CONSIDERATION

DEFINITION

Consideration means an advantage or benefit moving from one party to other. In simple words, it means something in return. Agreement is legally enforceable only when parties to the contract give and get something. According to section 25 of the I.C. Act, an agreement without consideration is void. But this rule is subject to some exceptions. Consideration need not necessarily be in cash or kind. It may be an act or abstinence, or promise to do or not to do something. It may be past, present or future. But it must be real and lawful. Consideration is a technical term used in the sense of quid pro quo (the giving of one thing of value for another thing of value, i.e. something in return.)

Definition:
According to Pollock, Consideration is the price for which the promise of the other is bought, and the promise thus given for value is enforceable. Section 2(d) of the I.C. Act, defines as under: 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 a consideration for the promise.

Examples: 1. if A promisesto sell a car to B for Rs. 76000/-.As consideration is Rs.76000/wereas Bs consideration is car. 2. A promises B not to file a suit against him if he pays him Rs.5000/-. The abstinence of A is the consideration for Bs payment.

LEGAL RULES AS TO CONSIDERATION:

It must move at the desire of the promisor or his request: If it is done at the request of the third party or without the desire of the promisor, it will not be a good consideration. E.g. A saves Bs goods from fire without being asked to do so. A can not demand payment for his service. Case: Durga Prasad V. Baldeo- (1880) 3 All. 221 Facts: B spent some money on the improvement of a market at the desire of the Collector of the district. In consideration of this D, who was using the market, promised to pay some money to B. Held- the agreement was void being without consideration.
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LEGAL RULES AS TO CONSIDERATION

An act done at the desire of the promisor, furnishes a good consideration for his promise even though it is of no personal significance or benefit to him. Case: Kedar Nath v. Gorie Mohamed-1886 ILR 14 Cal. 64 Facts: Decided to erect town hall at Howrah- by public subscription- D subscribed and agreed to pay Rs. 100/- and P, on the faith of the promised subscriptions, entered into a contract with the contractor for the purpose of building the hallD failed to pay- contended that there was no considerationheld-he was liable. 2. It may move from the promisee or any other person: Under the English law, consideration must move from the promisee only. But under Indian law, it may move from the promisee or any other person, i.e. even a stranger.
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LEGAL RULES AS TO CONSIDERATION

Case: Chinanayya v. Ramayya- (1882) 4 Mad. 137

Facts: Old lady gifted property to her daughter D- under the direction that she should pay her aunt P (sister of the old lady) a certain sum of money annually- same day D entered into an agreement with P to pay her the agreed amount- later D refused to pay the amount on the ground that no consideration. Held- P was entitled to maintain suit as consideration had moved from the old lady, i.e. sister of P. 3. It may be past, present of future: Past consideration- When consideration for a present promise was given by a party in the past. E.g. A renders some service to B at latters desire. After a month, B promises to compensate A for the services rendered to him. It is past consideration.

LEGAL RULES AS TO CONSIDERATION

Present of executed consideration: When consideration is given simultaneously with promise, i.e. a the time of promise, it is said to be present consideration. E.g.- A receives Rs. 5000/- for which he promises to deliver certain goods to B. Future or executory consideration: When consideration from one party to the other is to pass subsequently to the making of the contract, it is future or executory consideration. E.g.- D promises to deliver certain goods to P after a week- P promises to pay the price after a month. 4. It may be an act, abstinence or forbearance or a return promise: A person agrees not to sue other-comprise of a disputed claim- composition with creditors.

LEGAL RULES AS TO CONSIDERATION

5. It need not be adequate but must be of some value in eyes of law: Something in return need not necessarily be equal in value to something given. The law simply provides that a contract should be supported by consideration. But it must be of some value in the eye of law. Explanation 2 to Section 25 deals with this matter. E.g. A agrees to sell his horse worth Rs. 30,000/- only for Rs. 2,000/- to B. As consent to agreement is freely given. This is a contract notwithstanding the inadequacy of consideration. 6. It must be real and not illusory, impossible or uncertain: It must be real and of some value in the eye of law. There is no real consideration in the following cases. (i) Physical impossibility: A promises to put life into the body Bs dead wife should B pay him Rs.10,000/-.
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LEGAL RULES AS TO CONSIDERATION

(b) Legal impossibility: A owes Rs. 10,000/- to B. He promises to pay Rs. 500/- to C, the servant of B, who in turn promises to discharge A from the debt. (c) Uncertain consideration: A engages B for doing a certain work and promises to pay a reasonable sum. There is no recognized method of ascertaining the reasonable remuneration. Here consideration is uncertain. 7. It must be something which the promisor is not already bound to do either by general law or under an existing contract. Case:Ramachandra Chintaman vs. Kalu Raju-(1877) 2 Bom.362 Facts: Promise to pay to the Vakil an additional sum if the suit was successful- Held-promise was void for want of consideration. Because the Vakil was under a pre-existing contractual obligation to render the best of his services under the original contract.
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LEGAL RULES AS TO CONSIDERATION

8. It must not be illegal, immoral or opposed to public policy. Section 23 of I.C. Act.

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EXCEPTIONS TO THE RULE NO CONSIDERATION, NO CONTRACT: SECTION 25 OF I.C. ACT.

The general rule is ex nudo pacto non oritur actio, i.e. an agreement made without consideration is void (Section 25 of I.C. Act). But there are some exceptions to this rule under sections 25, 63 and 185 of I.C. Act. 1. Natural love and affection: [Section 25 (1)] A written and registered agreement based on natural love and affection between near relatives is enforceable even if there is no consideration. E.g. F, for natural love and affection, promises to give his son S, Rs. 10,000/-. F puts his promise to S into writing and registers it. This is a contract.

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EXCEPTIONS TO THE RULE NO CONSIDERATION, NO CONTRACT

Case: Rajlukhy v. Bhootnath-(1900)-Hindu husband promised to pay compensation to his wife- after quarrel and disagreementheld agreement was void. 2. Compensation for past voluntary services: [Sec. 25 (2)] A promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, is enforceable. E.g. A finds Bs purse and gives it to him. B promises to A to give Rs. 50/-. This is a contract. 3. Promise to pay a Time-barred debt: [Sec. 25 (3) ]- 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 or by his agent generally or specially authorized in that behalf. The promise may be to pay the whole or any part of the debt.
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EXCEPTIONS TO THE RULE NO CONSIDERATION, NO CONTRACT

The debt must be lawful one. 4. Completed Gift: (Explanation 1 to section 25) The rule no consideration, no contract is not applicable to completed gifts. 5. Agency: [section 185 of I.C. Act)- No consideration is necessary to create an agency. 6. Section 63 of I.C. Act: Promisee may accept any satisfaction instead of the performance of the proposal which he thinks fit.

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