1

Cov.iaeratiov
2
Presence of consideration is one of the essentials of
a valid contract. Subject to certain exceptions, the
general rule in ndia is that " an agreement without
consideration is void.
Consideration means something in return for the
promise. t may be either some benefit conferred on
one party or some detriment suffered by the other.
n the words of Lush J. n Curie Vs. Misa (1875)
" A valuable consideration in the sense of the law
may consist either in some right, interest, profit or
benefit accruing to one party, or some forbearance,
detriment, loss or responsibility given, suffered or
undertaken by the other.
3
Defivitiov vvaer ectiov 2;a)
Section 2(d), ndian Contract Act, defines
consideration as under :
"When at the desire of the promisor, the
promisee or any other person has done or
abstained from doing, or promises to do or
abstain from doing something, such act or
abstinence or promise is called a
consideration for that promise.
4
1be aefivitiov vevtiov. tbe fottorivg reqvirevevt. to be
.ati.fiea iv oraer tbat tbere i. ratia cov.iaeratiov :
. Consideration must be given 'at the desire of the promisor".
2. Consideration must be given ' by the promisor or any other
person '.
3. Consideration may be past, present or future in so far as the
definition says that the promisee :
(i) has done or abstained from doing, or
(ii) does or abstains from doing, or
(iii) promises to do or abstain from doing, something.
4. There should be some act, abstinence or promise by the
promisee, which constitutes consideration for the promise.
5
CO^DR.1O^ O^Y .1 1
DR O 1 PROMOR
t is essential that the consideration must have been given at the desire of
the promisor, rather than voluntarily or at the instance of some third party.
In Durga Prasad Vs. BaIdeo (1880) the consideration for the promise
had not moved at the desire of the promisor but some other person, and
that was held not to be sufficient consideration to support the promise.
The facts of the case are
The PIaintiff constructed certain shops in a market at the instance of the
collector of that place. Subsequently the defendants occupied one of the
shops in the market. The money for the construction of the market having
been spent by the plaintiff, the defendants, in consideration thereof, made
a promise to pay to the plaintiff commission on the articles sold through
their agency in that market. The defendants failed to pay the promised
commission. n an action by the plaintiff to recover the commission it was
observed that the consideration for the promise to pay the commission for
the construction of the market was not at the desire of the defendants,
but on the order of the collector. t was, therefore, held that since the
consideration did not move at the desire of the defendants (promisors) in
this case, this did not constitute valid consideration and therefore the
defendants were not liable in respect of the promise made by them.
6
vb.critiov for a cbaritabte vro.e
A promise to contribute an amount for a charitable
purpose may not be enforceable because against
this promise there may be no consideration. f there
is a promise to contribute on the part of one of the
parties but no act done in exchange thereof by the
other, there is no consideration in such a case. In
AbduI Aziz Vs. Masum AIi (1914) The defendant
promised to pay a sum of Rs. 500/- as donation for
the repair and reconstruction of a mosque. Nothing
was done to carry the repairs and reconstruction of
the mosque. The defendant refused to pay the
amount. t was held that since nothing was done on
the faith of the promise, there was no consideration
in this case and, therefore, the defendant was not
liable to pay the subscription promised by him.

2 CO^DR.1O^ Y PROM OR
.^Y O1R PRO^
According to ndian law consideration may be given by the
promisee or any other person. In India there is a possibility
that the consideration for the promise may move not from the
promisee but a third person, who is not a party to the contract.
n England the position is different. The position in ndia may be
explained by referring to the case of Chinnaya Vs. Ramaya
(1882) n this case A, an old lady, granted an estate to her
daughter (defendant) with a direction that the daughter should
pay an annuity of Rs. 653/- to A's brother (plaintiff). On the same
day the defendant made a promise to the plaintiff that she would
pay the annuity as directed by A. The defendant failed to pay
the stipulated sum. n an action against her by the plaintiff she
contended that since the plaintiff himself had furnished no
consideration, he had no right of action. The Madras High Court
held that in this agreement between the (defendant) and (the
plaintiff), the consideration has been furnished by the defendant's
mother and that is enough consideration to enforce the promise
between the plaintiff and the defendant.
8
Pririt, Of Covtract
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. f 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 only a
stranger to the contract.
The rule that a stranger to contract cannot sue has to be
distinguished from the rule discussed above that in ndia a
person who is stranger to consideration can sue. t has been
noted above 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 ndian Law consideration
may be given either by the promisee or even a third party. That
does not affect the rule of privity of contract.
9
vgti.b ar
&nder the English law old view was that a person, who is not a
party to the contract but is intended to be the beneficiary under
the contract and is nearly related to the promisee, has a right of
action. In Dutton Vs. PooIe (1678) A intended to sell his
wood to make a provision for the marriage expenses of his
daughter. The defendant, A's son requested A not to sell the
wood and in return made a promise toi his father that he would
pay ,000 pounds to A's daughter, the plaintiff. The father
forebore to sell the wood but the defendant did not pay the
promised amount to the plaintiff. t was held that even though
there was no contract between the plaintiff and the defendant,
but the plaintiff, who was a beneficiary in the contract was nearly
related to the promisee, i.e. her father, she was entitled to
recover.
10
The above mentioned view was rejected in TweddIe Vs.
Atkinson (1861) n that case the plaintiff married a girl. After
this marriage there was a contract in writing between the
plaintiff's father and the girl's father that each would pay a certain
sum of money to the plaintiff and the plaintiff would have a right
to sue for such sums. After the death of the two fathers, the
plaintiff brought an action against the executors of the girls father
to recover the promised amount. t was held that the plaintiff
could not sue for the same. Wightman J observed :
"Some of the old decisions appear to support the proposition
that a stranger to the consideration of a contract may maintain an
action upon it, if he stands in such a near relationship to the party
from whom consideration proceeds, that he may be considered
a party to the consideration ..... On the contrary it is now
established that no stranger to consideration can take advantage
of a contract, although made for his benefit.
n the above stated case the plaintiff was both a stranger to the
contract as well as stranger to consideration and he could not
enforce the claim.
11
The rule of privity of contract was reaffirmed by the House of
Lords in DunIop Pneumatic Tyre Co. Ltd. Vs. SeIfridge &
Co. Ltd. (1921) in the following words :
"n the law in England certain principles are fundamental. One is
that only a person who is a party to a contract can sue on t. Our
law knows nothing of a Jus quaesitum territo arising by way of
a contract. Such a right may be conferred on a stranger to a
contract as a right to enforce the contract in personam.
n Dunlop's case the appellants, who were manufacturers of
motor-car tyres, sold some tyres to one Dew & Co. with an
agreement that these tyres will not be sold below the list price.
Dew & Co. in their turn sold some of those tyres to the
respondents, with an agreement between Dew & Co. and the
respondents that they shall observe conditions as to price and
the respondents also promised that they would pay to the
appellants a sum of 5 pounds for every tyre sold below the list
price. The respondents sold some tyres below the list price, the
appellants brought a action against the respondents to recover
damages for the same.
12
The House of Lords held that Dunlop & Co. could
not bring an action against Selfridge and Co.
because there was no contract between the two
parties. t was further observed that even if it is
taken that Dew & Co. were acting as agents for
Dunlop & Co., the latter still cannot maintain an
action as there was no consideration between
Dunlop & Co and Selfridge & Co. since the whole
of the purchase price was paid by Selfridge & Co. to
Dew & Co.
13
vaiav ar
travger 1o . Covtract Cavvot ve
The rule that "privity of contract is needed and a stranger to
contract cannot bring an action is equally applicable in ndia as in
England.. Even though under the ndian Contract Act the
definition of consideration is wider than in English Law, yet the
common law principle is generally applicable in ndia, with the
effect, that only a party to th3e contract is entitled to enforce the
same. The authority for the application of the rule in ndia is the
decision of the Privy Council in amna Das Vs. Ram Autar. n
that case A had mortgaged some property to X. A sold this
property to B , B having agreed with A to pay off the mortgage
debt. X brought an action against B to recover the mortgage
money. t 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.
14
cetiov to tbe rvte tbat a .travger to covtract
cavvot .ve
;) 1rv.t of covtractvat rigbt.
One of the exceptions to the doctrine of privity of contract was
recognised by Lord Haldine in DunIop Pneumatic Tyre Co. Vs.
SeIfriidge & Co. While it was mentioned that only a party to a
contract can sue on it and 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 exampIe, under a trust. The basis of
an action by the third party is actually not enforcing the 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 between
A and B , beneficial right in respect of some property may be
created in favour of C. n such a case C can enforce his claim
on the basis of the right conferred upon him.
15
The Privy Council in the case of hwaja Muhammad han
Vs. Husaini Begum (1910) has recognised this exception. n
this case there was an agreement between the fathers of a boy
and a girl that if the girl (plaintiff in this case) married a particular
boy, the boy's father (defendant in this case) would pay certain
personal allowance known as arcipandan (betel-box
expense) or pin money to the plaintiff. t 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. The plaintiff therefore
brought an action against the defendant. t was held that in this
case the basis of the plaintiff's claim being a specific charge on
the immovable property in her favour she is entitled to claim the
same as a beneficiary, and as such, the common law rule is not
applicable to the facts and circumstances of the present case.
16
;2) Covavct, .c/vorteagevevt, or .avi..iov
Sometimes there may be no privity of contract between the two parties,
but if one of them by his conduct, acknowledgement, or admission
recognises the right of the other to sue him, he may be liable on the
basis of the law of estoppel against him. n the case of arayani Devi
Vs. Tagore Commercial Corporation Ltd. (1973) where there was no
contract between the plaintiff and the defendants but the defendants in
their agreement with the plaintiff's husband had agreed to pay certain
amounts to the plaintiff's husband during his life time and thereafter to
the plaintiff, the question of the right of the plaintiff to sue to defendants
had arisen. t was established that the defendants had made certain
payments to the plaintiff, in pursuance of the agreement, after her
husband's death, and had thereafter asked for the extension of time to
pay. Apart from that it was found that the defendants, by their
admission, had earlier called upon the plaintiff to executive certain
documents in this connection, which implies that they considered the
plaintiff to be entitled to certain rights. t was, therefore held that the
defendants have created such privity with the plaintiff by their conduct
and by acknowledgement and by admission, that the plaintiff is entitled
to her action even though there was no privity of contract between the
plaintiff and the two defendants, when the said contract was entered
into.
1
;) Prori.iov for varriage eev.e. or
vaivtevavce vvaer a favit, arravgevevt
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 hwaja
Muhammad han Vs. Husaini Begam to such
situations.
18
n Veeramma Vs. Appayya ( 1957) under
a family arrangement the father conveyed his
house to his daughter and the daughter
undertook to maintain him in his life time.
The daughter being a beneficiary under the
compromise agreement, it was held that she
was entitled to sue for the specific
performance in her favour.
19
;) CO^DR.1O^ M.Y P.1,
`C|1D OR `C|1ORY
ndian Contract Act recognises three kinds of
consideration, viz., Past, Executed and Executory.
When, in return for the promise, the promisee or
other person :
. Has done or abstained from doing, then
consideration is past.
2. Does or abstain from doing, the consideration is
Executed, or present.
3. Promises to do or abstains from doing, the
consideration is Executory or future.
Whether the consideration is past, Executed or
Executory, it is essential that it must have been
given "at the desire of the promisor
20
;) Pa.t Cov.iaeratiov
As noted above, ndain Contract Act recognises past
consideration. t means that the consideration for any promise
was given earlier and the promise is made thereafter. t is, of
course, necessary that at the time the consideration was given
that must have been done at the desire of the promisor. For
example, request you to find out my lost dog. When you have
done the same, promise to pay you Rs. 00/- for that, it is a
case of past consideration. For my promise to pay you Rs.00/-
the consideration is your efforts in finding my lost dog and the
same, had been done before promised to pay the amount. n
this case the consideration had been given at my request,
because it is only when requested you that you found out the
dog. This constitutes valid (past) consideration under Section
2(d), and therefore the promise is enforceable.
21
Pa.t .errice. rotvvtarit, revaerea
ndian Contract Act recognises only such consideration which
has been given at the desire of the promisor, rather than
voluntarily. f consideration has been given voluntarily, it is no
consideration. For example, if my dog has been lost and without
any request from me to find the same, you find that of your own
and deliver the dog to me. This a is case of past services
rendered voluntarily. n case promise to pay Rs. 00 to you
after you have rendered these services, the question which
arises in such a case is , can such an agreement be enforced ?
t has been noted above that rendering of such voluntary
services does not constitute valid consideration to support the
promise. A valid contract is created in such a case also because
the situation is covered by sec. 25 (2) of the ndian Contract Act,
which contains an exception to the rule that an agreement
without consideration is void. The provision is as under :
22
"Sec 25 An agreement made without consideration
is void unless
(2) t is a promise to compensate, wholly or in part,
a person who has already voluntarily done
something for the promisor, or something which the
promisor was legally compellable to do
The point may be further explained by the following
illustrations.
(i) A finds B's purse and gives it to him. B
promises to give A Rs.50. This is a contract.
(ii) A supports B's infant son. B promises to pay
A's expenses in so doing. This is a contract.
23
vgti.b ar regaraivg a.t cov.iaeratiov
According to English law past consideration is no
consideration. A promise in lieu for a past act is
deemed to be only expression of gratitude for the
benefit already received, rather than any
consideration motivating the other side to make the
promise. A promise after the consideration has
already been given and independent of it, is not
enforceable for want of any consideration in
exchange for the promise.
24
The case of Re Mc-ArdIe (1951) explains the point. n that
case, in accordance with the will of a father, his five children
were entitled to an equal share in a house after their mother's
death. During the mother's lifetime one of the testator's son and
his wife lived in that house. At that time the wife made some
improvements to the house, incurring an expense of 488 pounds.
Subsequently all the five children, who were to inherit the house,
signed a document in her favour, stating that "in consideration of
your carrying out certain alterations and improvements to the
property, we hereby agree that the executors shall repay to you
from the said estate, the sum of 488 pounds in settlement of the
amount spent on such improvements. On the mother's death
the promisee claimed 488 pounds from the executors on the
strength of the above promise, but except her husband all the
other promisors refused to pay. t was held by the Court of
Appeal that since the expenditure had been incurred before the
document was signed, the consideration was past and therefore
the promise could not be enforced.
25
Pa.t cov.iaeratiov at tbe rovi.or`. reqve.t
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.
t is deemed that when the previous request was made the promisor
had in mind his promise which he expresses afterwards. The previous
request and the subsequent promise are not considered to be
independent of one another but part of the same transaction. The
authority for this point is the case of LampIeigh Vs. Bratwait (1615)
Thomas Bratwait, the defendant, who was guilty of having committed a
murder, requested Lampleigh, the plaintiff to make all efforts to obtain
pardon for him from the King. The plaintiff made his efforts to secure
the pardon, going from one place to another, at his own expense. n
consideration for these efforts the defendant promised to pay 00
pounds to the plaintiff. The question was, whether the plaintiff
Had a legal right to recover this amount. t was held that the plaintiff
had a right to enforce the promise and recover the said amount
because for this promise, consideration in the form of efforts by the
plaintiff to obtain the pardon, had been there at the earlier request of
the defendant.
26
;2) ecvtea Or Pre.evt Cov.iaeratiov
xecuted consideration is there when one of the parties to the
contract has performed his part of the promise, which constitutes
the consideration for the promise by the other side. Performance
of the promise by the other side is the only thing now to be done.
For example, a advertises an offer of reward of Rs. 00/- to any
one who finds out his lost dog and brings the same to him. B
finds out the lost dog and brings the same to him. When B did
his part of the job that amounted to both the acceptance of the
offer, which results in a binding contract under which A is bound
to pay Rs. 00/- to B, and also simultaneously giving
consideration for the contract. The contract is case is said to be
executed"
xecuted consideration may be distinguished from past
consideration. n case of executed consideration, the
consideration is provided simultaneously along with the making
of the contract. n such a case at the time of providing of the
consideration the promise is non-existent.
2
;) ecvtor, or fvtvre cov.iaeratiov
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. For example, A agrees to
supply certain goods to B, and B agrees to pay for
them at a future date, this is a case of Executory
consideration.
28
;1) 1bere .bovta be .ove .ct, .b.tivevce or
rovi.e
According to the definition of consideration
contained in 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 consideration for the promise.
29
Cov.iaeratiov veea vot be aaeqvate
A contract which is supported by consideration is
valid irrespective of the fact that the consideration is
inadequate. According to Explanation 2 section 25 :
"An agreement to which the consent of the promisor
is freely given is not void merely because the
consideration is inadequate ; but the inadequacy of
the consideration may be taken into account by
Court in determining the question whether the
consent of the promisor was freely given.
30
The parties are free to make any contract of their choice. f, with
their free consent, they strike a bargain where the consideration
is too high or too little, the courts will not go into the question of
adequacy or inadequacy of consideration. The adequacy of the
consideration is for the parties to consider at the time of making
the agreement, not for the court when it is sought to be enforced.
For example, A agrees to sell a horse worth Rs. ,000 for Rs.
0. A's consent to the agreement was freely given. The
agreement is a contract notwithstanding the inadequacy of the
consideration.
Although inadequacy of consideration by itself is not a ground for
treating the contract as valid but it may be a factor which the
court may take into consideration to know whether the consent of
a party was free or not. For example, A agrees to sell a horse
worth Rs. ,000 for Rs. 0. A denies that his consent to the
agreement was freely given. The adequacy of the consideration
is a fact which the Court should take into account in considering
whether or not A's consent was freely given.
31
Cov.iaeratiov vv.t be reat
Although it is not necessary that consideration should be
adequate, it is, however, necessary that it should be real and
should not be unsubstantial. Promise not to bore the promisor is
not enough to constitute consideration. In white Vs. BIuett
(1853) a son used to complain to his father that his brothers had
been given more property than him. The father promised that he
would release the son from a debt if the latter promised stopped
complaining. After the father's death an action was brought by
the executors to recover the debt. t was held that the promise by
the son not to bore his father with complaints in future did not
constitute good consideration for the father's promise to release
him, and, therefore, the son continued to be liable for the debt.
32
Perforvavce of av ei.tivg avt, i. vo
cov.iaeratiov
n order to constitute proper consideration there
should be a promise to do something more than
what a person is already bound to do. Doing of
something what a person is already legally bound to
do is no consideration.
In CoIIins Vs. Godefry (1831) the plaintiff
received a subpoena to give evidence in a case.
Thereafter the defendant promised to pay to the
plaintiff some money for the trouble which was to be
taken by him in appearing in that case. t was held
that the plaintiff having received the subpoena was
already under a public duty to give evidence, and
therefore, the promise by the defendant to pay did
not constitute consideration for the promise.
33
Provi.e to erforv av atreaa, ei.tivg covtractvat
avt,
f the plaintiff is already bound to perform a
particular contractual duty owed to the defendant,
defendant's promise to pay something additional for
the same promise is no consideration. In StiIk Vs.
Myrick(1809) Two sailors having deserted in the
course of a voyage, the captain of the ship promised
to distribute the wages of those two sailors amongst
the other members of the crew if they would work
the ship home. t was held that the members of the
crew being already duty bound to work the ship
home, there was no consideration to pay the
additional amount and hence the promise to pay
that amount could not be enforced.
34
Perforvavce of av ei.tivg avt, orea to a tbira
art,
Whether performance of an existing duty towards a
third party constitutes consideration for a promise or
not came for consideration in the case of ShadweII
Vs. ShadweII (1860) The plaintiff had already
promised to marry one Miss Nicholl. The plaintiff's
uncle wrote a letter to the plaintiff as under :
" am glad to hear of your intended marriage with
Ellen Nicholl ; and, as promised to assist you at
starting, am happy to tell you that will pay to you
50 pounds yearly during my life or until your annual
income derived from your profession of a Chancery
barrister shall amount to six thousand guineas, of
which your own admission shall be the only
evidence that shall receive or require
35
Thereafter the plaintiff married Miss Nicholl. He
could not earn 600 guineas from his profession but
no annuity was paid by his uncle to him. After his
uncle's death he brought an action against his
executors to recover the amount promised to be
paid by his uncle to him. t was decided by a
majority that the promise was enforceable as it was
supported by consideration. Consideration in this
case being a benefit to the uncle as marriage of a
near relative could be of interest to him, and also
detriment to the plaintiff as he might have incurred
pecuniary liabilities on the faith of the promise.
36
Provi.e to a, te.. avovvt tbav ave
The question which sometimes arises is that : f
am bound to pay you Rs. ,000 and if pay or
promise to pay you Rs. 500 instead and you agree
to the same, can this promise to treat the payment
of lesser amount in lieu of the whole amount bind
the parties ?
ngIish Law --- The RuIe in PinneI's Case
According to English law such an agreement is not
binding because there is no consideration for the
same. This rule was laid down in PinneI's case.
3
The facts of this case are as follows : A sum of 8
pounds and 0 shillings was due to be paid on
November , 600 on the basis of a bond
executed by Cole in favour of Pinnel. On October ,
600 Cole paid 5 pounds , 2 shillings , and 6
pennies to Pinel, and Pinnel accepted this smaller
amount in full payment of the original debt.
Subsequently Pinnel brought an action against Cole
to enforce the payment of the full amount on the
basis of the bond. t was held that he was entitled to
succeed, on the ground that mere partial
performance of the original contract would not
discharge the original contract. t was, however,
stated that the original debt could be discharged
only by introduction of a new element in the contract
at the creditor's request e.g. tender of a chattel in
lieu of cash, or payment at a fresh place or at an
earlier date. The rule laid down is as under :
38
"Payment of a lesser sum on a day in satisfaction of
a greater sum cannot be any satisfaction for the
whole, because it appears to the judges that by no
possibility can a lesser sum be a satisfaction to the
plaintiff for a greater sum. But the gift of a horse,
hawk or robe, etc. in satisfaction is good. For it shall
be intended that a horse, hawk or robe, etc. might
be more beneficial to the plaintiff than the money in
respect of some circumstances, or otherwise the
plaintiff would not have accepted it in satisfaction..
The payment and acceptance of parcel before the
day in satgisfaction of the whole would be a good
satisfaction in regard of circumstances of time; for
pre-adventure parcel of it before the day would be
more beneficial to him than the whole at the day,
and the value of the satisfaction is not material
39
'ariov. ecetiov. to tbe rvte iv Pivvet`. ca.e bare beev recogvi.ea
iv vgtava, rbicb are a. fottor. :
Pa,vevt iv /iva :
t was held in Pinnel's case itself that "the gift of a
horse, hawk or robe, etc. in satisfaction (of a claim
for money) is good. For it shall be intended that a
horse, hawk, or robe, etc. might be more beneficial
to the plaintiff than the money in respect of some
circumstance, or otherwise the plaintiff would not
have accepted it i9n satisfaction.
hen the promise is made to deIiver some chatteI in
Iieu of a sum due, the promise is vaIid even if the
chatteI is worth a smaIIer sum than the amount due.
40
2 Pa,vevt before tbe ave aate :
Another exception, which has been recognised in
Pinnel's case is the payment and acceptance of the
smaller sum of money than originally due in
satisfaction of the whole, before the payment is due.
41
Part a,vevt b, a tbira art, :
Payment of a part of the sum due by a third party
has been recognised to be enough to discharge the
whole of the debt. f one party has accepted part
payment from a third party he cannot subsequently
sue for the balance of the amount.
The reason for such a discharge has been
explai9ned by Willes J. in Cook Vs. Lister (1863)
"f a stranger pays a part of the debt in discharge of
the whole, the debt is gone, because it would be a
fraud on the stranger to proceed. So, in the case of
a composition made with a body of creditors, the
assent to receive the composition discharges the
debt, because otherwise fraud would be committed
against the rest of the creditors.
42
1 Covo.itiov ritb tbe creaitor. :
A compromise between the debtors and his
creditors, according to which the creditors agree to
be satisfied with a certain percentage of the amount
due in satisfaction of the whole debt, has been
recognised to be valid contract. The reason behind
this exception appears to be "that no creditor will be
allowed to go behind the composition agreement, to
the prejudice either of the other creditors or of the
debtor himself, because this would be a fraud upon
all the parties concerned.
Thus, an agreement between a debtor and a single
creditor for payment of lesser amount than due will
come under the ban in Pinnel's case but an
agreement between a debtor and his creditors will
come under this exception.
43
Doctrive of Provi..or, .toet :
This is an equitabIe estoppeI preventing a person from denying what
he asserted earlier. The doctrine was invoked by Denning J. in
CentraI London Property Trust Vs. High Trees House, Ltd. (1947)
The facts of the case are:
The plaintiffs leased a block of flats to the defendants in 937 for 99
years on a ground rent of 2,500 pounds. n January 940 because of
wartime conditions the plaintiffs could not let many of the flats, and
because of these conditions they agreed in writing to reduce the rent of
the defendant's flats to ,250 pounds. n 945 the situation became
normal and all the flats were let again but the defendants continued to
pay the reduced rent. The plaintiffs brought an action against the
defendants to recover full original rent for the last two quarters of 945
as well as in future. t was held that the intention of the parties was that
the reduction of the rent was a temporary measure until the flats could
be fully let, the plaintiffs were therefore entitled to full rent as claimed. t
was also stated by Denning J. that had an action been brought to claim
full rent between 940 to first two quarters of 945. the action would
have failed because of the estoppel against the plaintiffs due to their
agreement to accept lesser amount.
44
vaiav ar
n ndia promisee may accept in satisfaction of the
whole debt an amount smaller than that. No
consideration is needed for such a promise. The
law on this point is stated in Section 63, which is as
under :-
"Every promisee may dispense with or remit, wholly
or in part, the performance of the promise made to
him, or may extend the time for such performance,
or may accept instead of it any satisfaction
which he thinks fit."
45
The position is further explained by the following illustration :
() A owes B 5,000. A pays to B , and B accepts, in satisfaction of
the whole debt, 2,000 rupees paid at the time and place at which 5,000
rupees were payable. The whole debt is discharged.
(2) A owes B 5,000 rupees. C pays to B ,000 rupees, and B
accepts them in satisfaction of claim on A. This payment is a
discharge of the whole claim.
(3) A owes B , under a contract, a sum of money, the amount of which
has not been ascertained . A without ascertaining the amount gives to
B, and B, in satisfaction thereof, accepts the sum of 2,000 rupees.
This is a discharge of the whole debt, whatever may be its amount.
(4) A owes B 2,000 rupees, and is also indebted to other creditors. A
makes an arrangement with his other creditors, including B, to pay
them compensation of eight annas in a rupee (.e. 50%) upon their
respective demands. Payment to B of 000 rupees is a discharge of
B's demand..
t may be noted here that the part payment discharges the debtor of the
whole claim, whether the payment is made by the debtor himself as in
illustration () above, or by a third party, as in illustration (2) above.
46
cetiov. rbev agreevevt ritbovt
cov.iaeratiov i. ratia
Section 25, as a general rule declares, that an agreement without
consideration is void. The section, however, mentions three exceptions,
when there is no need of any consideration for the validity of the contract.
The provision is as under :
25. An agreement made without consideration is void unless
() t is expressed in writing and registered under the law for the time
being in force for registration of documents and is made on account of
natural love and affection between parties standing in a near relation to
each other : or unless
(2) t is a promise to compensate , wholly or in part, a person who has
voluntarily done something for the promisor, or something which the
promisor was legally compellable to do ; or unless
(3) t is a promise, made in writing and signed by the person to be
charged therewith, or by his agent generally or specifically authorised in
that behalf, to pay wholly or in part a debt of which the creditor might
have enforced payment but for the law for the limitations of suits.
n any of these cases, such an agreement is a contract.
4
;) Provi.e ave to vatvrat tore ava affectiov :
When the promise is made in favour of a near relation on account of
natural love and affection, the same is valid even though there was no
consideration for such a promise. The following requirements have got
to be satisfied in order that the case is covered under this exception.
. The parties to the agreement must be standing in a near relationship to
each other.
2. The promise should be made by one party out of natural love and
affection for the other.
3. The promise should be in writing, and
4. The agreement is registered.
The parties should be nearly related to one another in such an
agreement. What is near relationship has neither been defined in the
Act, nor in any judicial pronouncement. But from the various decided
cases it appears that it will cover blood relations or those related
through marriage, but would not include those relations which are not
"near, but only remotely entitled to inherit.
48
"Natural love and affection between the parties so nearly related
is also needed. f one brother, although not legally bound to do
so, transfers half of his property in favour of another brother, so
that they have cordial relations, that is deemed to have been
done out of natural love and affection, and such an agreement is
binding. (Bhiva Vs. Shivaram) 1899
In RajIucky Dabee Vs. Bhootnath Mookerjee (1900) it has
been held that relations between the two parties does not
necessarily imply natural love and affection between them. n
this case after lot of disagreements and quarrels between a
Hindu husband and his wife they decided to live apart. At this
stage the husband executed a registered document in favour of
the wife whereby he agreed to pay for her separate residence
and maintenance. n that agreement mention was also made
about quarrels and disagreements between the two. t was held
that from the recitals in the document it was apparent that the
document had been executed not because of natural love and
affection between the parties but because of the absence of it,
and therefore the wife was not entitled to recover the sums
mentioned in the document.
t is further necessary that the agreement should be in writing
and registered under the law relating to registration of documents
49
;2) Covev.atiov for a.t rotvvtar, .errice. :
When something has been done "at the desire of
the promisor, that constitutes a good consideration
in respect of a subsequent promise to compensate
for what has already been done. The second
exception to Section 25 covers "cases where a
person without the knowledge of the promisor, or
otherwise than at his request does the latter some
service, and the promisor undertakes to
recompense him for it. The promise to compensate,
though without consideration, is binding because of
this exception. The exception also covers a
situation where the promise is for doing something
voluntarily "which the promisor was legally
compellable to do.
50
Thus, when A finds B's purse and gives it to him
and then B promises to pay A Rs. 50, or, A
supports B's infant son and B promises to pay
A's expenses in so doing, there is valid contract in
each case although the promisor's act was a
voluntary one.
The exception covers situations where the service is
rendered voluntarily and without promisor's
knowledge. t is also necessary that the service
must have rendered to the promisor and nobody
else. t is further necessary that at the time of doing
of the act the promisor must have been competent
to contract..
51
;) Provi.e to a, a tive barrea aebt
Another situation when an agreement is a valid
contract even without any consideration is a promise
to pay a time-barred debt. Section 25 (3) requires
the following essentials to be satisfied in such a
case.
. The promise must be to pay wholly or in part a time-
barred debt, i.e. a debt of which the creditor might
have enforced payment but for the law for the
limitation of suits.
2. The promise must be in writing and signed by the
person to be charged therewith, or his duly
authorised agent.
52
t is necessary that the debt must be one of which the creditor
might have enforced payment but for the law for limitation of
suits. t, therefore, does not cover such debts which are un-
enforceable for some other reasons. Thus if an insolvent debtor
has been discharged from payment under the insolvency law a
subsequent promise by him to pay that debt cannot be enforced
unless there is a fresh consideration for the same.
Similarly, if the payment of the debt cannot be enforced because
the debt was contracted by a person during his minority, the
same is not now enforceable if, on attaining majority, a promise
is made to pay the same, because a minor's agreement which is
void is incapable of being validated by ratification. t has been
held in Arumugan Vs. Duraisinga (1914) a promissory note
to pay the sum received minority is not enforceable.
53
Debt ave b, rbov .
In Pestonji Vs. Bai Meherbai (1928) the Bombay High Court
has expressed the view that under this exception the promise
should be to pay time-barred debt due from the promisor, and not
a promise to pay time-barred debts due from other persons.
Section 25 (3), it may be further noted, permits a promise to pay
wholly or in part a time barred debt. f a person promises to pay
a portion of a barr4ed debt, he can only be sued for that portion
alone and not for the whole debt. f, however, the promise to pay
the whole debt is there then the whole of the amount can be
claimed. A owes B Rs. ,000, but the debt is barred by
limitation Act. A signs a written promise to pay B Rs. 500 on
account of the debt. &nder this contract A is bound to pay Rs.
500.
54
1bere .bovta be ere.. rovi.e
The promise to pay the time-barred debt 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. t has been held in Debi Prasad Vs. Bhagwati
Prasad (1943) that when the acknowledgement (of the time
barred debt) is coupled with an agreement to pay interest, it
cannot be regarded as a mere acknowledgement and it should
be regarded as an agreement with a promise to pay (the debt)
within the meaning of Section 25 (3). n Appa Rao Vs.
Suryaprakasa Rao (1900) the defendant wrote a letter duly
signed by him to the plaintiff after the debt had become time
barred mentioning the periods for which the rents were due was
held that the document contained the ingredients mentioned in
Section 25 (3) and the defendant was entitled to enforce his
claim.