Consideration

Consideration is one of the essential elements to support a contract. Subject to certain exceptions, an agreement without consideration is void. Consideration is a technical term used in the sense of quid pro quo (ie something in return). When a party to an agreement promises to do something, he must get “something” in return. This „something‟ is defined as „consideration‟ Definition :in section 2(d) is a simple and practical definition: it is something of value which the promisee has given, gives or promises to give in return for the promise. Justice Patterson defines “ consideration means something which is of some value in the eyes of law.

pay the annuity and the uncle sued to recover the . Case law : Chinnaya Vs Ramaiah : an old lady made a gift of her property to her daughter with a direction to pay a certain sum of money to the maternal uncle by way of annuity. It was held that there was sufficient consideration for the uncle to recover the money from the daughter. In consideration of this D who was using the market promised to pay some money to B. Ex: A sees B‟s house on fire and helps to extinguish fire. Case Law: Durga Prasad Vs Baldeo B spent some money on the improvement of a market at the desire of the Collector of the district. The daughter did not. Held.Essentials of valid consideration 1. however. the daughter executed a writing in favour of the maternal uncle agreeing to pay the annuity. . Consideration may move from the promisee or any other person: under the Indian law. A can not demand payment for his services because B did not ask him any help. In other words. On the same day. consideration may move from the promisee or any other person ie even a stranger . consideration must have been given at the desire of the promisor. Acts done voluntarily or request of the third parties would not be valid consideration. The desire of the promisor may be express or implied. the agreement was void being without consideration as it had not moved at the desire of D 2.Consideration must move at the desire of the promisor: consideration must proceed or move at the desire or request of the promisor.

immoral or opposed to public policy .Essentials of valid consideration 3. Some value in the eyes of law.office if he pays Rs 50. Consideration need not be adequate: Something in return need not necessarily be equal in value . Even smallest consideration is sufficient provided it has some value. Consideration must be lawful: ex: A promises to B an employment in a Govt.00. Consideration must be real: it must be real not illusory. A promise to pay a sum of money to a police officer for investigation into a crime will be without consideration because he is already bound to do so by law. It must not be illegal.000 for Rs 1. Consideration may be past. 8. 5. present or future: 4.00. It is unlawful 7. Ex: A agrees to sell his house worth Rs 10. 6. the agreement is a contract.000 to B. It must be something which the promisor is not already bound to do.000 as bribe.

but the secretary in this case incurred a liability on the strength of the promise. Case law: Kedar Nath Vs Gauri Mohamed The facts of this case were almost similar to those of the previous case.Two leading cases • Case law: Abdul Aziz Vs Mazum Ali The secretary of a Mosque Committee filed a suit to enforce a promise which the promisor had made to subscribe Rs 500 to the re-building of a mosque. Held. Held. the amount could be recovered. “the promise was not enforcable because there was no consideration in the sense of benefit” as the person who made the promise gained nothing in return for the promise made”. .

• Case law: Dunlop Pneumatic Tyre Company Vs Selfridge & Co A sold a large quantity of tyres to B at a certain price on entering into an agreement not to sell the tyres below the price mentioned in price list supplied by A. .“Stranger to a contract can‟t sue” are there any exceptions • It is a general rule of law that only parties to a contract may sue and be sued on that contract. It was held that A could not sue C as A was not a party to the contract between A and C. C sold the tyres at less than the list price. B sold the tyres to C a retail dealer under the a contract stipulating the same agreement between A and B. A sued C for the breach.

partition or other family arrangements and a provision is made for the benefit of a person . B can enforce the provisions of the trust although he is not a party to the agreement. D and E as a trustees of the trust. 2. For ex: A. • Case law: Gandy Vs Gandy A husband who was separated from his wife. But he failed to do so. he may sue although he is not a party to the agreement. executed a separation deed by which he promised to pay the trustees all expenses for the maintenance of his wife. A trust or charge : a person (called beneficiary) in whose favour a trust or other interest in some specific immovable property has been created can enforce it even though he is not a party to the contract. . partition or other family arrangement: when an arrangement is made in connection with marriage. It was held that the agreement created a trust in favour of the wife and could be enforced by her. The wife filed a suit against her husband. Marriage settlement. creates a trust in favour of B and appoints C.• Exceptions : • 1.

Acknowledgement or estoppel: where the promisor by his conduct. contracts entered into through an agent .A admits of this receipt to P. on a partition of joint properties. Ex: A receives some money from T to be paid over to P. she was entitled to require her sons to make the investment. • 3.• Case law:Shuppu Ammal Vs Subramanyam : Two brothers. acknowledges or otherwise constitutes himself as an agent of a third party. agreed to invest in equal shares a certain sum of money for the maintenance of their mother. P can recover the amount from A who shall be regarded as he agent of P. Held. a biding obligation is thereby incurred by him towards the third party. • 4.

the promise was put in writing and registered. the agreement was held valid and binding. no contract” • An agreement made without consideration is void. The exceptions are: • Promise made on account of love and affection: An agreement made without consideration is valid if it is in writing and registered and is made on account of love and affection • Case law: Venkataswamy Vs Rangaswamy V on account of natural love and affection for his brother R. promises to discharge his debt to B. Sections 25 and 185 dealt with the exceptions to this rule. .A contract without consideration is void – exception “NO consideration. In such cases the agreements are enforceable even though they are made without consideration.

completed gift: The rule “No consideration. a person who has already voluntarily done something for the promisor. contract of agency: no consideration is necessary to create an agency. even though without consideration. • 5. • Ex : A says to B. I promise to pay you Rs 5000. there is a contract between A and B. Gift does not require any consideration. . a promise to pay for a past voluntary service is binding. “At the risk of your life you save me from an accident. • 4. Gifts once made cannot be recovered on the ground of absence of consideration. Promise to pay a time-barred debt: a promise by a debtor to pay a time barred debt is enforceable provided it is made in writing and is signed by the debtor. is enforceable.compensation for voluntary services: A promise to compensate. no contract” does not apply to completed gifts. In simple words.• 2. • 3.

Sign up to vote on this title
UsefulNot useful