CONSIDERATION

Name : Anjali singh

Course : BALLB
Section : A
Email Id : [email protected]
Contact No : 9580526267
Name Of Faculty : prof. Bhavish Gupta
DME Law School – Delhi Metropolitan Education
– Guru Gobind Singh Indraprastha University
 What is Consideration
• ‘Consideration’ means “something in
return”, i.e. quid pro quo that is an essential element
to find out the genuine intention of the parties of the
promise to create legal relationship. Consideration is
an essential component of a valid contract.
Consideration is the price for the contract. An
agreement without consideration is void and thus not
enforceable by law except under certain
circumstances.
 Meaning
• Consideration is the price of the contract and it
can be right, interest or responsibility etc.
According to section 2(d) of the Indian Contract
Act “when at the desire of the promisor,
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.”
 EXAMPLE :

• A offers to sell his car to B for a sum of `

1,00,000. B accepts the offer. In this contract,
• A is the promisor and it is his desire to sell his
car for ` 1,00,000
• B is the promisee and on the desire of A he is
purchasing the car for ` 1,00,000.
• The consideration for A’s promise, is a sum of `
1,00,000 while consideration for B’s promise is
the car.
 ESSENTIALS :
1 . Something should be done or abstained from
doing at the desire of the promisor only.
2 . Promisee or any other person has done or
abstained from doing something at the desire of
the promisor.
3. It can be Past, Present or Future.
4 . It is not necessary that Consideration must be
adequate.
5 . Consideration must be Real and Not Illusory or
Impossible.
6 .It must be Lawful
 Consideration must proceed at the
desire of the Promisor
• An act must have been done at the desire or request of
the promisor. Voluntary acts or acts done at the desire of
the third party is not a consideration in the eyes of law.

2. Consideration may move from the

promisee or any other person

• Consideration may proceed from the promisee or any

person.
 Leading Case

• CHINAYYA Vs. RAMAYYA

• Facts: Laxmi Rani gifted her property to her daughter
Ramayya with the direction to pay a certain sum of
money annually to chinayya, her maternal uncle.Same
day Ramayya executed an agreement with Chinayya
agreeing to pay the amount annually.Later, Ramayya
refused to honor agreement on the ground that there is no
consideration.Chinayya sued for the recovery of the
annuity.Decision of the court :The court held that there
was sufficient consideration i.e. the property given to her
by the sister of Chinayya.
 CONSIDERATION MAY BE PAST PRESENT OF FUTURE

• 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.

B house is on fire. A rushes to B’s help and saved his life. In

a show of gratitude, B promises to pay A ` 5,00,000 for the help
provided by A. In this case, B’s motivation for making this
promise is the past benefit that A provided which gave rise to
the moral obligation to compensate A.
• Present or Executed consideration

When the promisor receives consideration simultaneously

with his promise, the consideration is termed as Present
Consideration.
• A purchased goods from a shopkeeper of the worth of ` 10,000 A
pays money to the shopkeeper immediately. Consideration is
“Present”.
 FUTURE 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.
•
Ruhi promises to sell and deliver a new wristwatch to Rekha after
a week. Rekha accepts the offer and promises to pay after one
month of receiving the watch. This is executory or future
consideration.
 CONSIDERATION NEED NOT TO BE ADIQUATE :

• 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.
• A agreed to sell his Mobile worth ` 40,000 for ` 2,000
with his free consent. This is a valid Contract.
 CONSIDERATION MUST BE REAL :

Real consideration means that the consideration

should not be physically or legally impossible.
6 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:
• When it is made of an act forbidden by law
•
When it causes injury to a person or property of another person.

When it is declared as immoral or opposed to public policy.

•
PRIVITY OF CONSIDERATION :
• Privity of Consideration means that although
the party is stranger to consideration as he or
she has not paid the consideration, but
someone has paid consideration for the
benefit of the beneficiary. So, the beneficiary
may file a suit to execute the contract.
 EXCEPTION :
• The general rule is that contracts made without consideration
are void. But Section 25 of the Contract Act lays down the
undermentioned exceptions which make a promise without
consideration valid and binding.
• When a contract is made on account of natural love and
affection between the parties.
•
The parties are standing in a near relation to each other, and
• The contract is in writing and registered under the law for the
time being in force for the registration of documents.
 CASE INDEX:

Combe v. Combe : [1951] 2 KB 215

• District Board of Ramnad v. D.K. Mahomed Ibrahim
Sahib (1933) 64 MLJ 574
• Durga Prasad v. Baldeo 1880 3 All 221
• Past Consideration:
• Re McArdle (1951) Ch 669
• Adequacy of Consideration:
Chappell & Co. Ltd. v. Nestle Co. Ltd. [1960] AC 87
• Real Consideration:
• White v. Bluett (1853) 23 LJ Ex 36
 Conclusion
• Consideration is a benefit which must be
bargained for between the parties, and is the
essential reason for a party entering into a
contract. Consideration must be of value and is
exchanged for the performance or promise of
performance by the other party (such
performance itself is consideration).