to infer
she wa with the words:
of the pla int iff . Lo rd DE NN ING MR concluded
in fav our a
benefit of a third person who has
Where a contract is made for the son in
it can be enforced by the third per
legitimate interest to enforce it, y with him or, if he refuses to
the co ntr act ing pa rty or jointl
the name of se,
ad din g him as a def end ant . In that sense, and it is a very real sen
join, by erest
rd pe rso n has a rig ht arisin g by way of contract. He has an int
the thi ry ... are
. The observations to the contra
which will be protected by law
(1949) 2 KB 500 (CA);
v River Douglas Catchment Board,53 3
50. See Smi th & Snipes Ha ll Far m Ltd
Ltd v Strutt, (1954) 1 QB 250: (1?
) A~ ~\~
111 p t
Drive Yoursel f Hire Co (Lo ndo n) lan, ,rt ay resen
pp. 514-15. Cathe~ine Mac Mil 99 9, (2000) 63 MLR 721 at
51. In first of the above-stated cases, at Parties) Act, 1
(Rights of Third
for Lord Denning· The Contracts Act permits a person who is not a party tol a contra~tdto
pp. 726 730-31 Thi s New Zea lan d
. (l) h the contrac t express y so prov1n, esit
' · .
ns: w ere t whe re on roper constructio
two situatio
enforce a term of the contract in sh:u ld be enforceable by
to conf~r a be~efit excep the term
and (2) where the ter_m purports t did not mten~ t~at S p eme Cou rt of Canada (1993)
the par ties to the con trac '
appears that Privity of Contract ,n t e u r
the third party. S. M. Waddams,
109 LQR 349.
52. 1968 AC 58: (1967) 3 WLR 932.
Chapter 3 Con sid era tion
[S. l(d)j
in m o inion erroneous. It is diff ere nt
. y. r wh en a thi rd p_e rso n has no I .
l
1ma te inte rest , as w 1
en he is see kin g to enf orc e the ma tnte nan ce f cg,t.
p
neu ma ttc Tyre v SeJrr •dpr·tees
to t he pu . d 'sad van uge as in Du n
/
op · O
. bl IC 1 ~ " , l
Co Ltd-~3 or wh en he is see kin g to re y . h .
not on_ any ng t given to, , him.
' ge 6
the cont~ac~, .but on an exe mp tion cla
use , see km g to exe mp t hirnself fr()~
his justhab1hty.
The case shows tha t a refo rm, as wa s
~ecom1:nended by the Law Revisio
Com mit tee in 1937, is long ove rdu e ~nd
respect tha t wo uld har dly be revolut10
1f Par liam ent tak es any step in
nary.
th:
An oth er such obs erv atio n is to be see
n thr oug h the wo rds of STEYN LJ .
Darlington Borough Council v Wiltshier
No rth ern Ltd : 54 in
"Th e case for rec ogn isin g a con trac
t for the ben efit of a thir d pa
is simple and stra igh· tfo rwa
rd. Th e aut ono my o f t he w1·11 of the
sho uld be res pec ted . Th e law of con tra partrty
'
ct sho uld give effe ct to the reas~~~
able exp ect atio ns of con trac ting par ties
. Pri nci ple cer tain ly requires that
a bur den sho uld not be imp ose d on
a thi rd par ty wit hou t his consent. But
the re is no doc trin al, log ica l or pol icy
rea son wh y the law should deny
effectiveness to a con trac t for the ben
efit of a thi rd par ty wh ere tha t is the
exp res sed inte ntio n of the par ties . Mo
reo ver , oft en the par ties , and par-
ticu larl y thir d par ties , org ani se the ir
aff airs on the fai th of the contract.
The y rely on the con trac t. It is the ref
ore unj ust to den y effectiveness to
suc h a con trac t. I wil l not stru ggl e
fur the r wit h the poi nt since nobody
seriously ass erts the con tra ry .... "
But the Ho use of Lor ds did not app
rov e the app roa ch ado pte d by Lord
DEN NIN G MR and fou nd for the
pla inti ff on a dif fer ent gro und . 55 Lor
said tha t the pla inti ff "in her per son d REID
al cap aci ty has no rig ht to sue, but
has a rig ht as adm inis trat rix of her hus she
ban d's est ate to req uir e the appellant
to per for m this obl iga tion und er the
agr eem ent ". Lo rd PEA RC E put it like
this : "Th e est ate (th oug h not the wid
ow per son ally ) can enf orc e it." 56
In som e ear lier cas es also the Ho use
of Lo rds sho we d no preference
f~r. Lor d DE ~~I NG 's_ app roa ch. For
exa mp le, in Scr utt ons Ltd v 1:1idla nd
Szlt~ones Ltd ref err mg to the arg um ent
tha t the ort hod ox vie w which crys·
~alhsed a cen tur y ago in Tw edd le v
Atk ins on (1861) and fina lly established
~n Du ~lo p v Selfridge (1915) sho uld be
reje cte d Vis cou nt S1M ON D said t~at
ce~tam state me nts wh ich app ear to sup
por t it in rec ent cas es suc h as Srnit~
v Riv er Douglas Ca tch me nt Board5
mu st b . d If h s and Wh •t J h w, ·ck & Co Ltd·
. . t ev
e reJecte · t e prm cip le of jus qua esi tum oterntiow arw t d d
is to be intr o uce
53. 1915 AC 847.
54. (1995] 1 WLR 68 at p. 903 -04 (CA
).
55. Bes wick v Bes wick , 1968 AC 58· 19
56. As stated in Anson THE L · ( 6 7) 3 WL R 932.
57. 1962 AC 446: (1962)
2wt: ~:
58. (1949) 2 KB 500: (194 ) All ER 6
~~~ TRA CT (23rd Edn by A.G
).
. Gue st, 1971) 388.
9 2
59. (1953) 1 WLR 1285 (CA). 179
-
·
[S, 2(d)J Privity of contra ct and of consideration 117
. by p 1.iament f
, It mus,,t be done n of its
. to our law
d d . H '
ds hip
ar
em ph . a tcr a du e co nsideratjo d
,n . Is L or d
that "the law is eve1ope
merit an _em~nts of old principl · as ised
apphca tion b es to new • r~u~stances. Therein Hes its
by the t c1
the abrogation of th e princ1ples is the task not of the
genesis. Its re1orm yParliament", os
courts of law but of
.
ition in India: Decisions /ollowin g Eng1tsh Law
Pos
s been a great d1v · gence of o . . . h urts as
In India also there ha ntra ct ca
er
[ . pm1on m t e co .
ro how £ar a strangerhto a co n en10brce It . Th ere are many decihded
. h d 1are t at a co nt ra ct ca
ot e en forc ed bY_ a person w o is
cases wh1c ec h
. d t at the rule in Twed
nn dl A k . 60
as much appli-
not a party to 1t an in England But th ~ v t znson 1s tract
cable in India as it
is
l~ T he /~ e isC no pr~vision in thethCon1
Act either for or against the ru · nv y ouAncd extended61 e ru e to
· an di t R
. • d · · m ]amna Das v P am utar Pande.
India m its ec1S1on m t fh .
n
..
m
00 0 by ex ec ut in g a ga ge o er zam m da
rrow
A bo f B S bed R s4 0, or for R s4 4,00 0 an d
1 h th e pr op er ty to C
sold
£avour p . u sequent y stoe retain Rs 40 000 of th e pn·ce m · order to
haser, , e
allowed hC, the purc • gh t fit . B su ed C for the recovery of th
e 1f he thou e he was no party to
the
redeem t e mortgag no t su cc ee d be ca us
t he could
mortgage money, bu A and B.
agreement between t, said that the unde
r-
ve ry sh or t ju dg m en
N, in his ndor.
Lord MACNAUGHTA ee w as gi ve n by th e defendant to his ve
the mortgag that. He was no part
y to the
taking to pay back to av ai l hi m se lf of
no right ith him, and the purc
haser is
"The mortgagee has into no co nt ra ct w
entered
sale. The purchaser y th is mortgage debt."
62

not personally bo un d to pa
a pe rs on tra ns fe rs property to another
appears is that on, a suit to enforce
Thus, where all that ey to a th ird pe rs
e payment of mon 63 But the party making th
e
and stipulates for th w ill no t lie .
the third party
64

that stipulation by ce fo r th e be ne fit of the third party.

r specific perform an ,
contract may sue fo rt ai n m ua fi la nd , the lessees undertook
a lease of ce sible for the paymen
t
Similarly, where on le ss or , to be re sp on
es and their was primarily bound
as between themselv w hi ch th e m ua fid ar
certain sums force this covenant
by a
to the zamindar o f in da r co ul d no t en
th at the zam
to pay, it was held
shan
21 8 4 LT 468 · Mal v Dhan Sin h Bi
: ret ed
ain
12 3 ER 76 2: 1 B& S 23, 393: 30 LJ QB 4 63 · Ba bu R a; B :: :: recover the mone:
60. Al l tgagee.
. (191 1- 12 ) 39 IA 7: ILR (1911-12) 3 ee wa s no t :h ~: w ne r and second mor
61 169, the first mortg ag Court,
Singh, AIR 1957 Punj b, ;; ;~ f Cu rr LJ 860 (Malaysia), High d to
emer 2 to sue a person who puporte
agee under the agre a ty,
by the second mortg ng Re .tted vacant
p. 9. Th am Sa w Fo ng v Te h Teng Se
nhot pe rim • d th at he defaulted in giving
62. At we re
ctors of a company
Ipoh, where the dirempany and about whom r ey a ege
sell Jand to their co 30 Mad 382.
. ) 53 Mad 270: AIR 19 Ltd, (2003) 1 ICC
1930 using Society
possession.
un ac ha lam Ch ett tar, ILR ~/ C00p Ho
63. Subbu Chetti v
Ar t
ty v Sel/iamman Ko
64. K. Gopa/asamy Chet .
184 (M ad ).
8 Chapter 3 Consilleration [S
, . 2(d)I
6
suit aga in st the lcssces.''i 5 ln strn am~thcr case '\ the plai_ntiff cou ld Oot
a dcaee agai nst the tlppcl lant for lus sa lary on 67 the basis of an ag ree Rct
entered into by the plai ntiff with a nother person , nient
In the o pinion of R A N K IN CJ this seems to be t he effect of the Contrc:1q
·1 B I D st·,;s he ~ bserved: No
Act itself. In Krishna Lal Sad h_u v Pr?mt a a a a
only however is there not hing m Sect10n. 2 to encoura ge the idea that t
, ' h h con
tracts ca n be enforced by a person w o 1s not a party to t e contraq b ·
this notion is r igidly exduded by the definitio n of "promisor" and "pr~ ~t
see" . .. . In my judgmen t, it is erroneou s .. . to ~uppose that in India Pers:;
who a re not parties to a contract can be permitte d to sue thereupo n ... ,
Consequ ently, a Hindu assured' s wife's action to recover the money d
under her deceased husband 's policy was rejected because she, thoughue
nominee under the policy, was not a party to the contract between tha
deceased and the insuranc e compan y and no interest passed to her meret
because she was named in the policy.
69 y

Decisions not following English Law

There is, however , another line of thinking also which is mainly based
upon an observat ion of the Privy Council in Nawab Khwaja Muhammad
Khan v Nawab Hussaini Begum. 70 Their Lordshi ps observed :
PILOT
In India and among commun ities circums tanced as the Mahommedans,
among whom marriag es are contract ed for minors by parents and guard-
ians it might occasion serious injustice if the commo n law doctrine was
applied to agreeme nts or arrangem ents entered into in connecti on with
such contract s.
This statemen t has been taken by some High Courts as laying down the
1
rule that Indian courts are not bound by the rule in Tweddle v Atkinson.7
72
Accordin gly, it has been observe d by the Madras High Court:

65. Mangal Sen v Mohd Husain, ILR (1915) 37 All 115.

66. State of Bihar v Charanjitlal Chadha, AIR 1960 Pat 139.
67. Thi, line of thinking has been followed in insurance cases also. See, for example, Shan~a,
Vish11anath v Umabai, ILR (1913) 37 Born 471, where the beneficiary of an insurance pohcy
could clail\1 no right under the contract between the assured and the insurance company
because there was nothing to show that the plaintiff was either the promisor or the promisee
and, therefore, a party to the agreement. See also Oriental Govt Security Life Assurance Ltd
v Venteddu Ammira;u, ILR (1912) 35 Mad 162, where it was held that the contract between
the company and the assured gives no right of action to the beneficiary named.
68. AIR 1928 Cal 518: ILR (1928) 55 Cal 1315. .
69· Other examples of the rule are: _P~otapmull Rameswar v State of W.B., (1956) 61 _cwN
8
:s;
Chhangamal Harpaldas v Domm,on of India, AIR 1957 Bom 276. In the last-ment1onedc d
th e c~urt held that a bare consignee, who is not a party to the contract of consignment,
0
i~r
who is not the owner of the goods, cannot maintain a suit for compensation for loss
damage to the goods.
70. (1909-10) 37 IA 152.
71. 123 ~R 7~2: 1_ B&S 23, 393: 30 LJ QB 218: 4 LT 468.
72. Mumsam, Na,cker v Vedachala Naicken, AIR 1928 Mad 23.
 . 1n vv••" . ' :· r-•" ' II TI'1ClmTI1c halt'~
.,1:11ntf ·cd to fulhl ;1suh stan11nl part of hi ~ c.:, t , ·. ()f t.otton frcun a
,, rclls n1ill
1,1.1r II tl down . Tl, l ·f · l· . >nr, H.ta ,t lwp · .
d f;1 r H t t cm
,
,t nt s, who wc-r" 1t1
"' r,c
I.<!
~
wlli - nu ~ ,,( d,,, h'
h~ 1 who hnd ~11:H:ltlt t ('J the P<'tfonnanrc cf ti ,tc,
·11 a11u nv, t1gt-t111 of the
f11' . ·ff to tnkc thC' w 1,o1c n f tlw quot ;l of halt. , w,:,mtr ·t(t
'c; fi · If 1' : '
pI:1 In fl .1nd pi-o tnt·S('u1 t Imt t I1ty would huy frc>1n tlxu c, r < d, w·rc,l'H ·
''1frd the
ntl1• , I . . .ry int }1c frr•it
01° t the co11trr\ct prn.· : c or pay him Rs2 .) ()()() 1cpa111t1{f
l,,,. 1cs a,,,lied wit. 11 t lKit ' t' nt n, ~ <,pt,• a part r,f "'" h
,· . . r. .
·ff ,on 1
1t'qtwst "n<l clcc.: t(•d t<> k , ·r·t
on. n~ pLu.n.
•ont . . - ,1 c 1,\ 2 5O<H) 'f'h
1rs 1.. rndcJ that1 t 1ru prom
fl ise W:lR void for w
1 · f · ' . · c ddcnd -
tit '. df w:ts alrcauy 1munu to take ante , c<m <sil ,
1.,,n I the <.: otto n 'l'} ,
rttl )ritics an sa1 : ·rom t 1csc dcdsions-it tlJ)J• •\C court r<'vi< trnt,
J 'J "]' I .
,m a, the
<l J· .
3 Il( • ewe
J·. ngl, ,h
. . 1.
,cnt brings int<~ existence a new <.: 011tract between · ' )Cn r s tnat the . .
11
h refore a promise to <lo a thi ng which the hror . ,
cliff : , ~tu m, : agrcr.~
t c . . crtnt panic;, and
dcr a contract wit. 11 a t I11r . <l
part y can be
., n tsce ts ,11read
goo d , . I . y houncJ to d,,
un . ~ ,,
contiad, con s1t crat1on to ~upp<,rt a
Herc also the cou rts have to safeguard a party
into extra payment. from b .· .
cing hlackmadc<l
A vessel was chartered to carry a consignm t
.1
The fre1g 1t was prepa1'd by the consign . .en of. tractors to Yemen
ees The h
· h·
defau1te d m t e1r paymen t o
f .
hire to
· c artcrers however·
the ship
· h
congestion at t e port of disc
• · owners, because' t here was'
· h· harg e and the ship had
ports. Durmg t is pen·od the ship . procee ded to ot h.er·
· f • owners negotiated an e t
the consignees or the dis~harge of cargo. The cons x ra pay ment by
ignees agreed to pay,
but, after the cargo was discharged, refused to mak
e the payment.
I~ was held th~t the promise o~ extra payment did
not create any estoppel
agamst the consignees. There bemg no consideratio
n for the promise it was
not enforceable. 193
'

Consideration and motive

Consideration should be distinguished from mot
ive or a pious desire to
fulfil an obligation. "Motive is not the same thing
with consideration." This
well-known phrase occurs in the judgment of PAT
TERSON J in Thom as v
Thomas: 194 A testator, on the day of his death, had
verbally said in front of
witnesses that he was desirous that his wife shou
ld enjoy certain premises
for her life. The executors, who were also the assig
nees, "in consideration
of such desire and of the premises," agreed with
the widow to convey the
premises to her provided she would pay to the
executors the sum of £ 1
yearly towards the ground rent and keep the said
house in repair. On the
question of consideration for the agreement betw
een the executors and the
widow the court pointed out that the motive for the
agreement was , unq_ues•
tionably, respect for the wishes of the testator. But
that was no part of the

193. Syros Shipping Co SA v Elaghill Trading Co,

(1981) 3 All ER 189.
194. (1842) 2 QB 851, 859.
Chapter 3 Considerati
on

legal cons,'Jerat1c• m fo r tl,e 3 ,, rccmcnt. ~ fotiv e sh ls· ls

. h . c, ou lJ no t he .
wit cons1ucr~mo n. Tl,e 3 ,,rccnwnt wns, however, 11l' ld to he h,·,collfc ' I
1 •
undertaking to pay the gr._ r,
ound rent w,,s a sut.fi ctc
.. , ,. . )l1n,1
ll1,
nt cons 1<lcnuion.11111f a~ \l~d
the
Absence of considcrittion
In a case where the prom
issor y note was appare
forged, nor fabricated, th ntly genuine, n .
e lender was allow e_d to
with interest. The co urt recover the loan a~'ther
sa id that a bare d~mal
·on does not make any o~ th~ passing of co
a t, defence. Something wh
ich 1s probable h der.
ns~llnt
brought on record s~ th
at the _co ur t may e1.t her b 1·
did not exist or that its e ieve t hat conside as to b
rati e
non-existence was so pr
would under the circum obable th at a prude
stances of the case, act on
exist.1'~
'
6 on th e be lief that it ~~dlllan
l n~

EXCEPTIONS TO CONS
IDERATION
Contracts under seal in
English Law
In English law a contract
under seal is enforceabl
In the words of Anson: e without considerati
"English law recognises
the contract made by de ~nly _two kinds of comr:c~
ed that is under seal, w :
ciality, and the simple co hich 1s called a deed or
ntract." A contract un
197 spe -
which is in writing and der seal means a contract
which is "signed, sealed
and delivered".
Exceptions under Sectio
n 25, Contract Act
Indian law, however,
does not recognise an
Section 25 of the Contra y such exception. But
ct Act lays down a few
exceptions.
S. 25. An agreement m
ade without considerat
(1) it is in writing and ion is void, unless. -
registered. - It is expr
tered under the law for essed in writing and reg
the time being in force is-
uments], and is made on fo r registration of [doc-
account of natural love
parties standing in a near and affection between
relation to each other; or
(2) or is a promise to co unless
mpensate for somethi
to compensate, wholly or ng done. - It is a promise
in part, a person who ha
done something for the s already voluntarily
prornisor, or something
legally compellable to do which the promisor was
; unless
(3) ~r is a promise to pa
y a debt barred by lim
ise, made in writing and itation law. - It is a pro_m
signed by the person to -
or by his agent generally be charged therew 1th•
or specially authorised
wholly or in part a debt in that behalf, to pay
of which the creditor m
ment but for the law for ight have enforced pay·
the limitation of suits.
195
· ~he di stinction thus dr~
wn between a moral oblig
t e Madhya Pradesh Hi ation and consideration
37 at p. 40. gh Court in Firm Gopal Co was appro;;d~;
Ltd v Firm Hazarilal Co,
196. Atma Singh v Lachma AIR 19
n Dass, (2009) SCC
197. A.G. Guest, PRINCIPL 4
ES OF TH E LAW OF
668 P&H
CO NT RA CT (22nd
Edn, 1964) 65.
 ' M7
,~. 25 1 f,:1m•p11111111 to eott ic l1f, •r111 ''"
h llll "' ,, f'l'fllf\1 I I
I ~llY of tht '\t' cIN '~, SIie
/ 1,1,,n,1tlcm 1. - Nothh,9 In thl
, ~"lllor,' 1'11 ~tontt,H t.
ldlt y, 111 b,•twtirn
t A< tti ,lly fl "~' ' 1,,' Mfr,<.t th,, v,,l
~ nM l'll d do 1w e,
A
of illly gif
. I
tht' (ll1 . "\
,. - " "nr t'('lllP l)t to Wille h ti P '
np1<111t1t i<> n :>m ,,nt or 1.h".pr,m1l•H,r 11 fr.-rly
nw rl'ly bt' tl1 lls t' the com l<f,,r: ,,,~
veil Is nnt void
nl. ly be t,lkPn 1111 > n Isntlrw l,•q11;1tf'; b11t th~ lrit1d~ -
gl ·y of the co ns ldernt lon
. t nc-cou by tlw·Crn ,rt In <I••tttrmln~
I
QU,1l qut\stlon wIwt I,er t ,e co nso nt to the
1
the pronil ~or wn, fr,,Ply glvA.n ,
11 9 .i
llltmmt1cm
tlon, to give! lo oHs 1000
) AP'"''"lses, for no consld l'rn , proml ~es to glv@ his. Thi ~Isa void ;,q, ,..,m .. nt.
e And aff cct lon
(a A, for n"t ur~ l lov 8 0. Apuh hi, prriml'lft
ting and reg iste rs It. This Is 8 contr t.lC t son, , R~ 100
(b) to BInto wri I

d hltn . Bpromises to
) Afinds B's purse an gives It tomises to pny e 91ve A Rs 50. Thl11 Isa contrt1ct.
A'~
barred b~ the u:;~:c s~ so
(C Asupports B's Infant son. 8 pro doing. ThlJ Is acc>ntrdc:t.
:!) '1 owes 8 Rs 100 0,
on
bu t
acc
the
oun
de
t
bt
of
Is
the de bt. This Is a cont~a~t ct. Asign s
awrlttM proml~e
to pay 8 Rs 500 t h
Rs 1000 for Rs 10 A's con t
,n Aagrees to sell a horse worth tract notwlthst~ndlng tshenl odt e agreement wa sfree ly
iven. The ag ree ment Is a con e na equ acy of the considera -
g
. .
t1on A denies th t hi
(g) A agrees to sell agiv horse worth Rs 1000 for Rs 10. a s consent to the agree-
ment wa s fre ely en.

t. Natural love and affection -

of the fir st ex ce pti on i~ tha t a written and registered agree
The essence enforce-
on na tur al lov e an d aff ec tion between near relatives is
ment based
rat ion , 1 Who is a near rel
98 ative? The Act provides no
tho ut co ns ide
able wi
ex pre ssi on be en jud icially construed. The expression
guidance, nor has the rel ate d by blood or marriage. Again
,
ub t inc lud e pa rties
wilJ without do ion ? There is always some degree
of
by na tur al lov e an d aff ect
what is meant parties nearly related. But this
instinct
lov e an d affec tio n be tw ee n
instinctive example,
etime s be ov err ule d by ex ternal circumstances. Thus, for
may som
jlukh y Da be e v Bh oo tna th Mookerjee: 199
in Ra ney every
de fen da nt pro mi sed to pa y his wife a fixed sum of mo
The ment was
for he r se pa rat e res ide nc e and maintenance. The agree
month
ere d do cu me nt wh ich me ntioned certain quarrels and
contained in a regist
o.
disagreements between the tw
Co ur t ref us ed to reg ard the agreement as one c~v-
The Calcutta High ~ aff!ctton
ex ce pti on . Th e co ur t could find no trace of love an
ered by the arate.
en the pa rties wh os e qu arr els had compelled them to sep
betwe
promise bec~use o~her~ishe emotio~~l exP,resf
has to be the bas is of the e o
materia sense se
l98. Love and affection . k the place of con s1derat1on m tran
t
sfer of a hou
. All LJ (NO C)
cannot ta e 21 nsid;ration
s1ons and human sentiments Lal v Jodona th , 1~84f f
·
the word. See Sur end ra Behari wa nt o co S.
· brother-m
II Otted to a member to h1s
J w
· -a , . held v01 d or'J t'10n not necessary to attract
a not withou t con s• era '
199- (1899-00) 4 CWN 488. Prize chits fare W.·B., AIR 198 1 dCal1.157 . case a member of an un~•- .
s ·
25 . ancha,ta Investment v Sta_te ~ 82 ) 6
Ma 7
In this
d 11 rights in the family proper
ty m
v Ra nga P1/la1, ILR (18
200. See also Appa Pillai a registered document renounce a
vided Hindu family by
~ Chapter 3 Consideration [S. i . I
5
With this should be contrasted th e decision of th e Bombay l Iigh Court .
1
Bhiwa v Shivaram: 20 1 11
A sued B, his brother, for a share in certa in lan<ls. But the suit w
dismissed as B solemnly affirmed th~t the property was not ancestral, ~s
then agreed by registered writing to g_1ve A one-half of the same Prope;t 8
The present suit was brought to obtam that share. Y.
The plaintiff admitted that he and his brother had long been on h
terms But in spite of the strained relations, the court held "that this is . ad
the ca.se to which Section 25(1) should be held to apply. The defendant lu st
such natural Jove and affection for his brother that in order to be reconc·Iad
. h'1m h'1s property. ,,202
to him he was willing to give
1
ed
A fa~ily settlement between a man and his wife was made for provid'
maintenance to wife. This was held to be enforceable because it was Ille Ing
for deriving satisfaction and p~ace ~f mind from family har~onr So it co:~
be interpreted either as a cons1derat1on or as love and affection. 03 The cou
followed the decision of the Supreme Court in Ram Charan Das v Gi/t
Nandini Devi204 where it was observed that "the courts give effect to a fa~~
ily settlement upon the broad and general ground that its object is to settle
existing or future disputes regarding property among members of a family.
The word 'family' in this context is not to be understood in the narrow sense
of being a group of persons who are recognised in law as having the right
of succession or having a claim to a share in the property in dispute .... The
consideration for such a settlement, if one may put it that way, is the expec-
tation that such a settlement will result in establishing or ensuring amity and
goodwill among persons bearing relationship with one and another. That
consideration having passed by each of the disputants, the settlement con-
sisting of recognition of the right asserted by each other cannot be permitted
to be impeached thereafter." The same view was again reiterated in Maturi
Pullaiah v Maturi Narasimham. 205

favour of the _other members who agreed to maintain him in the family. This promise was
held to be void as the plaintiff did not seem to have been moved by love and affection in
.renouncing his share.
201. (1899) 1 Born LR 495.
202 • See also Ram_Dass v
Kishan f?ev, AIR 1986 HP 9, a family settlement between cousins
~~other a?d sister) t? r~solve disputes regarding family property on account of natural love
Md af,~ec~ion,
203 • ana I Smghalheld bmdmg. The court recognised a cousin (brother) as a near relative.
v Ravi Singha/ AIR 1999 Del 156
204. AIR 1966 SC 323: (1965) 3 SCR 841. .
205. !J1Rt}~;;dc
f h
1836; Radhakrishna Joshi v Syndicate Bank, (2006) 1 AIR Kant 692: (2006) 2
C) 403 (Kant), loan advanced to defendant's son under self employment scheme,
t::uegrhehxecuted documents undertaking and acknowledging to pay. He was held li~ble
e was not a guarantor Th . . obhges
parents to provide for h 'Id · e case came w1thm the exception because natu.re . f nt·
ily peace by saving thee tit rehn. There was also consideration because he purchasea his ache
a ac ment of his
was a11owed tozo05
bank and not 14 per cent R .
k sons estate. 6 per cent mterest
AIHC 4410 (Kant) fami·I· ang~~aya_ amma v K.S. Prakash, (2005) AIR Kant 26 54: uf6·
. . ' y part1t1on made f . . . f
cient, pomt not raised 1·n pl ea d.mgs an' d ra. quacy o cons1derat1on without rau d, not s
1 d I f
se on y a ter 21 years, not tenabIe.
 Exc eptions to consideration 149
[S, ZS]
. ,
A power of attorney was executed by .stc( , re/'nqui shin g her right to
h re in joint famjl y properties in favour 0
~ ;'
1
5 and affe ction for thr brothe r al, lrr ro~ 1_er on tok en of Re 1 but
a of Jove 1ori s111g the br oth er to enter
c so aut 1
out
. partitio n ag reem ent on her bch ,t1 f Tl I
.he ie c oc_um~nt ~as in writing and
u1t~stered. She was held to be bou nd 11 . ered
Y r promise, it bcrn g who lly cov
reg . · 206
by the ex,ept 1on.
untary service
2. Past vol h h
lJy or in part
Secondl y, a pro mise to compensate who persboln o has
don e something for the prom1·s or, 1.s en' £aorcea e. n ot er
WI
lready volu nta rily
a . £0 neces·
words, a promis e ~o pay .r a pa st volunta ry service is binding . It is d d
uld h b
Sa ry to attro7act this1excf eption that the service sho ave een ren ere
• d th Thus where services were rendered
voluntarily2 an a so ~r e. promisor.
sequent promise to pay for them
for a company not the~ i~ existence, a.sub
But a promise made after attain•
could not be brought withm the exception.
the promisor during minority has
ing majority to pa~ f~r goods sup~lied208to
The court in that case said: "It is
been held to be withm the exception.
infant is in law a mere nullity and
now settled la~ that a promise by an
ent made by a person of full age to
void, but we fail to. see how an agreem
voluntarily done something for the
compensate a promisee, who has already
or was a minor does not fall within
promisor even at a time when the promis
Contract Act. As at the time when
the purview of Section 25(2) of the Indian
to contract, the person who did it
the thing was done the minor was unable
e done it voluntarily. But he has in
for the minor must, in law, be taken to hav
words mean anything at all, surely
fact done something for the minor, and if
the scope of the Act."
his case must be deemed to come within
in Sindha Shri Ganpatsinghji v
Earlier the Bombay High Court had held
desire of the minor expressed dur·
Abraham 209 that "services rendered at the
e request after his majority form a
ing his minority and continued at the sam
good consideration for a subsequen210 t express promise by him in favour of the
•
person who rendered the services".
on is where the prom1see has
Another situation covered by the excepti
the promis~r was legally compel-
done something for the promisor "which
for the act 1s enforceable.
lable to do". A subsequent promise to pay

673 ·
ash, (2008) 15 SCC Com . G / 1i , .11:, Co AIR 1952
206. Ranganyakamma v KS Prak ,1: . IL. 'd t Of Cape orm enerae unde Tw1 t• ,
r S. 25(2) as the
207. See T. V. Krish~a Iyer v O, ,,eta ,qui a or f bonus will not com
that the paym ent O d ntari'ly See also Kalip Das v
TC 99, where It was held . . i wage.s an not voIu Rao· Bahadur Krishm,yya,
emp1oyees render services) 27 m return or f Venkatagiri v
adas Roy , (1922-23 CW N 769; Raia 0
Durg 91
(1948) 61 LW 545: AIR 1948 PC 150. . Rec No 31 ' P· ·
208. Karam Chand v Basant Kau r, 1911 Pun1 ab
kh ILR l947 Born 807: AIR 1948 Born
l09. ILR (1896) 20 Born 755. a~, motive other than the desire to
210. See also Abdulla Darakhan v Purshottam Dar~ gtven 1or any
h
. ted out t at a pro mise .
265, where it was p01n · the exceptton .
b · hm -.._
compensate the promisee would not e wit
pter 3 Consideration

3. Time-barred debt
Lastly, a promise to pay a time-barred debt is enforcea ble.2111'h
should be in writing. It should a.lso be signed by the prornisor · e NllJni
agent generally or specially authorised in that behalf". 212 The p Ot ''hy h~e
roni · is
be to pay the whole or any part of the debt. The debt must be such ,, tse Ilia
the creditor might have enforced payment but for the law for the .0 f_whic(
11th1
of suits". tati 00
Is it necessary that the promise should be given by the person
liable for the original time-barred debt? The Bombay High Court 1ho Was
that "a promise made by a person who is under no obligation t as held
debts of another ... does not fall within the clause." 213 But in the 0 .P~Y the °
the !\fadras High Court "the words 'by the person to be charged tfInto~ of
in Section 25(3) are wide enough to include the case of a person wh:r:wtth'
to become liable for the payment of a debt due by another and need grees
limited to the person who was indebted from the beginning."214 not he
An admission by the legal heir of a deceased debtor in his deposit' .
the court to the effect that he was willing to pay the principal time-tn in
amount was held to be a promise to pay making him liable. 215 arred
"The promise referred to in Section 25(3) must be an express one a d
cannot be held to be sufficient if the intention to pay is unexpressed and hn
to be gathered from a number of circumstances. There must be a distin::
promise to pay before the document can be said to fall within the provisions
of the section." Thus a debtor's letter to his creditor "to come and receive"
what was due to him, was held to disclose no express promise. A brief note
by the promisor on the back of the promissory note written at the expiry of
the period of limitation that he had taken the loan and unaccompanied by
any words promising or undertaking to pay, was held to be not sufficient
to attract Section 25. 216 In another case there was a demand by a landlord
for rent including time-barred rent. The tenant replied that the rent may

211. It is different from acknowledgment of liability because that has to be within the period of
limitation, whereas under this exception the matter is ex hypothesi an already time-bar~ed
debt. Hence, the promisee gets new cause of action. Umesh Chandra Chakravarty v Union
Bank of India, (1991) 1 Gau LR 223. A pronote executed for a time-barred debt was held to
be enforceable, Indian Bank v C.K. Syed Mohammed, (1997) 2 KLJ 290.
212. A.V. Murthy v B.S. Nagabasawanna, (2002) 3 Born CR 13 (SC), distinction bet":een
acknowledgment before expiry of limitation and promise to pay after expiry of limitation£
Rakesh Kumar Dinesh Kumar v UG Hotels & Resorts Ltd AIR 2006 HP 135, the bur od
goods defaulted in payment, he made an offer in writing to 'pay a certain amount in ful a~o
final settlement, the seller accepted part payment. The court said that a new contract as
payment arose, the plea of time bar was not available.
213. Pestonji Manekji Mody v Bai Meherbai, AIR 1928 Born 539.
214. Puliyath Govinda Nair v Parekalathil Achutan Nair, AIR 1940 Mad 678.
215. SBI v Dilip Chandra Singh Deo, AIR 1998 Ori 129. gOri
9
216. Tutsi Ram v Same Singh, AIR 1981 Del 165; SB/ v Dilip Chandra Singh Deo, AIR 19 f his
129, no definite understanding was spelt out that the defendant would clear the dues :k in
late mother. He had made one payment towards the over-drawn account and uoclertodra 1/.
· · to c1ear the dues. Such undertaking was distinguished from a promise.
wntmg · Naren
L·

[S, 25] Exceptions to consider ation 151

ollected by cash or cheque, · but mentioned no arno un t . Th 1s '

be C h •t was not
regarded by t e cour as a promise to pay a time-barred debt 2 11 As a ainst
. in another case, ~here an acknowledgment of a deb ·. g .
it, ent to pay mterest it w h Id b t was coupled with
an agree~ . . ' ~s e to e an agreemen t with a promise
ay within the meanmg of Section 25(3) ·21s Simi'! ar1Y, w here a tenant tn .
to P I dl d f d a
fetter to the an or re erre to the arrears of time-bar red rent and said· "I
month" , it was h eId t h at th e document ·
shaII send by . d. of the Vysakh
the end .
1ents required by Section 25(3) •219 Wh ere, m . a rep 1y to
contained the mgre . d
a notice, the authoris e ad~ocate stat~d _that on receiving payment from a
third person the account_ with the plamt1ff will be settled, it was held that
this amounted to a promise to pay. 22 0
The Bombay Hig~ Court has given a new turn to this exception by hold-
ing that a statemen t m_ the balance sheet of a firm signed by a partner show-
ing that the firm was mdebted to the plaintiff in respect of the stated sum
221
became an im~lied ~ro~is~ _to pay. In reply to a winding-up petition, the
company admitted it_s ha?ihty and also promised to pay by a letter to the
creditor. The debt bemg time-bar red at the time, the letter revived it. 2
22

A cheque issued for a time-bar red debt would still fall within the purview
223
of Section 138, Negotiab le Instrume nts Act in view of Sections 25(3).
An acknowledgement of a debt is something different from a promise
of this kind. An acknowl edgemen t has to take place before expiry of the
period of limitatio n only then the period of limitation becomes extend-
ed. 224 Section 25(3) requires a promise to pay a time-barred debt. It thereby
becomes a new contract . It is not just merely the acknowledgement of an
existing liability. 225 -

Kanekar v Bardez Taluka Coop Housing Mortgage Society Ltd, (2006) 6 Born CR 874, issue
of a cheque for a time-barred debt does not create liability under S. 138 of the Negotiable
Instruments Act that section requires an enforceable debt or liability.
217. Dau/at Ram v S~m Nath, AIR 1981 Del 354. It is not necessary that the new promise should
expressly mention the time-barred debt. Bishambhar Dayal v Vishwanath, ~I~ 1985_ Al~ ~2;
Canara Bank v Viiay Shamrao Ghatole, (1996) 5 Born CR 338, a mere admiss10n of ha~ihty,
not sufficient to attract the section. Kadir Usman Malawar v Dattatraya Bhaskar Smkar,
(2005) 4 Mah LJ 1076, signed promise in writing made with knowledge that it was for pay-
ment of past debt, binding.
218. Debi Prasad v Bhagwati Prasad, AIR 1943 All 63.
219. Appa Rao v Suryaprakaoh Rao, ILR (1899) 23 Mad 94.
220. Panicker v Prabhakaran, (1993) 2 KLJ 380: (1993) 2 KLT 417. !he cou~t followed Noo~
168· Puliyath Govmda Nair v Parekalath,l
Mohamma d Rawther v Charu, 1959 KLJ ' . f h
Achutan Nair. AIR 1940 Mad 678 where it was held that "a promise to pay a part o t e
barred debt c;nnot be taken to be a promise to pay the whfole ohfatthe de~t. Ifla persodnnporto:'1or-
. d b he can on 1Y be sued or t portion a one an ,,
tsed to pay a portion of a barred e t,
the whole debt." 1991 Born 44 ·
22 1. R. Sureshchandra & Co v Vadnere Chemical Works, AIR
222. Business Forms Ltd v Ashoka Agen~ies, AIR 199 t2~
~~~j (Ker): 2007 Cri LJ 1486.
22 3. Ramakrishanan v Gangadharan Nair, AIR 200?
224. Madishetti Shekar V Puliyala Komurelli, (200 8
2
)Jl2~:~1 st~r
9
Baroda VD Radha Krishna
22 5. MNS Charities v Pilla Ramarao, (200 9 ) APL . . ' •a~t of lien even in respect of a claim
Reddy, (2008) 1 ICC 633 AP, a banker can exemse its rig
which is time-barred.
Chapter 3 Consideration [S. 25]

Gift actually made [S~ 25 (Expln. I)]

affect, as between don
Th e provisions as to consideration do not
actually been made. A gift ofor and
don ee, the validity of any gift which has
bles which has been completed by delivery and
gift of immovables whi:oha-
ir validity
questioned as to the ;s
been perfected by registration can not be
y may be questioned other:~ Y
on the gro und of lack of consideration. The
istered deed and attested by /8e.
Wh ere a gif t of pro per ty was made by reg
oned by the don or on the grou:~
witnesses, it was ~o~ allowed to be _questi
was not able to establish. 226
tha t she was the v1ct1m of fraud which she

Inadequacy of consideration [S. 25 (Expln. II)]

ation" (supra).
For notes see und er "Adequacy of Consider
t which the Co urt should take
Th e inadequacy of the consideration is a fac
int o acc oun t in considering wh eth er or not
A's consent was freely given.

CR 196; K.
226 . Vasant Rajaram Narvekar v Ank
ush a Rajaram Narvekar, (1995) 3 Born
gift
581, gift by mot her to her minor son under
Balakrishnan v K. Kama/am, (2004) 1 sec his father
up to her life time. The son kept it with
deed with the righ t to be in the prop erty
. Thus, accepted and became irrevocable.
and did not repudiate on atta inin g majority

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