Author: Disha Vadwana, Student, KES’Shri Jayantilal H. Patel Law College
Edited by: Gaurav Katiyar, Student, University of Lucknow
INTRODUCTION
Consideration is part of a valid contract in Indian contract law 1872, The word Consideration arise from Latin term quid pro quo,” which means “something for something.” When a person to an agreement promises to do something or not to do something, he must get something in return. The reason for the need of Consideration in Indian contract law is that it builds Mutuality, Legal Enforceability, Economic value, Fairness, Reciprocity and legal protection between parties. Without consideration, an agreement is void in Indian contract law 1872.
Section 2(d) and Section 25 of Indian contract law defines consideration in detail and there are certain exceptions to consideration also which is Natural love and affection, promise to compensate for past voluntary services and promise to pay time-barred debt. Consideration may be past, present, or future. Consideration simply means ” When parties to the agreement agree to give upon something to get something in return is called the consideration.”
Keywords (Minimum 5): Indian Contract Law 1872, Consideration, Section 2(d), Valid contract, Section 25.
Definition of Consideration
“Section 2(d) of the Indian Contract Act defines ‘Consideration’ as under:
“When at the desire of the promisor, the promisee or any other person has done or abstains from doing or does or abstains from doing or promises to do or abstains from doing something, such act or abstinence or promise is called consideration for that promise.”
Definitions of Consideration by famous Scholars:
Blackstone: “Consideration is the recompense given by the party contracting to the other”.
Pollock: “Consideration is the price for which the promise of the other is brought, and the promise thus given for value is enforceable.”
Patterson: “Consideration means something, which is of some value in the eye of the law. It may be some benefit to the plaintiff or some detriment to the defendant.”
Cheshire and Fifoot: “The expression consideration has to be understood as a price paid for a promise has been commended.”
Essentials elements of Consideration:
Consideration must be given at the desire of the Promisor.
If the action of promisee does not fulfil the consideration, by the desire of promisor then it is not fall into the definition of consideration. A promisee must fulfil the desire of the promisor for valid consideration.
Consideration may be given by the promisee or any other person:
In the agreement between the promisee and promisor, consideration may be given to the promisor by the promisee or any person. A person can sue as long as he/she is part of the contract. Section 2(d) of consideration also defines that the consideration may proceed from the promisee or any other person.
Consideration must have some value in the eyes of law:
Consideration should not be unreal. It must be of some value in the eyes of law. An act that is impossible to perform in the contract cannot be called a valid consideration.
Consideration must not be unlawful, immoral, or opposed to public policy:
Section 23 of the Indian Contract Act states that every agreement or consideration that is unlawful is void.
Section 23 of ICA 1872: “23. What considerations and objects are lawful and what not. – the consideration or object of an agreement is lawful, unless- – it is forbidden by law; or – is of such nature that, if permitted, it would defeat the provisions of any law; or – is fraudulent; or – involves or implies injury to the person or property of another or; – the Court regards it as immoral, or opposed to public policy.”
Types of Consideration
- Past consideration
Past consideration is a consideration that is already done by the promisee at the desire of the promisor before the promise is given by the promisor.
- Present Consideration
Consideration, which is done by the promisee at the time of making a promise. When both parties agree to perform obligations on their part, this is known as present or executed consideration.
- Future Consideration
Consideration that is promised to pay at the future date or render service at the future date is known as future consideration. Future Consideration is also called executory or prospective consideration.
Exception to Consideration
Section 25 of the Indian Contract act 1872 states about the exception to consideration that is no contract without the consideration.
- Natural love and affection:
An agreement without consideration is valid consideration if it is made on account of love and affection and shall be enforceable only if such agreement is in writing and registered.
Illustration:
A, out of natural love and affection, promises to give his grandson, C Rs. 2000/-. A put his promise to C into writing and registers it. This is a contract.
- Promise to compensate for past voluntary services:
An agreement without consideration is valid when it’s promised to compensate a person who has formerly done something for the promisor.
Illustration:
- A finds B’s Bag and give it to him. B promises to give A Rs 100/- this is a contract.
- A support B’s for treatment of his son. B promises to pay expenses to A This is a Contract.
- Promise to pay time-barred debt:
A time barred agreement is an agreement where debt may be given in certain time. Section 25 of the Indian contract act states, a time barred debt is valid if, the debt is time barred, promised to pay debt, signed by debtor and if the promise is written.
Illustration:
A owes D to Rs. 10,000/- but the debt is forbidden by the Indian limitation Act. A sign a written promise to pay D Rs 5,000/- on account of debt. This is a contract.
Landmark Case and Judgment:
Chinnaya v. Rammaya (1882):
The case is about a gift deed agreement where a plaintiff transferred her property to her daughter by a registered deed of gift. One of the conditions of the agreement was to pay Rs. 653/- to plaintiff’s sister. For the desire of the plaintiff, defended made an agreement in favour of the plaintiff to make a promise to pay sum of annual amount to plaintiff’s sister.
Issue of the case:
Whether the plaintiff can file a suit against the defendant for the money promised in an agreement when the consideration of that promise was actually provided by third party, the defendant’s mother who was plaintiff’s sister?
Judgement of the case:
The Madras High Court states that the agreement between the plaintiff and defendant, consideration was on the behalf of the plaintiff’s sister, even a plaintiff was stranger to consideration, plaintiff can file a suit because the plaintiff was the part of a contract. The court held that section 2(d) of Indian Contract Act 1872 defines, a stranger to consideration can pay the amount on behalf of promise because he/she becomes the part of a contract. Lastly, the court states that the plaintiff’s sister was entitled to a decree of the payment of money.
Conclusion
The concept of Consideration is a part of valid contract and ensuring that the agreements are backed by reciprocal and mutual benefits in agreement. Section 2(d) of the Indian Contract Act, 1872, transforms the promises into enforceable contracts by each party to receive something in return. It upholds the integrity and fairness in the agreement by the both side of parties. Consideration is essential part of contract for maintaining the balance, trust and enforceability of contracts within the Indian legal framework.
REFERENCES
Books / Commentaries / Journals Referred
Law of Contract (a Study of the Contract Act, 1872) and Specific Relief (2018)
Online Articles / Sources Referred
“Consideration in Indian Contract Law – Drishti Judiciary”
“Consideration in Contract Law – iPleaders”
“Chinnaya vs. Ramayya : An Analysis – iPleaders”
Cases Referred
Chinnaya v Rammaya (1882)
Statutes Referred
The Indian Contract Act, 1872
