Module 2 - 2.3 -Consideration

Consideration
Definition
 Sec 2(d) defines consideration as follows: “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 promsies to do or to abstain from doing,
something, such act or abstinence or promise is called a
consideration for the promise.”
 “Quid pro quo” – something for something.
Consideration
 Is an act, i.e., doing something.
Ex: A promises B to guarantee payment of price of the goods which
B sells on credit to C. Here, selling of goods by B to C is
consideration for A’s promise.
 Is an abstinence or forbearance, i.e., abstaining or refraining from
doing something.
Ex: A promises B not to file a suit against him if he pays him Rs. 500.
The abstinence of A is the consideration for B’s payment.
 A return promise.
Ex: A agrees to sell his horse to B for Rs.10,000. Here B’s promise to
pay the sum of Rs. 10,000 is the consideration for A’s promise to sell
the horse, and A’s promise to sell the horse is the consideration for
B’s promise to pay the sum of Rs.10,000.
Legal rules as to Consideration
1. It must move at the desire of the promisor – an act constituting
consideration must have been done at the desire or request of the
promisor.
Ex: A saves B’s goods from fire without being asked to do so. A cannot
demand payment for his services.
2. It may move from the promisee or any other person – even a
stranger. As long as there is consideration for a promise, it is immaterial
who has furnished it.
Ex: [Chinnaya v. Ramayya]
3. It may be an act, abstinence or forbearance or a return promise
Ex: A borrows from B Rs.100 at 20% p.a., but fails to pay the amount.
When B is about to file a suit, A agrees to pay a higher rate of interest.
B, does not file a suit.
Legal rules as to Consideration (contd)
4. It may be past, present or future –
Ex: A renders some services to B. After a month, B promises to compensate for
those services. It is past consideration.
Ex: A cash sale, it is present/executed consideration.
Ex: D promises to deliver certain goods to P after a week, P promises to pay
after a fortnight. It is future/executory consideration.
5. It need not be adequate - it need not necessarily be equal to “something
given”.
6. It must be real and not illusory – it must be real, competent and of some
value in the eyes of law. There is no real consideration in the following cases:
- Physical impossibility
- Legal impossibility
- Uncertain consideration
- Illusory consideration
Legal rules as to Consideration (contd)
7. It must be something which the promisor is not already bound to do.

Ex: There was a promise to pay the Vakil an additional sum if the suit
was successful. Held, the Vakil was under pre-existing contractual
obligation to render the best of his services.
8. It must not be illegal, immoral or opposed to public policy.
Stranger to Contract
 It is a general rule of law that only parties to a contract may sue and be
sued on that contract. This rule is known as the doctrine of privity of
contract.
There are two consequences of the doctrine of privity of contract:
(1) A person who is not a party to a contract cannot sue upon it even though
the contract is for his benefit and he provided consideration.
(2) A contract cannot confer rights or impose obligations arising under it on
any person other than the parties to it. Eg: If there is a contract between A
& B, C cannot enforce it.
A contract without consideration is
Void - Exceptions
Cases where an agreement though made without consideration will be valid.
1. Love and affection – agreement will be valid , if it is in writing and registered
and is made in account of natural love and affection between parties
standing in a near relation to each other.
Ex: A for love and affection, promises to give his son B, Rs.1,000. A puts his promise
in writing and registers it. It is a valid contract.
2. Compensation for services rendered – agreement may be valid, if it is a
promise to compensate wholly or in part, a person who has already voluntarily
done something for the promisor, is enforceable, even though without
consideration.
Ex: A finds B’s purse and gives it to him. B promises to give A Rs.100. This is a
contract.
Void – Exceptions (contd)
3. Promise to pay a time-barred debt – is also enforceable, but the promise
must be in writing and be signed by the promisor or his agent authorised in
that behalf.
Ex: Raghav owes Murli Rs.10,000. This debt is time barred. Even then Raghav
promises in writing to pay Murli Rs. 4,500 on account of debt. This is a
contract.
4. Completed gifts – if a person gives certain properties to another
according to the provisions of the Transfer of Property Act, he cannot
subsequently demand the property back on the ground that there was no
consideration.
Void – Exceptions (contd)
5. Charitable subscription – where the promisee on the strength of the promise
makes commitments.
Ex: [Kedar Nath v. Gori Mohammed] - D had agreed to subscribe Rs.100
towards the construction of a Town Hall at Howrah.
P the secretary of the committee, on faith of the promise, started working on
the project & undertook liability to pay the contractors.
D refused to pay & P brought a suit against him.
It was held that though the promise was to subscribe to a charitable institution
and there was no benefit to D, yet it was supported by consideration in that P,
the promisor suffered a detriment in having undertaken a liability to the
contractors on the faith of the promise made by D.

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Consideration

7. It must be something which the promisor is not already bound to do.

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