In Indian contract law, “consideration” refers to the benefit or detriment exchanged between parties, forming the foundation of a valid contract. It is essential for the enforceability of agreements, ensuring mutual obligation and value.

MEANING AND DEFINITION OF CONSIDERATION

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 emphasizes that consideration involves an act, forbearance, or promise performed at the promisor’s request, which constitutes the price for the promise made.

ESSENTIALS OF VALID CONSIDERATION

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

1. Desire of the Promisor:
   The act or abstinence constituting consideration must be done at the promisor’s request. If performed voluntarily or at a third party’s behest, it doesn’t qualify as valid consideration. For instance, if A saves B’s goods from fire without B’s request, A cannot claim compensation for the service.

2. Move from Promisee or Any Other Person:
   Indian law allows consideration to proceed from the promisee or any other person, meaning even a stranger to the contract can provide consideration. This principle was upheld in Chinnaya v. Ramaya (1882) ILR 4 Mad 137, where a gift deed was enforceable despite the consideration moving from a third party.

3. Past, Present, or Future Consideration:
   Unlike English law, Indian law recognizes past consideration as valid. For example, if A renders a service to B at B’s request, and later B promises to compensate A, this promise is enforceable.

4. Real and Lawful Consideration:
   The consideration must be real, tangible, and lawful. It should not be illusory or involve acts prohibited by law. For instance, a promise to perform an impossible act, like bringing a dead person back to life, is not valid consideration.

5. Not Already Bound to Do:
   If a person is already legally obligated to perform a particular act, promising to do that act cannot serve as valid consideration for a new agreement. In Ramchandra Chintaman v. Kalu Raju AIR 1929 Bom 490, the court held that performing an existing duty cannot be consideration for a new promise.

6. Need Not Be Adequate:
   The law doesn’t require consideration to be equal in value to the promise made. As long as consideration exists and is lawful, its adequacy is not questioned. This principle was highlighted in Thomas v. Thomas (1842) 2 QB 851, where a nominal rent was deemed sufficient consideration.

TYPES OF CONSIDERATION

Consideration can be categorized based on the timing of the act or promise:

1. Past Consideration:
   An act or service done before the promise is made. For example, A helps B during an emergency. Later, B promises to pay A for the assistance. This promise is based on past consideration and is valid in Indian law.

2. Present (Executed) Consideration:
   An act done in response to a promise. For instance, A buys goods from B and pays immediately. The payment and delivery occur simultaneously, constituting present consideration.

3. Future (Executory) Consideration:
   A promise to do or abstain from doing something in the future. For example, A agrees to deliver goods to B next month, and B agrees to pay upon delivery. Both promises represent future consideration.

EXCEPTIONS TO THE RULE “NO CONSIDERATION, NO CONTRACT”

While consideration is fundamental to contract formation, Section 25 of the Indian Contract Act outlines exceptions where an agreement without consideration is valid:

1. Natural Love and Affection:
   Agreements made out of natural love and affection between close relatives are enforceable, provided they are in writing and registered. For instance, a written and registered agreement where a father gifts property to his son is valid without consideration.

2. Compensation for Past Voluntary Services:
   If a person has voluntarily done something for another, and the beneficiary later promises to compensate, such a promise is binding. For example, A finds B’s lost dog and returns it. B later promises to pay A Rs. 500 for his effort. This promise is enforceable.

3. Promise to Pay a Time-Barred Debt:
   A written and signed promise to pay a debt barred by the statute of limitations is valid without consideration. For instance, if A owes B Rs. 1,000, but the debt is time-barred, A’s written promise to pay Rs. 500 is enforceable.

LEGAL PROVISIONS AND DOCTRINES RELATED TO CONSIDERATION

Several legal provisions and doctrines are intertwined with the concept of consideration:

1. Section 23: Lawful Consideration and Objects:
   This section states that the consideration or object of an agreement is lawful unless it is forbidden by law, fraudulent, involves injury to person or property, or is against public policy. Agreements with unlawful consideration are void.

2. Doctrine of Privity of Contract:
   This doctrine posits that only parties to a contract can sue or be sued on it. However, in India, due to the allowance of consideration moving from a third party, the strict application of this doctrine is relaxed. In Tweddle v. Atkinson (1861) 1 B&S 393, the English court held that a third party cannot enforce a contract, but Indian courts have adopted a more lenient approach.