Topic name - Consideration

Consideration is one of the essential elements of a contract. The general

principle is that,”No consideration,no contract.”. But there certain
exceptions to this general principle where there may be contracts even without
consideration.

Meaning of consideration: Consideration has a different legal meaning

which does not restrict only within the area of monetary compensation rather
the term has been given a wider legal connotation.
The concept consideration' has been defined in section 2(d) of the contract
Act, 1872. It says; “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 to abstain from doing something, such act or
abstinence or promise is called a consideration for the promise.”

Essence of Consideration: According to the definition to be a consideration

it is required something is to be done, forborne, or promised at the desire of
the promisor. In fact, it is wonderfully defined in famous English case Currie
Vs Misa.
“ A valuable consideration in the sense of law may consist either in some
right, interest, profit or benefit occurring to one party, or some
forbearance,detriment, loss or responsibility given, suffered or undertaken by
the other.”
Justice Patteson’s Observation is Also Remarkable Here: Consideration
means something which is of value in the eye of the law, moving from the
plaintiff it may be some detrimen to the plaintiff or some benefit to the
defendant.

Types of Consideration: Consideration may be of three types as it appears

clearly from the language used to define the term, “Consideration” has done
or abstained from doing, or does or abstains from doing, or promises to do or
to abstain from doing. Consideration may be of the following three types:

1) Executory Consideration;
2) Executed Consideration;
3) Past Consideration.
 1) Executory Consideration: Executory consideration consists of a
promise to do or to abstain from doing something at a future time. In
such case, the liability becomes outstanding on both sides and in fact
most of the business contracts take place in this way. Suppose, A
agrees to sell a car and B agrees to to buy it at a certain price, here the
consideration is executory.

2) Executed Consideration: If one of the parties thereby performs his

part and the liability on another’s part remains outstanding, the
performance is an executed consideration.

Suppose, A agrees to sell his computer for tk 30,000 and B agrees and
pays the amount stated to A but still A has not delivered the computer
then the payment made by B will be considered as an executed
consideration.

3) Past Consideration: By using the words 'has done or abstained from

doing' in section 2(d) of the contract Act 1872, the law clearly
recognized past consideration as a good consideration, though it is not
generally recognized as consideration in English Law. If the service is
rendered in the past at the request or desire of the promisor the
subsequent promise is regarded as an admission that the past
consideration was not gratuitous and which is evidence of the amount of
the reasonable remuneration on the faith of which the services were
rendered. Thus, in Sindha Vs. Abraham, the plaintiff rendered services
to the defendant at his desire during his minority and continued those
services at his request after his majority and this was held to be a good
consideration for a subsequent express promise by the defendant to
pay an annuity to the plaintiff, but it was admitted that if the services had
not been rendered at the desire of the defendant the case would have
fallen within section 25 of the Act.3 According to section 2(d), the act
should be done at the desire of the pomisor. A past consideration
should be distinguished from an executed consideration. An executed
consideration is done in response to a positive promise, whereas the
case of past consideration is not so.

Consideration: An Essential Element of a Contract

Section 25 lays down the general principle regarding the requirement of
consideration to form a contract in this way that-”An agreement made
without consideration is void”. From here the rule has sprung that if there is
no consideration there is no contract.

Essentials of Consideration: Analyzing the above mentioned definition of

“Consideration” we got the following ingredients of consideration-

1) It may be positive or negative;

2) It is done at the desire of the promisor;
3) It may form in three states. As - Past, Present, Future consideration.

General Principle: Section 25 lays down the general principle regarding th

requirement of consideration to form a contract in this way that- An
agreement without consideration is void From here the rule has sprung
that if there is no consideration, there is no contract.

Exceptions to the consideration general principle: Contracts without

Section 25 of the Contract Act, 1872, also speaks of exceptions to the general
principle where there may be valid agreements without consideration. In the
following three circumstances there can be valid agreements without
consideration:

1) Natural Love and Affection;

2) Compensation for Post Voluntary Service;
3) Promise to Pay Time Barred Debt.

1)Natural Love and Affection-

Section 25(1) while laying down the first exception says that- “It is
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.”

So, it appears that the first exception requires to satisfy three conditions,
which are as follows-

1) The parties stand near in a relation and it is made out of natural love
and affection, i.e. father and son, husband and wife etc.
2) It is written and signed.
3) It is registered.
Necessary Conditions: Some conditions are as follows:

1)The Act must have been done voluntarily and not at request.
2) The Act must have been done for the promisor. Case reference- Durga
Prasad Vs Baldeo
3) The Act must have been done for a promisor who was in existence at the
time when the Act was done. The work done by a promoter of a company
before its formation cannot be said to have been done for the company.

Consideration may move from the promisee or any other person - It

appears from the clear language used in the definition of consideration that
there is no such requirement that a consideration must move from promisee,
rather it may be furnished by the promisee or any other person and such only
material thing to be considered is whether there is any consideration or not.
So, a promise is enforceable if there exists any consideration and it is
immaterial that by whom the consideration has been furnished. Thus in
Chinaya Vs Romaya . An old lady by deed of gift, made over certain landed
property to the defendant,her daughter. By the terms of deed, which was
registered, it was stipulated that an annuity of Rs. 653 should be paid every
year to the plaintiff, who was the sister of the old woman. The defendant on
the same day executed in plaintiff’s favour an agreement promising to give
effect to the stipulation. The annuity was, however, not paid and the plaintiff
sued to recover it. The promisee was held to be enforceable through here the
defendant’s promise was given to the plaintiff and the consideration was
furnished by the plaintiff’s sister.