DR.

RAM MANOHAR LOHIYA

NATIONAL LAW UNIVERSITY, LUCKNOW
Batch –

CONTRACT ACT – I

project on:

“CONSIDERATION”

Submitted by: Under the Guidance Of:

Enrolment No.: Assistant Professor (Law),
Sec: A Dr. Ram Manohar Lohiya
BA LLB (Hons), Semester-II National Law University, Lucknow
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ACKNOWLEDGMENT

I would like to convey my sincere thanks to my colleagues, who painstakingly reviewed most of
the content Special thanks, are due to our teacher
I am thankful to the seniors for ensuring that the project would be well enough to be presented in
front of others. I also acknowledge the contribution of my friends for general guidance they have
provided. I am also very grateful to the various sources of information, the journals, magazines
and lots of articles which provided me all aspects of information.

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TABLE OF CONTENT

S/No. CONTENTS PAGE

No.
1. INTRODUCTION 4

2. DEFINITION 5

3. REQUIREMENTS 6

4. RELATED CASES 9

5. CONCLUSION 10

6. BIBLIOGRAPHY 11

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INTRODUCTION

Enforcing any legal contract requires it to have an element of consideration included in it. In
simple words, it is nothing but a price that the promisee agrees to pay to the promisor. Now,
this price can be paid as a benefit to the promisor and/or a loss or detriment to the promisee.
The term contract is defined in section 2(h) of the Indian contract act, 1872, as “An
Agreement enforceable by law is a contract.” According to this statement a contract is an
agreement which is enforceable by law. but when does an agreement becomes a contract?

All agreements are contracts if they are made by the free consent of parties competent to
contract, for a lawful consideration and with a lawful object, and are not hereby expressly
declared to be void.1 An agreement without consideration is a bare promise and exnudo pacto
non aritio actio, i.e., cannot be held to binding on the parties. This simply means that an
agreement cannot be termed as a contract until and unless it does not have a consideration in
it. Subject to certain exceptions, an agreement made without consideration is void.
Consideration is a technical term used in the sense of quid pro quo (something in return).
When a party to an agreement promises to do something, he must get ‘something’ in return.
That ‘something’ is defined as a Consideration.2

For example:

A offer to sell his car to B for a sum of Rs. 1,00,000. B accepts the offer. In this contract,

i. A is the promisor and it is his desire to sell his car for Rs. 1,00,000

ii. B is the promisee and on the desire of A he is purchasing the car for Rs. 1,00,000.

The consideration for A’s promise, is a sum of Rs. 1,00,000 while consideration for B’s
promise is the car.

When we say that consideration is abstinence or forbearance it acquires negative tone. It

means one party agree not to do something in lieu of the promise of other party of the
contract. Thus, one party may be able to benefit due to the abstinence of another who refrains
from some gain. A valuable consideration in the sense of the law may consist either in some
1
Contract Act 1872, s 10.
2
Souvik Chatterjee, ‘Consideration Under Indian Contract Act 1872’ (2019) Legal bites
<https://www.legalbites.in/consideration/> accessed 11 February 2019.

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right, interest, forbearance, detriment, loss or responsibility, given, suffered or undertaken by

the other.3

DEFINITION

There are various definitions of consideration that had been given by several scholars and
judges. In the words of Sir Frederick Pollock, “Consideration is the price for which the
promise of the other is brought, and the promise thus given for value is enforceable. But the
most commonly accepted definition is that which was attempted by Lush J in Currie v. Misa:
“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.”4

According to Section 2(d) of the Indian Contract Act, 18725, consideration is defined 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 promises to do or abstain from doing
something, such act or abstinence is called a consideration for the promisee.”

breaking it down for further, understanding and rewriting it as follows:

At the desire of the promisor if the promisee either

 Does something (in the past, present or future) OR

 Abstains from doing something (in the past, present or future)

Then, this act of doing or abstinence is called Consideration.

3
Currie v Misa LR 10 Ex 153; LR 1 App Cas 554.
4
Avatar Singh, Contract & Specific Relief, (twelfth edition, 2019) 103
5
Contract Act 1872, s 2(d).

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REQUIREMENTS

According to Section 2(d) of the Indian Contract Act, 1872, the following
features are essential for a valid consideration:

1. Consideration must proceed at the desire of the Promisor:

The definition in sec. 2(d) clearly emphasizes that an act or abstinence which is to be
a consideration for the promise must be done or promised to be done in accordance
with the desire of the promisor. Consideration can be offered by the promisee or a
third-party only at the request or desire of the promisor. If an action is initiated at the
desire of the third-party or without the desire of the promisor, it is not a consideration.
For example, Peter is going back home from work. On his way, he sees that his
neighbor John’s house is on fire. He immediately arranges for a water hose and
manages to douse the fire. Peter cannot claim any reward for his effort because it was
a voluntary act and was not done at the desire of John (promisor).

2. Consideration may move from the promisee to any other person:

If you look at the definition of consideration according to section 2 (d) of the Indian
Contract Act. 1872, it explicitly states the phrase ‘promisee or any other person…’
This essentially means that in India, consideration may move from the promisee to
any other person. However, it is important to note that there can be a stranger to
consideration but not a stranger to the contract. Consideration may move from the
promisee or even a stranger. But the stranger to the consideration cannot sue until he’s
a party to the contract.
For example, 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 favor of the brother and agreed to pay the
annuity. After that the daughter declined to fulfil her promise, the brother sued to
recover the amount. The defendant (sister) contended that as there was no

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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.6

3. 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.

Present or Executed consideration: When the promisor receives consideration

simultaneously with his promise, the consideration is termed as Present
Consideration.

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.

4. Consideration must be Lawful:

Consideration should be lawful, otherwise the agreement becomes void. According to

section 23 of the Indian Contract Act consideration is not lawful in the following
situations:

6
Venkata Chinnaya Rau vs. Venkataramaya Garu & ors., ILR (1876-82) 4 Mad 137.

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i. When it is made of an act forbidden by law

ii. When it causes injury to a person or property of another person.
iii. When it is declared as immoral or opposed to public policy.7

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.

5. 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.
Example: A agreed to sell his Mobile worth ` 40,000 for ` 2,000 with his free consent.
This is a valid Contract.

6. Consideration must be Real and Not Illusory or Impossible:

Real consideration means that the consideration should not be physically or legally
impossible.
Physical Impossibility: 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.

7
Contract Act 1872, s 23.

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RELATED CASES

1. In Kedarnath Bhattacharji v Gorie Mahomed8, it was thought advisable to

erect a town hall at Howrah provided sufficient subscription could be got together for
the purpose. To this end the 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 for the purpose of building the hall. But the defendant failed to pay the
amount and contended that there was no consideration for his promise.
He was, however, held liable: Persons were asked to subscribe knowing the purpose
for which the money was to be applied, they knew that on the faith of their
subscription an obligation was to be incurred to pay the contractor for the work.

2. In Durga Prasad v Baldeo9, the plaintiff, on the order of the Collector of a town,
built at his own expense, certain shops in a bazar. The shops came to be occupied by
the defendants who, in consideration of the plaintiff having expended money in the
construction, promised to pay him a commission on articles sold through their agency
in the bazar. The plaintiff's action to recover the commission was rejected.

3. In Tweddle v. Atkinson10, the father of the groom and the father of the bride,
agreed that each of them shall pay a sum of money to the boy, and after marriage the
husband should have full power to sue for such sums. After the death of both the
contracting parties the husband sued the executors of the wife’s father upon the above
agreement, but the action was held not to be maintainable because the husband was
not a party to the contract.

8
Kedarnath Bhattacharji v. Gorie Mahomed, (1887) ILR 14 Cal 64.
9
Durga Prasad v Baldeo, 1880 SCC OnLine All 29: ILR (1881) 3 All 221.
10
Tweddle v Atkinson, (1861), 1 B&S 393, 121 ER 762.

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CONCLUSION

Under section 2d of the Indian Contract Act, 1872, the word Consideration is defined.
Consideration could be present, past, or future. And it should only concern parties to the
contract and not third parties. But there is a certain exception present under section 25. It has
3 sub-sections present and is made keeping in mind various situations so that the interest of
the parties to the contract or even the third party to the contract should get compromised.
Further, the consideration need not be adequate, however, it should be valuable, according to
the parties of the contract.

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BIBLIOGRAPHY
 Books
1. Avatar Singh, Contract & Specific Relief, twelfth edition, 2019
2. Pollock & Mulla, The Indian Contract Act,1872, 15th ed

 Websites
1. https://www.legalbites.in/consideration/
2. https://www.taxmann.com/post/blog/consideration-under-the-
indian-contract-act-1872/
3. https://blog.ipleaders.in/consideration-under-the-indian-contract-
act-1872/
4. https://casebrief.fandom.com/wiki/Tweddle_v_Atkinson

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