UNIT-II

CONSIDERATION
 CONSIDERATION
DEFINITION
Blackstone: “Consideration is the recompense given by the party contracting to the other.”
It is a price of a promise.
Pollock: “Consideration is the price for which the promise of the other is bought, and the promise thus given for value is
enforceable.”
Patterson J: “Consideration means something which is of some value in the eyes of law…it may be some benefit to the
plaintiff or some detriment to the defendant.”
Currie Vs. Misa: Lush J: “A valuable consideration in the sense of the law, may consist either in some right, interest,
profit or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered or
undertaken by the other.”
Section 2(d) of ICA defines consideration as:
“When, at the desire of the promisor, the promise 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.”
The consideration is some act, done or promised to be done, at the desire of the promisor. Thus, any kind of act or
abstinence, which is to be a consideration for the promise, should be done or undertaken to be done at the desire of the
promisor is sufficient consideration.
• The definition requires the following essentials to be satisfied in order that
there is valid consideration:
1. Consideration to be given at the desire of the promisor
2. Consideration to be given by the promisee or any other person
3. Consideration may be past, present or future, in so far as
i. has done or abstained from doing or
ii. Does or abstained from doing
iii. Promises to do or to abstain from doing something
4. There should be some act, abstinence or promise by the promise, which
constitutes consideration for the promise.
 CONSIDERATION ONLY AT THE DESIRE OF THE PROMISOR

• It is essential that the consideration must have been given at the desirer of the
promisor, rather than merely voluntarily or at the instance of some third party.
Durga Prasad Vs. Baldeo ILR (1881) 3 All 221
• The plaintiff, on the order of the Collector of a town, built at his own expense,
certain shops in a bazaar. The shops came to be occupied by the defendants who,
in consideration of the plaintiff having expended money in the construction,
promised to pay him a commission on articles sold through their agency in the
bazaar. The plaintiff’s action to recover the commission was rejected.
• “The only ground for the making of the promise is the expense incurred by the
plaintiff in establishing the Ganj (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 a result not of the promise but of the Collector’s order.”
 CONSIDERATION BY THE PROMISEE OR ANY OTHER PERSON
(PRIVITY OF CONSIDERATION)

• According to the Indian Law [Section 2(d)], Consideration may be given by the
promisee or any other person. In India, there is a possibility that consideration for the
promise may move not from the promise but a third person, who is not a party to the
contract.
• In England, the position is different.
• There the rule is that consideration must move from the promisee and nobody else.
• For example: A promises to give his watch to B and a consideration of Rs. 2,000/- for
the same is given to A by X and not by B. This will not constitute a valid contract in
England as consideration for A’s promise in favour of B was not provided by the
promisee B himself but by somebody else.
• Such a contract will be valid in India as section 2(d) clearly provides that….. “at the
desire of the promisor, the promise or any other person” may be consideration.
 INDIAN POSITION
Chinnayya Vs. Ramayya (ILR 1876-1882 4 Mad. 137)
An old lady, by deed of gift, made over the certain land property to the defendant, her daughter.
By the terms of the 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 the plaintiff’s favor in Iqrarnama (agreement) promising to give effect
to the stipulation. The annuity was, however, not paid and the plaintiff sued to recover it.
It was clear that the only consideration for the defendant’s promise to pay the annuity was the
gift of certain lands by the old woman to the defendant. The defendant, therefore, tried to defend
herself on the ground that the promisee (the plaintiff) has furnished no consideration. Briefly, the
whole situation was this: the defendant’s promise was given to the plaintiff’s sister, but
consideration was furnished in favour of the plaintiff. The court could have easily allowed the
plaintiff to recover the annuity, as consideration given by “any other person” is equally effective.
The court reached the same result but on a somewhat different ground.
 PRIVITY OF CONTRACT

• The doctrine of privity of contract means that only those

persons who are parties to the contract can enforce the
same. A stranger to the contract cannot enforce a contract
even though the contract may have been entered into for
his benefit.
• If in a contract between ’A’ and ‘B’ some benefit has been
conferred upon ‘X’ , ‘X’ cannot file a suit to enforce the
contract because ‘A’ and ‘B’ are the only parties to the
contract, whereas ‘X’ is stranger to the contract.
• Note: The rule that a stranger to contract cannot sue has to be
distinguished from the rule that in India a person who is
stranger to consideration can sue. It has been noted that a
person may not have himself given any consideration but he
can enforce the contract if he is a party to the contract, because
according to the Indian law, consideration may be given either
by the promise or a third party. This does not affect the rule of
privity of contract.
ENGLISH LAW

• Tweddle v. Atkinson (1861): it was held that only parties to the contract
can sue each other. In this case plaintiff ‘A’ married a girl, B. After this
marriage there was contract in writing between A’s father and B’s father
that each would pay a certain sum of money to A and that A will have the
power to sue for each sums. After the death of the two fathers, A brought
an action against the executors of B’s father to recover the promised
amount. It was held that A could not sue for the same.
• In this case the plaintiff was both a stranger to the contract as well as
stranger to consideration and he could not enforce the claim.
 INDIAN LAW
• The rule that privity of contract is needed and a stranger to the contract cannot bring an
action is equally applicable in India as in England.
• Even though under the Indian Contract Act the definition of consideration is wider than
under the English Law, yet the common law principle of privity of contract is generally
applicable in India, with the effect that only a party to the contract is entitled to enforce
the same.
• Jamna Das v. Ram Avtar (1911) : ’A’ had mortgaged some property to ‘X’. ‘A’ then sold
this property to ‘B’, B having agreed with ‘A’ to pay off the mortgage debt to ‘X’. ‘X’
brought an action against ‘B’ to recover the mortgage money. It was held by the privy
council that since there was no contract between ‘X’ and ‘B’, ‘X’ could not enforce the
contract to recover the amount from ‘B’.
• Court said that the undertaking to pay back the mortgagee was given by the defendant to
his vendor. “The mortgagee has no right to avail himself of that. He was no party to the
sale. The purchaser entered into no contract with him, and the purchaser is not personally
bound to pay this mortgage debt.”
 EXCEPTIONS TO THE RULE THAT A STRANGER TO
CONTRACT CANNOT SUE
i. Trust of contractual rights or beneficiary under a contract
One of the exceptions to the doctrine of privity to contract was recognized by Lord
Haldane in Dunlop Pneumatic Tyre Co. v. Selfridge & Co. itself. While it was mentioned that
only a party to a contract can sue on it, no such right is conferred on a third party, it was also
stated that “ such a right may be conferred by way of property, as for example under a trust.
The basis of an action by the third party in such a case is actually not the enforcing of contract
but the right conferred by a particular contract in favour of a third party in the form of trust etc.
For example: in a contract b/w ’A’ and ‘B’ beneficial right in respect of some property may be
created in favour of C. In such a case ’C’ can enforce his claim on the basis of the right
conferred upon him. The question whether in a particular case there is an obligation in the
nature of a trust in favour of a third party arising out of a contract will depend on the facts of
the case.
• Indian Law has also recognized this exception.
• Khwaja Muhammad Khan v. Husaini Begum- There was an agreement between the father of a
boy and a girl that if a girl (plaintiff) married a particular boy, the boy’s father (defendant)
would pay certain personal allowance to the plaintiff. It was also mentioned that a certain
property had been set aside by the defendant and this allowance would be paid out of the
income of that property.
• The plaintiff married the defendant’s son but the defendant failed to pay the allowance agreed to
by him.
• In an action by the plaintiff to claim this allowance, the defendant contended that his contract to
pay the allowance had been only with the plaintiff’s father and not with the plaintiff, she being a
stranger to the contract cannot sue.
• The defendant’s contention was that Tweedle case , which debarred an action by a stranger to
the contract, should be applicable in this case.
• It was held that since, the basis of the plaintiff’s claim being a specific charge on immoveable
property, in her favour, she was entitled to claim the same as a beneficiary, and as such the
common law rule was not applicable to the facts and circumstances of the present case.
2. Provision for marriage expenses or maintenance under family arrangement .
Where under a family arrangement the contract is intended to secure a benefit to a third party, he may sue in his
own right as a beneficiary. Such an action has been allowed in many cases where, on the partition of joint
family property between the male members, a provision is made for the maintenance of the female members of
the family. The basis of the recognition of such an action is the application of the rule laid down in Khwaja
case.

Rose Fernandez Vs. Joseph Gonsalves (ILR 1924 48 Bom. 673)

A girl’s father entered into an agreement for her marriage with the defendant, it was held that the girl after
attaining majority could sue the defendant for damages for breach of the promise of marriage and the defendant
could not take the plea that she was not a party to the agreement.
The agreement entered between the Brothers to provide maintenance to the mother; enforceable
Daropti Vs. Jaspat Rai (1905 Punj Rec 171)
D’s wife left him because of cruelty. The agreement was entered between the father of the wife and husband to
treat her properly and if he fails to do so, he has to pay her monthly maintenance and provide her with a
dwelling house. She was held entitled to enforce the promise made by the defendant to her father.
 CONSIDERATION MAY BE PAST, PRESENT[EXECUTED] OR FUTURE
[EXECUTORY]

• Section 2(d) ICA, 1872.

a) Past Consideration means that the consideration for any promise was given earlier and the promise is made
thereafter. It is, of course, necessary that at the time the act constituting consideration was done must have
been done at the desire of the promisor.
A past consideration may arise in two ways. It may consist of services rendered at request but without any
promise at the time or it may consist of voluntary service.

For example: I request you to find my lost dog. After you have done the same, if I promise to pay you Rs. 100
for that, it is a case of past consideration.
For my promise to pay you Rs. 100 the consideration is your efforts in finding my lost dog and the same had
been done before I promised to pay the amount. In this case the consideration has been given at my request
because it is only when I requested you that you found the dog. This constitutes valid (Past) consideration under
section 2(d) and therefore the promise is enforceable.
“If A saves B from drowning and B later promises A a reward.”
“A finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract.” (Past
voluntary service)
A supports B’s infant son. B promises to pay A’s expenses in doing so. This amounts to
contract.”
Section 25(2) provides “a promise to compensate, wholly or in part, a person who has already
voluntarily done something for the promisor” is enforceable.
Under English Law, past consideration is no consideration.
PAST CONSIDERATION AT THE PROMISOR’S REQUEST
• Past Consideration though given prior to the promise, but at the request of the promisor,
is deemed to be a good consideration for the promise. It is deemed that when the
previous request was made, the promisor had in mind his promise which he expressed
afterwards. The previous request and the subsequent promise are not considered to be
independent of one another but part of the same transaction.
• Lampleigh v. Brathwait – Thomas Brathwait, the defendant who has held guilty of
having committed a murder, requested Lampleigh, the plaintiff to make efforts to obtain
pardon for him from the King. The plaintiff made efforts to secure the pardon going
from one place to another, at his own expense. In consideration of these efforts, the
defendant promised to pay 100 pound to the plaintiff. The question was whether the
plaintiff had a legal right to recover this amount.
• It was held that the plaintiff had a right to enforce the promise and recover the said
amount because for this promise the consideration, in the form of efforts by the plaintiff
to obtain the pardon had been there at the earlier request of the defendant.
• On the question of past consideration there is not much difference
between Indian and English Law. Indian Law recognizes past
consideration when the same has been given, “at the desire of the
promisor”. English Law although as a general rule does not
recognize past consideration, but if the exception created by
Lampleigh case is read along with the general rule, there also it
means that an act done at the instance of the promisor even before
the promise is made constitutes a good consideration for the
promise.
• Past act done voluntary is no consideration either in India or
England.
• In India, however such a promise in lieu of the past voluntary
services is enforceable because of the exception mentioned in
section 25 (2), which declares such an agreement valid even if it is
 EXECUTED OR PRESENT CONSIDERATION

• When of the parties to the contract has performed his part of the promise,
which constitutes the consideration for the promise by the other side, it is
known as executed consideration.
• Performance of the promise by the other side is the only thing now to be done.
• E.g.: A makes an offer of reward of Rs. 100 to anyone who finds his lost dog
and brings the same to him. B finds the lost dog and delivers the same to A.
When B does so that amount to both the acceptance of the offer, which results
in a binding contract under which A is bound to pay Rs. 100 to B and also
simultaneously giving consideration for the contract. The consideration in
this case is executed.
• Executed Consideration may be distinguished form Past
consideration. In the case Executed Consideration , the
consideration is provided simultaneously along with the making of
the contract.
• Example: When B finds the lost dog that constitutes not only the
acceptance of the offer but that also provides the consideration in
respect of the contract between A and B. In the case of past
consideration , on the other hand, consideration is provided prior to
the making of the contract. In such a case at the time of providing of
the consideration, the promise is non-existent. Thus, if after B has
found A’s dog , A promises to pay Rs. 100 to B, the consideration
here is past.
 EXECUTORY OR FUTURE CONSIDERATION

• When one person makes a promise in exchange for the promise by

the other side, the performance of the obligation by each side to be
made subsequent to the making of the contract, the consideration
is known as executory.
• Example: A agrees to supply certain goods to B and B agrees to
pay for them on a future date, this is a case of executory
consideration.
CONSIDERATION MUST BE OF SOME VALUE
A worthless act will not amount to consideration.
Indian Contract Act does not in terms provide that consideration must be good
or valuable to sustain a contract. It has always been understood that
consideration means something which is of some value in the eyes of law. It
must be real and not illusory, whether adequate or not….so long as the
consideration is not unreal, it is sufficient if it is of slight value.
VALUE NEED NOT BE ADEQUATE (Adequacy of Consideration)
If a party gets what he has contracted for, and if it is of some value, which
may be great or small, it courts “will not enquire whether it was equivalent to
the promise which he gave in return.”
• Consideration is defined as an act of abstinence from doing something, at
the desire of the promisor. The consideration should be of some value in
the eyes of the law, but the court have been liberal in interpreting and
anything of value by the parties is regarded as a valid consideration.
• Thus the value need not be adequate for the promise made. The court will
not enquire whether the value of the consideration is equivalent to the
promise that is made. If the parties agree to the value of the consideration
then it is sufficient. This rule is applicable as per Indian and English law.