In Indian contract law, the doctrine of consideration is pivotal, encompassing past, present, and future considerations. Understanding these facets is essential for law students to grasp the enforceability of agreements under the Indian Contract Act, 1872.

MEANING AND DEFINITION OF CONSIDERATION

Consideration refers to the benefit or detriment exchanged between parties in a contract. Section 2(d) of the Indian Contract Act, 1872, defines consideration as:

“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 or promise is called a consideration for the promise.”

This definition highlights that consideration involves an act, forbearance, or promise by the promisee or any other person, executed at the promisor’s request.

TYPES OF CONSIDERATION

Consideration in Indian contract law is categorized into three types:

1. Past Consideration: An act or forbearance that has already been done before the promise is made.
2. Present (Executed) Consideration: An act or forbearance that is done simultaneously with the promise.
3. Future (Executory) Consideration: An act or forbearance that is to be done after the promise is made.

PAST CONSIDERATION

In Indian law, past consideration is valid and enforceable. This means that a promise made in return for an act already performed at the promisor’s request constitutes good consideration.

For instance, if A helps B during an emergency, and later B promises to compensate A for his assistance, A’s past act serves as valid consideration for B’s promise.

This principle is enshrined in Section 2(d) of the Indian Contract Act, 1872, which acknowledges past consideration as valid. In contrast, under English law, past consideration is generally not recognized as valid.

PRESENT (EXECUTED) CONSIDERATION

Present consideration involves an act or forbearance that occurs simultaneously with the promise.

For example, when A buys goods from B and pays for them immediately upon delivery, the payment and delivery happen concurrently, constituting present consideration.

FUTURE (EXECUTORY) CONSIDERATION

Future consideration refers to a promise to perform an act or abstain from doing something in the future.

For instance, A promises to deliver goods to B next month, and B promises to pay upon delivery. Here, both promises represent future consideration.

ESSENTIALS OF VALID CONSIDERATION

For consideration to be valid under Indian law, it must meet the following criteria:

• It must move at the desire of the promisor: The act or abstinence constituting consideration should be done at the promisor’s request.
• It may move from the promisee or any other person: Consideration can be provided by the promisee or any third party.
• It can be past, present, or future: As discussed, consideration may be an act done before, during, or after the promise.
• It must be real and have some value: The consideration must be something of value in the eyes of the law.
• It must be lawful: The consideration should not be illegal, immoral, or opposed to public policy.

LEGAL PROVISIONS AND CASE LAWS

Section 25 of the Indian Contract Act, 1872, outlines agreements that are void if made without consideration, with certain exceptions:

1. Natural Love and Affection: An agreement made without consideration is valid if it is in writing, registered, and made out of natural love and affection between parties standing in a near relation to each other.

2. Compensation for Past Voluntary Services: A promise to compensate someone for services rendered voluntarily in the past is enforceable.

3. Promise to Pay a Time-Barred Debt: A written and signed promise to pay a debt barred by the law of limitation is valid without consideration.

In the case of Chinnaya vs. Ramaya (1882) ILR 4 Mad 137, the court held that consideration can move from a third party. In this case, a donor gifted property to her daughter, with the stipulation that the daughter pay an annuity to the donor’s brother. The daughter later refused to pay, arguing lack of consideration from the brother. The court held that the consideration provided by the donor was sufficient, even though it did not move directly from the brother.

COMPARISON WITH ENGLISH LAW

A key difference between Indian and English contract law is the treatment of past consideration. While Indian law recognizes past consideration as valid, English law does not. In English law, consideration must be present or future; past acts are generally not sufficient to enforce a promise.

EXCEPTIONS TO THE RULE “NO CONSIDERATION, NO CONTRACT”

While the general rule is that an agreement without consideration is void, Section 25 of the Indian Contract Act provides exceptions:

• Agreements made on account of natural love and affection: These agreements are valid if they are in writing, registered, and made between close relatives.
• Promise to compensate for past voluntary services: A promise to pay for services already rendered voluntarily is enforceable.
• Promise to pay a time-barred debt: A written promise to pay a debt barred by limitation laws is valid without consideration.

LEGAL MAXIMS RELATED TO CONSIDERATION

• “Ex nudo pacto non oritur actio”: No cause of action arises from a bare promise. This maxim underscores the necessity of consideration for a contract to be enforceable.
• “Quid pro quo”: Something for something; consideration ensures mutual exchange in a contract.