Consideratio

nNatasha Martin
Section 25
An agreement without consideration
is void. (Section 25)

1.Money for Goods and Services

2.Service for Service
3.Forbearance - Settlement agreements
4.Modification of existing contract
5.Employment contracts
Functions
• English Law - Only bargains should be
enforced
• Consideration is the reason to make
the bargain binding
• Reflects the contents and
circumstances of the promise
• Evidential/ formal function
• Requirement to display the deliberate
intent to contract
• Prevent accidental binding on impulse
• Nudum factum - does not create legal
obligation
Rann v.
Hughes
(1778)
Case law
Lord Chief Bardon Skynner

It is undoubtedly true that every

man is by the law of nature
bound to fulfill his
engagements. It is equally true
that the law of the country
supplies no means, not affords
any remedy to compel the
performance of an agreement
made without sufficient
consideration.
 ENGLISH LAW

Consideratio 16th Century - Consideration becomes crucial factor

• Blackstone: Recompense given by the party contracting

n Defined to the other

• Pollock: Consideration is the price for which the promise
of the other is bought.
• Justice Patterson in Thomas v. Thomas (1842):
Consideration means something which is of value in the eye of
the law... It may be some benefit to the plaintiff or some
detriment to the defendant.
19th Century - Plaintiff may establish consideration in 2 ways
1.Prove he had a benefit upon the defendant in return for which
the defendants promise was given
2.He himself had incurred a detriment for which the promise was
to compensate
Idea of reciprocity i.e. benefit or detriment
 Case laws
Lush J. in Currie v. Misa (1875)
A valuable consideration in the sense of the law
may consist in some right, interest, profit or
benefit occurring to the one party or some
forbearance, detriment, loss or responsibility
given, suffered or undertaken by the other.

Dunlop v. Selfridge (1915)

The price for which the promise of the other is
bought would be a preferable definition of
consideration.
Fazaluddin v. Panchu Das (1957)
Price of a promise. a return or Quid Pro Quo,
something of value received by the promisee as
inducement of the promise.
 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 a consideration for the
promise
4 elements
1.Consideration at the desire of the promisor
2.Promisee or any other person (Privity)
3.Act, abstinence or promise (Value)
4.Past, present or executory
AT THE DESIRE OF
THE PROMISOR
 durga prasad v. baldeo
(1880)
FACTS
• Collector asks party A to construct shops in a market
• Party B occupies one shop
• Party B promises Party A to pay commission on sale of articles since
Party A had build the market place
• Party B fails to pay the commission and Party A files a case

JUDGEMENT
• Construction was not at the desire of the promisor
• On instructions of Collection
• Hence, no valid consideration exists
• Defendants not liable to pay
 No significance to
promisor
Kedar Nath v. Gorie Mohamed (1886)
• Proposal to construct Town Hall at Howrah
• Funds by subscription
• Defendant subscribes but doesnt pay
• Held - Engaging contractor and starting
construction is enough consideration though
not significant
 Charitable purpose
whether desire

• Re Soames (1897) - Promise to leave 300

If in exchange of
pounds in will on the basis of which school
promise, something is
was built, executors responsible
done or some
• Hudson Re - Promise to pay debts of
obligation is incurred
Chapel, death after one major payment,
towards the completion
executors not liable since no liability
of the purpose, the
undertaken
same will be
• Kedar Nath v. Gouri Mohanmed (1887)
enforceable.
• Abdul Aziz v. Masum Ali (1914) - Promise
PROMISEE OR ANY
OTHER PERSON
(PRIVITY)
 promisee or any
other
S. 2 (d): As long as there is
consideration, whoever has produced
it

Chinnaya v. Ramaya (1882)

• Old lady granted estate to daughter with
condition to support her brother with
annuity
• Promise with brother to pay annuity
• Annuity not paid, Brother sues daughter
Held - Although not party to contract, can
be enforced since the rule in Indian law
allow promisee or any other person
 privity of consideration
Privity of Contract (which persons can sue and be sued on a
contract)
and Privity of Consideration (which promises should be enforced)
PRIVITY OF CONSIDERATION PRIVITY OF CONTRACT
• Only he can sue on a promise who • Only person who is party to
has paid the price of it the contract can sue
• Plaintiff cannot sue the defendant if
he cannot show any consideration for
the promise moving from him to the
defendant
• No stranger to the consideration can
take advantage of a contract
 example
1.A, B, C have signed an agreement where C
promises A and B to pay A Rs 100, if B carries
out work as desired by C (A cannot sue C, since
no consideration has moved from C to A.)
2.B and C make an agreement whereby B
promises to write a book for C, C promises to
pay consideration to A. (A cannot sue C since he
DUNLOP V. SELFRIDGE
is not privy (1915)
to the contract)
Lord Viscount Haldame “they are but different ways
of saying the same thing”
Sir William Anson
“They may sometimes coincide but not always.. it is not
enough that consideration must be given, it must have been
given by the promisee”
Tweddle v. Atkinson (1861)
• A agrees to get daughter married to
C, who is B’s Son.
• A and B promise each other that they
will pay an amount to C. A fails to do
so.
• Held - C cannot sue for breach, since
he is stranger to the consideration/
contract.
• No stranger to the
consideration/contract can take
advantage of a contract, although
Dunlop v. selfridge (1915)

• Dunlop sells goods to Dew. Agreement to not

sell to others or else make similar
agreement.
• Dew sells to Selfridge and makes similar
agreement.
• Dunlop sues Selfridge
• Held - Not a party to the contract, no
consideration moved, hence cannot sue.
 position in india
• Jamna Das v. Ram Avtar (1911) - Rule of
privity extended to India (Mortgage on
Zamindari, sell land to 3rd party, cannot
sue 3rd party)
• Khwaja Md. Khan v. Hussaini Begum (1910)
- Marriages of minors and guardians, might
lead to injustice, hence not applicable
• M. C. Chacko v. State Bank of Travancore
(1970) - Applicable to India with exceptions
Exceptions
1.Beneficiary under a trust or charge
2.Marriage, Settlement, Partition of other
Family arrangements
3.Acknowledgement, conduct or estoppel
4.Covenants running with Land
Act, Abstinence or
Promise
Consideration must
be of some value
“Something”
Something to be consideration must be of some value in
the eye of the law, that, it must be real. Sham
consideration of apparent value is not suffi cient.

Example
A promises to gift a Rolls Royce to B if he fetches the car
from the garage.

Case law
White v. Bluett (1853)
• Son complains brothers given more property and more
advantages
• Fathers says he will excuse debt if he stops complaining
• Father dies, other sons sue to recover debt, argument
that father has promised to excuse debt
• Held - Not valid consideration
Consideration
need not be
adequate
It is said that the Courts will not make
bargains for the parties and, if a person gets
what has been contracted for, the Court will
not inquire whether it is an equivalent to the
promise, what is given in return. The most
trifl ing detriment or benefi t may suffi ce.

De La Bere v. Pearson (1908) - Investment

advice in newspaper, undischarged bankrupt,
whether suffi cient consideration? Yes,
increase in sales of papers.
Differen
t
When inadequacy by
fraud
Illustration to Section 25
A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies that his
consent to the agreement was freely given. The inadequacy of the
consideration is a fact which the Court should take into account in
considering whether or not A’s consent was freely given.

Party must show that such inadequacy as will involve the conclusion
that he either did not understand what he was about, or was the
victim of some imposition.
 Question of Reality of
Consideration

Forbearanc Existin Legal Duty to Less than

e to sue g duty obligatio 3rd party due
Regarded as valuable
consideration.
Performance of public
duty - summons,
n
Desertion of ship Change in contract on 3rd
party
Change in contract

maintenance
Alliance Bank Ltd. v. Brown
(1864)
Debi Radha Rani v. Ram Dass
Past, present
and executory
Past
Examples
1.Finding a purse
2.Saving from drowning

Re McArdle (1951)
• Number of children entitled to house by
Fathers will
• After mothers death
• One child and wife stay
• Make improvements
• Agreement - pay for improvements
• Mothers death - not all pay
• Held - Past consideration, not valid

Indian Law allows past consideration, as long

as at the desire of the promisor or voluntarily
Future
Consideration
Promise for a promise

A agrees to sell some product for a price

Till performance, the promise is executory
Present
Consideration
Also known as Executed consideration

Examples
General off er for reward on information
Performance of information
Executed consideration

In past, promise is subsequent to the act

In Present, act / performance generates the
contract

Union of India v. Chaman Lal Loona & Co.

(1957)
• No contract is formed unless the act if
performed
Thank You