CONSIDERATION

Section 2 (d): 1. When at the desire of the promisor, 2. the promisee or any other person, 3. Has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing something, 4. such act or abstinence or promise is called Consideration for the promise.

Pullock: consideration is the price for which the

promise of other is bought, and the promise thus given for value is enforceable

Currie v. Misa: A valuable consideration in the sense of the law, may consists either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by another
Consideration is the price for the promise, a return or quid pro quo, something of value received by the Promisee as inducement of the promise.

Gratuitous services A sees B drowning and saves his life. A cannot demand payment for his services as it is a gratuitous service. B had not asked for his service. The repair of a mosque was in progress. As the work proceeded more money was required and to raise this amount, subscriptions were invited. The defendant put himself on the subscription list for Rs. 10000. to recover this sum a suit was filed. Decide?

Essentials of valid consideration

1.

At the desire of the promisor: may be express or implied. It should be at the request of the promisor. The act or abstinence of the promisee should benefit the promisor. A voluntary gratuitous service rendered by the promisee is not a consideration enforceable at law.

Kedar Nath v. Gorie Mohamed:

A town hall was decided to be erected at Howrah provided sufficient subscription could be got together for the purpose. Commissioners of Howrah Municipality set out to work to obtain necessary funds by public subscription. The defendant was a subscriber to this fund for RS. 100, having signed his name in the subscription book for that amount. On the faith of the promised subscriptions, the plaintiff entered into a contract with a contractor. But the defendant failed to pay the amount. Decide?

Doctrine of Promissory Estoppel

The party asserting the estoppel must have acted upon the assurance given to him. He must have relied upon the representation made to him. It means that the party has changed or altered his position by relying on the assurance or representation. The alteration of his position by the other is the only requirement of this doctrine. It is not necessary to prove any damage, detriment or prejudice to the party asserting estoppel.

2. The promisee or any other person:

As long as there is consideration for the promise, it is immaterial who furnished it. It may move from the promisee or from any other person.

Privity of contract and consideration

Privity of contract is a part of Indian law privity of consideration is not. In English law, privity of consideration and privity of contract applies DUTTON V. POOLE was the law earlier

A had a daughter to get married. He wished to sell his wood upon intending to arrange for her marriage. B, his son promised to pay the daughter, 1000 pounds, if the father forbear to sell the wood at his request. The father did so. The daughter and her husband sued B for the promised amount. The promise was between A and B. B had promised and A by not selling had paid the consideration. THE DAUGTER WAS PRIVY OR STRANGER TO THE CONTRACT. But the object of the agreement was to provide a portion to the daughter. Held B was liable as there was an implied promise between the son and daughter out of which the daughter was the beneficiary.

Tweedle v. Atkinson

The plaintiff was to marry Gs daughter. In consideration for this promise, both G and Plaintiffs father, each had agreed upon to pay certain sum of money to the plaintiff. G failed to pay the money and plaintiff sued his executors. Though the contract was for plaintiffs benefit , his plea was not allowed as the contract was between his father and G. it was held that the Plaintiff was a privy to the contract and he had no right to sue G. This case laid the foundation for the doctrine of privity

of contract. This means that the contract is a contract between the parties only and no third person can sue upon it even if it is avowedly made for his benefit.

In India the doctrine is applicable but consideration can be moved from the promisee or any other person.
Chinnayya v. Ramayya A an old lady, by deed of gift, made over certain landed property to defendant her daughter. By the terms of the deed, which was registered, it was stipulated that an annuity of Rs. 653 should be paid every year to the plaintiff, who was the sister of the old woman. The defendant on the same day executed an Iqrarnama in plaintiffs favour, promising to give effect to the stipulation. It was not paid and the plaintiff sued the defendant.

The defendants promise was given to the plaintiff by means of iqrarnama, but consideration was moved by defendants sister. Court held that the consideration can be from any other person as per the request of the promisor. Also the plaintiff was receiving benefit from her sister and the deed between A and the defendant, had put her in loss. Her loss itself was declared as the consideration for the promise of the plaintiff.

Exceptions to the Privity of contract

1.

2.

3. 4.

Beneficiaries under Trust or Charge or other Arrangements Marriage settlement, Partition or other family arrangements Acknowledgement or estoppel Covenant along with the land runs with the land

1.

Khwaja Muhammed Khan v. Hussaini Begum

A executed an agreement with Bs father that in consideration of Bs marriage with his son (both being minors at the time) A would pay B Rs. 500 a month in perpetuity for the betel leaf expenses and charged certain properties with the payment, with the power to B to enforce it. The husband and wife separated on account of a quarrel and B bought the suit against A for the recovery of arrears of this annuity. The decree went for B. B though not a party to the contract was entitled to enforce it because she was the beneficiary under the charge.

2. Daropati v. Jaspat Rai

As wife B left him because of cruelty. A entered into an agreement with Bs father, promising to treat her properly failing which he would pay her monthly allowance and provide her a dwelling. A continued to treat B cruelly. B was entitled to enforce the promise between A AND HER FATHER.

Where by the terms of a contract a party is required to make a payment to a third person and he acknowledges it to the third person a binding obligation is there by incurred to him

A sold his house to B under a registered deed and left a part of the sale price in his hands desiring him to pay this amount to C, his creditor. B made part payments to C informing him that they were out of sale price left with him and the balance would be paid immediately. B failed to pay the remaining amount and C sued for the same. Held B was liable because he had acknowledged the debt and was estopped from denying the payment to C.

A person who purchases a land with the notice that the owner of the land is bound by certain duties created by an agreement or covenant affecting the land , shall be bound by them although he is not a party to the agreement.

Consideration may be past, present or future

If the consideration for the present promise was given in the past, it is past consideration. section 25 (2): A supports Bs infant son. B promises to pay As expenses in doing so later on. This is a binding contract. A saves B from drowning. B promises certain amount for the service later on. It is a binding contract. When the consideration is done along with the promise it is present. A promises to buy Bs land. He pays 50000 in consideration for the promise. It is a binding contract A promise for the promise is future consideration. A promises to marry Bs daughter. B agrees to pay 5 lakhs in cash. It is a binding contract.

Consideration need not be adequate but must be real and lawful

A agrees to sell B his house worth 1000000 for 10000. it is a binding contract. The inadequacy of consideration will be looked on as evidence of not obtaining free consent of the party. A agrees to pay B 10000 upon getting him a public job. The contract fails for want of lawful consideration.

But consideration should not be

To do something physically impossible. E.g. to make a dead man alive, to find out a treasure by magic etc. To do something legally impossible. E.g. to abduct a person, to compel a lady to marry a person etc. To do something very absurd- e.g. to pay a remuneration as shall be deemed right. To do something illusory or deceptivesomething which the promisor is already bound to do. E.g. A promises to pay money for a police officer for investigating a crime. It is not a valid consideration.

Ex nudo pacto non oritur actio

An agreement without a consideration is not an agreement. It is nudum pactum or naked promise.

Exceptions for consideration section 25

1. 2. 3. 4. 5.

Section 25 (1): natural love and affection. An agreement; In writing Registered Made on account of natural love and affection between parties Standing in near relation to each other Is a valid agreement even if without consideration.

Rajlukhy Dabee v. Bhootnath Mookerji

The defendant promised to pay his wife a fixed sum of money every month for her separate residence and maintenance. The agreement was a registered document which mentioned certain quarrels and disagreements between the two. This is not an agreement falling under the first exception as there was no love and affection between the parties.

Section 25(2) past voluntary services

A promise to compensate wholly or in part, a person who has voluntarily done something for the promisor, is enforceable, though without consideration. A finds Bs purse and gives it to him. B promises to give A 500 rupees. This is a valid contract, thought without consideration.

Section 25(3) time barred debt

1.

2.
3.

4. 5.

The promise should be in writing It should be signed by the promisor or his agent, generally or authorized on his behalf It should be a time barred debt- i.e. of which the creditor might have enforced payment but for the law for limitation of suits The promise may be to pay in whole or part A the legal heir of deceased, admits in the court that he was willing to pay B the principal time barred amount. Held bound by this promise.

Explanation I to section 25 gifts actually made

A gift made by the donor to the donee is a valid one and cannot be declared invalid on the basis of absence of consideration. A transfers property in Bs name as per the Transfer of Property Act. He cannot later claim back the property on the basis of want of consideration.

Explanation II of section 25 inadequacy of consideration

Inadequacy of consideration is a point which decides the free consent of the parties but not a valid ground to set aside the contractual obligation. Agency section 185 Guarantee section 127 Remission section 63- no consideration is required for a contract to receive less than what is due