Consideration

Section 2(d)

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.

- Consideration moves at the desire of the promisor

- It can be moved by promisee or any other person
- It can be past, present or future

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- There must be an act, abstinence or promise to do or not to do something
- Consideration must be of some value
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It must be real and not illusory
It may be inadequate but it must be present (there)

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# Fazalaldin Mandal v. Panchanan Das

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Consideration is the price of a promise, a return or quid pro quo something of value received by

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the promisee as inducement of the promise. Quid Pro Quo means something for something. It

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means something of value received by the promisee as inducement of the promise.

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At the Desire of the Promisor

# Durga Prasad v. Baldeo

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The only ground for making of the promise is the expense incurred by the plaintiff in
establishing the market but it is clear that anything done in that way was not ‘at the desire’ of the
defendants so as to constitute consideration. The act was the result not of the promise but of the
Collector’s order.
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# Kedarnath v. Gorie Mohd.

Persons were asked to subscribe or pay funds knowing the purpose for which the money was to
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be applied, they knew on the faith if their subscription an obligation was to be incurred to
pay the contractor for the work. An act done at the promisor’s desire furnishes a good
consideration for his promise even though it is of no personal significance or benefit to him.

# Chinnaiya vs Ramaiyya
In this case it was held that the beneficiary of the contract has the right to sue on the breach of
the contract although they are not for the direct party to the contract, even if consideration is
moved by a third person, it is a valid consideration.

Unlawfulness of Object and Consideration

Section 23 -

1. Forbidden by Law
2. Defeats the provision of Law
3. Fraudulent

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4. Involves/implies injury
5. Immoral
6. Opposed to public policy.

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Assignment

- Forbidden by law v. Defeat provision of Law

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- Fraudulent u/s 23 v. Fraud u/s 17

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- Injury U/s 23 v. coercion u/s 15 v. forbidden by law u/s 23
- Immoral

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# Zaffar Ali v. Budge (object and consideration)

The word object under section 23 in was not used in the same sense as consideration but was
used to mean purpose, or design. This section coverstr-5N 2S1N6Q9P0U
the
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illegality of both object as well as
consideration. In some cases, they might mean the same thing but usually they are different.

# Nandlal v. Thomas J William (forbidden by law)

A liquor license is neither transferable nor can1Nit6Qbe given

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The person shared the liquor license and it was held that the contract is void and forbidden by
law.

#Fateh singh v. Sanwal Singh (defeat the provision)

In this case the appellant was 1G6E9K0A5C

tr-5E2Krequired by the magistrate to furnish two sureties for his good
behavior, each in the sum of 600 rupees. He deposited the sum with the respondent and
persuaded him to become a surety. After the period of security ship was over, he sued the
respondent for amount. The intention in requiring a security is that the security shall at his own
risk see to the appearance of the accused and this purpose is defeated by such agreement.

#Mohinder singh v. State of Punjab

A person who was elected to be the sarpanch for 5 years, made an agreement with another
member to share the seat in 2:3 tenure. The agreement was void as it defeated the provision of
Punjab Panchayat Raj Act 1994.

# SCOT v. BDMC (Fraudulent)

The plaintiff entered into a contract with a broker that he should purchase the share of a
particular company at a premium of so as to induce a public belief that the share was worth
buying. Later he sold his own shares and bought no new shares. A plaintiff moves the court
seeking relief but the agreement was held to be void as it was fraudulent in nature.

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# Ram Swarup Bhagat v. Bansi Mandar (Injury to person/ property)

It was held to be injurious to the borrower’s interest.

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A bond was executed to pay its exorbitant interest in case the borrower left the lenders services.

# Clay v. Yates

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An agreement to commit a tortious or a civil wrong, for example publish a libel against a person

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– will fall under this category. Agreement that seems like or promote bonded labor/slavery/ etc.
will fall under this section.

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# Gheorolal Parekh v. Mahadeo Das (Immoral)

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It was held that the word immoral under section 23 ordinary cannot different things depending
upon the circumstances and societal structure and upon the standard of morality prevailing at that

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particular time, and as approved by the court. It is a vague and unsatisfactory term that can be
interpreted as differently. However, acts like interfering with marital
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relation, adultery, dealing
with prostitutes etc. are usually considered to be immoral by the courts, and this refers to sexual
immorality.

# Fender v. St Johns Mildmay

It was held that the plaintiff was not tr-

entitled
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interference with marital status, where as in the present case after decree nisi is pronounced, the
bottom has dropped out of marriage and nothing but a shell is left. Here the petitioner agreed to
marry the defendant after the divorce decree.

# Subhash Chandra v. Narmada 1G

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Consideration for past or future cohabitation is also immoral and considered to be void.

# DTC v. DTC Mazdoor Congress

Against Public Policy - Where a term in the contract of employment that a permanent worker can
be removed without enquiry solely relying on the allegation made, was opposed to public policy.
# Sujan Singh v. Mohakam Singh

Any agreement between two bidders not to bid against each other with an understanding that the
successful bidder would convey have the property to the other has been held not to be held
against public policy.

The public policy means -

1. Trading or facilitating the enemy.

2. Inference with administration of justice.
A. To interfere with court of justice

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B. Stifling prosecution.
3. Trafficking in public office.
4. Marriage brokerage agreement.
5. Unfair Dealing.

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Section 24

# Alice Mary Hill v. William Clark

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Mr. William hired Alice Mary hill to work as domestic servant and also to commit adultery with

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him in exchange of a single consideration of 700 pounds. In this case it was held that if

of the object.

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consideration cannot be severed, then the whole agreement will be held void due to unlawfulness

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Ex turpi causa non oritur action – No court shall enforce, or allow and illegal contract nor shall
it allow itself to be made an instrument of enforcing obligation which arise out of an illegal
contract or transaction.

Section 25
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Ex Nudo Pacto Non Oritur Actio – No action can be taken upon a naked promise

Nudum Pactum – Naked Promise

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Naked promise is to mean a promise, without consideration. Plain, bare, promise.

General Rule – Agreements without consideration are void

There are a few exceptions to this rule:

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1. Natural Love and Affection
a. Parties in near relation (blood, adoption, consanguinity)
b. Written and Registered agreement
c. Love and affection
 2. Compensate for Past Voluntary Services
a. Service rendered to the person paying
b. Has to be voluntary
3. Agreement to pay a Time Barred Debt
a. Person to be charged therewith
b. Written and Signed
4. Gift – Explanation 1
5. Agency – U/S 185
6. Gratuitous Bailments – U/S 150

# Rajlukhy Debi v. Bhootnath Mukherjee

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It was held that near relation between two parties doesn’t necessarily implied natural love and

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affection. In this case the defendant promised to pay his wife a fixed sum of money for her
separate residence. The court found that there was no trace of love and affection between the
parties. The agreement was held to be void.

# Karam Chand v. Basant Kaur

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In this case a promise made after attaining majority to pay for goods supplied to the promisor

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during minority was held to be within the exception however such promise must be to
compensate for the person who has himself done something for the promisor and not for

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compensating the one who has done nothing.

# Tulsi Ram v. Sher Singh tr-5N2S1N6Q9P

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The promise referred to under section 25 (3) must be an express one and cannot be held to be
sufficient if the intention to pay is unexpressed and has to be gathered from a number of
circumstances. There must be a distinct promise to pay before the document can be said to fall
within the provision of this section. Intr-this case
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acknowledgment about the existence of the pro note and there were no words stating that the
defendant intended to pay or promised to pay the time barred debt.

# Devi Prasad v. Bhagwati Prasad

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In this case it was held that the acknowledgment is coupled with an agreement to pay
interest it cannot be regarded as a mere acknowledgment and it should be regarded as an
agreement with a promise to pay the debt with in section 25 of Indian Contract Act.

# Bishambardayal v. Vishwanath
It has been held that when there is an express promise to pay a certain amount in the promissory
note which is executed in lieu of a time barred debt the same is enforceable. It was further held
that for the validity of such a promise it is immaterial that the said promissory note does not
expressly mentioned that this was in lieu of a time barred debt or even that while executing the
promissory note the defendant were not conscious of the fact that the debt had become barred by
limitation. A cheque issued for a time barred debt would still fall within the purview of section
138 of NIA in view of section of 25(3).

Explanation 2 - Consideration in any agreement not to be adequate but it can be anything, just
because the consideration is inadequate does not render the contract to be void. However, in
such cases a presumption may be drawn which question the free consent of the parties. In other

not automatically vitiate the contract.

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word inadequacy of consideration raises a suspicion that the consent might not be free but it does

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