Table of Contents
Section 2(d) of the Indian Contract Act defines the term consideration as follows-
When at the desire of the promisor, the promisee or any other person
- Has done, or abstained from doing something;
- Does or abstains from doing something;
- Promises to do, or to abstain from doing something;
Then such act, abstinence or promise is called a consideration for the promise.
In short, the term consideration means ‘something in return’ i.e. ‘QUID PRO QUO’.
Pollock- “the price for which the promise of the other is bought, and the promise thus given for value is enforceable”.
Blackstone- “the recompense given by the party contracting to the other”
In Currie v. Misa, Lush J. define the term consideration as follows-
“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit accruing to the party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by other”.
Illustration- A agrees to sell his car to B for Rs. 50,000. Here, B’s promise to pay the sum of Rs. 50,000 is the consideration for A’s promise to sell the car, and A’s promise to sell the car is the consideration for B’s promise to pay the Rs. 50,000.
Essential elements of consideration
- Consideration should be passed at the request of offeror:- offeree should send only such consideration which is wanted by the offeror. In the case where offeree sends unwanted consideration, he has no right to claim counter consideration. (Durga Prasad v. Baldeo)
- Consideration may move from a promisee or any other person:- In Indian law, according to section 2(d) of the Indian Contract Act, consideration may move from the promisee or if the promisor has no objection, from any other person.
In English law, consideration should move from promisee only. Though it is said so English law has given an exception i.e there should be blood relation between the promisee and that other person who is sending the consideration. (Dutton v. Poole)
- Consideration need not be adequate:- Consideration of the contract need not have equal magnitude. The inadequacy of consideration will not infect the validity of the contract. (Thomas v. Thomas)
- Consideration must be lawful:- Presence of unlawful consideration makes the contract illegal and hence void.
Illustration- A promises to maintain B’s child and B promises to pay A Rs. 1,000 yearly for the purpose. Here, the promise of each party is the consideration for the promise of the other party. They are lawful considerations.
- Consideration must be real:- Consideration should not be of an illegal contract. It must be a believable concept.
Types of consideration
Consideration is of the following five kinds
- Past Consideration- Past consideration is something wholly done, forborne, or suffered before the making of the agreement.
Illustration: A saves B’s life. B promises to pay A Rs. 21,000 out of gratitude. Here, the consideration is past, because A did nothing or refrained doing anything on account of B ’s promise. Whatever he did, he did before B’s promise was made.
Present Consideration- The consideration which moves simultaneously with the promise is called present consideration or executed consideration.
Illustration:- X buys an article from a shop and pays the price immediately. The
Consideration moving from X is present or executed consideration.
- Future Consideration: This type of consideration is a promise to do or abstain from doing something in the future. Sometimes executory consideration is also known as a future consideration.
Illustration: A promises to pay a sum of money to B in consideration of B’s
promise to delivers a book for A. As B’s promise has not yet been performed, it is
- Unreal Consideration: When a consideration exists only in words, and not in fact. Then such consideration is known as unreal consideration for a promise.
Illustration:- A promises to pay B, Rs. 2,000 on a particular day, in consideration of a promise by B to pay A Rs. 500 at the same time, the consideration is ‘unreal’ or ‘illusory’, and the promise will be regarded as merely a gratuitous promise by A to pay B, Rs. 1500.
- Unlawful Consideration- S.23 of the Act describe the term unlawful consideration. A consideration is said to be unlawful if-
It is forbidden by law;
It would defeat the provision of any law;
It Is fraudulent;
Involves or implies injury to the person or property of another;
It is regarded as immoral or opposed to public policy, by the Court.
Illustration- A, B and C enter into an agreement for the division among them of gains acquired or to be acquired, by them by fraud. The agreement is void, as its object is unlawful.
Exceptions to Consideration
Section 25 of the Contract Act lays down a few exceptions when an agreement made without consideration is not void.
Exception 1- Natural Love and Affection
A written and registered agreement based on natural love and affection between near relatives is enforceable without consideration. The expression ‘near relative’ will include parties related by blood or marriage.
Exception 2- Past Voluntary Service
A promise to compensate a person, who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do, is enforceable. However, such service should have been rendered voluntarily and without promisor’s knowledge, and for the promisor only.
For example, a promise made after attaining the age of majority to pay for goods supplied to the promisor during minority was held to be within the exception.
Illustration:- A finds B’s mobile phone and gives it to him. B promises to give Rs. 100. This is a contract.
Exception 3- Time-barred Debt
A promise to pay a time-barred debt is enforceable.
Illustration:- X owes Y, Rs. 1,000, but the debt is barred by the Limitation Act. X signs a written promise to pay Y, Rs. 500 on account of the debt. This is a contract.