Consideration

Definition
• According to section 2(d) of the Indian Contract Act “when at the desire of the
promisor, 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.”
• Example:
A offers to sell his car to B for a sum of ` 1,00,000. B accepts the offer. In this
contract,
A is the promisor and it is his desire to sell his car for ` 1,00,000
B is the promisee and on the desire of A he is purchasing the car for ` 1,00,000.
The consideration for A’s promise, is a sum of ` 1,00,000 while consideration for B’s
promise is the car.
Cont….
• ‘Consideration’ means “something in return”, i.e. quid pro quo that is
an essential element to find out the genuine intention of the parties
of the promise to create legal relationship. Consideration is an
essential component of a valid contract. Consideration is the price for
the contract. An agreement without consideration is void and thus
not enforceable by law except under certain circumstances. According
to Sir Frederick Pollock. Consideration is the price for which the
promise of the other is bought, and the promise thus given for value
is enforceable.” An agreement without consideration is a bare
promise and exnudo pacto non aritio actio, i.e., cannot be held to
binding on the parties.
Essentials:
• Something should be done or abstained from doing at the desire of
the promisor only.
• Promisee or any other person has done or abstained from doing
something at the desire of the promisor.
• It can be Past, Present or Future.
• It is not necessary that Consideration must be adequate.
• Consideration must be Real and Not Illusory or Impossible.
• It must be Lawful.
Consideration must proceed at the desire of the Promisor

• An act must have been done at the desire or request of the promisor.
Voluntary acts or acts done at the desire of the third party is not a
consideration in the eyes of law.
• Example: B house is on fire. A rushes to B’s help and later demanded `
10,000 from B. Is A justified in claiming ` 10,000
No, he is not justified as there is no consideration here. It is a voluntary
act of A.
But if A goes to B’s help at B’s request who promises, to give ` 10,000 to
A for the help then B is bound to pay. As the consideration for B is to
get the help from A and consideration for A’s promise is ` 10,000.
Durga Prasad v. Baldeo, 1880
• In this case, on the order of the collector of a town Durga Prasad built
some shops on his own expense in a market. The shopkeepers who
occupied these shops promised to pay to Durga Prasad commission
on their sales. Durga Prasad sued the shopkeepers when he did not
receive the commission. The court held that the promise was not
supported by any consideration as the shops were built on the
collector’s order and not at the request of the shopkeepers. Therefore
there could not be a recovery.
Consideration may move from the promisee or any other
person

• Consideration may proceed from the promisee or any person.

• Privity of Consideration means that although the party is stranger to
consideration as he or she has not paid the consideration, but
someone has paid consideration for the benefit of the beneficiary. So,
the beneficiary may file a suit to execute the contract. (Doctrine of
constructive consideration)
Chinnaya v. Ramayya
• In this case, A, by a deed of gift, made over certain property to her daughter, with a
direction that the daughter should pay an annuity to A’s brother. On the same day the
daughter executed a deed in writing in favour of the brother and agreed to pay the annuity.
After that the daughter declined to fulfil her promise and the brother sued to recover the
amount. The defendant (sister) contended that as there was no consideration from the side
of brother, and that he being the stranger to the consideration had no right to sue. It
was held that it is not necessary that consideration must move from the promisee himself.
Therefore, the brother was entitled to maintain the suit.
• In this case consideration for the defendant’s promise to pay the annuity was the gift of
certain lands by the mother to the defendant. Although in this case consideration is not
moving from the side of the plaintiff i.e., brother but has been paid by the mother for the
benefit of the son. Thus, in this case it was held that it is a valid consideration as section 2(d)
permits that consideration may be moved from the promisee or any other person.
Dutton v. Poole
• In this case, the court observed that the stranger was having very close relations to the
promise. He could, therefore, maintain an action on a contract as a beneficiary. In this
case the father of the defendant wanted to sell some timber trees. The defendant
promised (in consideration that his father would refrain from cutting down the trees)
to pay to his sister Grizil pounds 1000 Grizil (as Mrs. Dutton) with her husband sued
from breach of the promise. It was held that the action was maintainable.
• Analysis: In this case the reason to ignore the doctrine of privity of contract was that
there were very near and affectionate relation between the plaintiff and her father
who was the promisee under the contract. The court was of the opinion that natural
love and affection could constitute consideration. Therefore, the consideration and
promise to the father could extend to the children for there exists natural love and
affection between them. The plaintiff was, no doubt, a stranger to the contract, but
not a stranger to the consideration, she was deemed to have furnished consideration,
so she was held entitled to sue.
Consideration may be past, present or future

• Past consideration:
Past consideration is a promise for a voluntary act done in the past to help the
party who is making promise to pay or to do something subsequently. It means
consideration is promised to pay later for an act done without any promise from
the other party.A promise is said to be given for past consideration when the
promisor’s motivation for making the promise is a past benefit he received that
gave rise to an obligation to make compensation. Earlier past consideration was
no consideration but now it is a good and valid consideration.
• B house is on fire. A rushes to B’s help and saved his life. In a show of gratitude,
B promises to pay A ` 5,00,000 for the help provided by A. In this case, B’s
motivation for making this promise is the past benefit that A provided which
gave rise to the moral obligation to compensate A.
Cont….
• Present or Executed consideration:
When the promisor receives consideration simultaneously with his promise, the consideration is termed
as Present Consideration.
A purchased goods from a shopkeeper of the worth of ` 10,000 A pays money to the shopkeeper
immediately. Consideration is “Present”.
• Difference between Past and Executed Consideration
Past consideration always consists of an act done without any promise But an executed consideration
means an act which has been done in response to a promise
• Future or Executory Consideration:
When a promise is to be executed on a future date it is called executory consideration or future
consideration. In this the promisor makes an offer for a future date and the promisee promises to accept
and execute the contract after that date this is future consideration. In this case both parties move the
consideration to a future date. The liability becomes outstanding on both parties on a future date.
Ruhi promises to sell and deliver a new wristwatch to Rekha after a week. Rekha accepts the offer and
promises to pay after one month of receiving the watch. This is executory or future consideration.
Cont….
• Consideration need not be Adequate
What is important to convert agreement into contract is the presence of the
Consideration, but it is not essential that the consideration should be adequate. It may or
may not be adequate. Consideration should be of some value in the eyes of the law.
A agreed to sell his Mobile worth ` 40,000 for ` 2,000 with his free consent. This is a valid
Contract.
• Explanation 2 to 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 the Court in determining
the question whether the consent of the promisor was freely given.
A agrees to sell a horse worth ` 1,000 for ` 10. A’s consent to the agreement was freely
given. The agreement is a contract notwithstanding the inadequacy of the consideration.
Cont….
• Consideration must be Real and Not Illusory or Impossible

Real consideration means that the consideration should not be physically or legally impossible.
Consideration is not real in the case of physical and legal impossibility or uncertainty.
Physical Impossibility: If a promise is made to do impossible things that are not possible to do
physically, it is not real. For example, A promises to pay B ` 1,00,000 if he will be able to run 200
km in 5 minutes. This is not a valid consideration as it is physically impossible for anybody to do
this.
Legal Impossibility: If a promise is made to do things that are prohibited by law then also it is not
valid consideration. For example, A enters into contract with B that he will pay ` 5,00,000 to B if B
will murder C. This contract cannot be executed as consideration is illegal.
Uncertain Consideration: Consideration must be certain otherwise it is impossible to carry out an
agreement
A dentist says he will charge ` 10,000 or ` 6,000 for his services. This is uncertain consideration
and difficult to carry out because of the uncertainty about the exact amount.
Cont….
• Consideration should be lawful, otherwise the agreement becomes
void. According to the Indian Contract Act consideration is not lawful
in the following situations:
1. When it is made of an act forbidden by law
2. When it causes injury to a person or property of another person.
3. When it is declared as immoral or opposed to public policy.
When a part of the agreement is unlawful the whole agreement will
become void except in those cases when the unlawful part can be
separated from the lawful one
Thank You