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Consideration and valid consideration

PRESENTATION OF UNIVERSITY OF CENTRAL PUNJAB OF BUSINESS LAW OF BBA OF SEMESTER -5

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Consideration and valid consideration
CONSIDERATION AND VALID CONSIDERATION
It is a essential element for formation of a valid contract .
A contract is void without consideration.
According to Sir Pollock-” Consideration is the price for
which the promise of the party is brought”.
EXAMPLE
A agrees to sell his factory to B for Rs. 50,000.
Here for A’s promise, the consideration is the
price of his factory i.e. Rs. 50,000 and for B’s
promise, consideration is A’s factory
ESSENTIAL ELEMENTS OF VALID OR LAWFUL
CONSIDERATION
A) Consideration may be an act to do something of doing
something.
B) Consideration may be past, present or future.
C) Consideration must be real & not illusory.
D) Consideration should move at the desire of the promisor.
E) Consideration may move from any person including the
promisee.
F) For supporting each independent promise, there
must be an independent consideration.
G) Consideration need not be adequate.
H) Consideration must be something which the
promisor is not already bound to do.
I) Consideration must be valuable in the eyes of
laws.
KINDS OF CONSIDERATION
1) Present or Executed Consideration
2) Past Consideration
3) Future or Executory Consideration
4) Unlawful Consideration
5) Illusory or Unreal Consideration

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Consideration and valid consideration

  • 2. CONSIDERATION AND VALID CONSIDERATION It is a essential element for formation of a valid contract . A contract is void without consideration. According to Sir Pollock-” Consideration is the price for which the promise of the party is brought”.
  • 3. EXAMPLE A agrees to sell his factory to B for Rs. 50,000. Here for A’s promise, the consideration is the price of his factory i.e. Rs. 50,000 and for B’s promise, consideration is A’s factory
  • 4. ESSENTIAL ELEMENTS OF VALID OR LAWFUL CONSIDERATION A) Consideration may be an act to do something of doing something. B) Consideration may be past, present or future. C) Consideration must be real & not illusory. D) Consideration should move at the desire of the promisor. E) Consideration may move from any person including the promisee. F) For supporting each independent promise, there must be an independent consideration.
  • 5. G) Consideration need not be adequate. H) Consideration must be something which the promisor is not already bound to do. I) Consideration must be valuable in the eyes of laws.
  • 6. KINDS OF CONSIDERATION 1) Present or Executed Consideration 2) Past Consideration 3) Future or Executory Consideration 4) Unlawful Consideration 5) Illusory or Unreal Consideration
  • 7. 1) Present or Executed Consideration- A present Consideration is something which is already actually done . It is done in response to some promise by the promisee. In this, one party has already performed its part of the promise while the other party has to perform its part of the promise.
  • 8. 2) PAST CONSIDERATION A past consideration is something that is wholly done by the promisee even before making of the agreement. It is always supported by the future promise. For example X was an infant & at his desire, Y provided him certain essential commodities. After attaining the majority X promises Y to compensate for what Y did in the past.
  • 9. 3) FUTURE CONSIDERATION A Consideration is said to be future when it is to be done in future. A future Consideration is always a promise to do or for bear or suffer at a future date only.
  • 10. 4) UNLAWFUL CONSIDERATION 1) When forbidden by law 2) When defeat the provisions of law 3) When they are fraudulent 4) When cause injury to other persons or their property 5) When opposed to public policy
  • 11. 5) ILLUSORY OR UNREAL CONSIDERATION When a consideration subsist in wards only & is physically or legally impossible to perform a promise, such consideration is known as illusory or unreal.
  • 12. CAPACITY OF PARTIES All agreements are contracts provided that: a) they are made by the free consent of parties. b) these parties must be competent to contract c) the contract must be for a lawful consideration and with a lawful object d) they must not be expressly declared to be void
  • 13. AS PER SECTION 11 DECLARES THE FOLLOWING PERSONS TO BE INCOMPETENT TO ENTER INTO A CONTRACT: 1) Minor- A person who has not completed his 18th of age is considered to be minor in the eyes of law & his minority a) where a guardian of a minor’s person or property is appointed by the court under the Guardians & Ward Act 1890. b) Where the property of a minor is taken over by the court of wards for management under the Court of Wards Act
  • 14. AGREEMENT WITH THE MINORS: 1) Agreement with or by a minor is absolutely void: An agreement with a minor is void 2) No Ratification of Minor’s contract: A minor’s agreement or contract cannot be ratified by him when he becomes a major. A consideration given by a person when he was a minor is no consideration in the eye of law & therefore a consideration given under earlier contract cannot be implied into the contract which the minor enters on attaining majority. Minor can enter into a fresh contract on attaining majority.
  • 15. 3) A minor can be a promisee : A If minor has carried out his obligations on entering into a contract, he gets every right to bring a suit against the other party for the enforcement of the other party’s obligation. Suppose , if a minor delivers some goods under a contract a sale of Mr. X & if Mr. X does pay, the minor is entitled to bring a suit for the recovery of the price of the goods sold.
  • 16. 4) NO RESTITUTION IN AGREEMENTS WITH A MINOR: If a minor receives any benefit or advantage under an agreement or a contract which is void, he cannot be asked or compelled to pay the amount benefit received. example suppose a minor gets a loan from a money lender by mortgaging his property neither a minor nor his property can be held liable for recovering the loan given to him.
  • 17. 5) MINORS INSOLVENCY A minor cannot be declared as an insolvent because of his or her incapacity to enter into a contract . He cannot be held personality liable even for necessities of life.
  • 18. 6) NO ESTOPPELS IN THE CASE OF A MINOR A minor can always plead minority & is not bound by his misrepresentation or fraudulent behavior the rule of estoppels is not applicable against minor.
  • 19. 7) MINOR AS A PARTNER A minor cannot be a partner or cannot enter into partnership contract as a partner. However , he can be admitted to the benefit of the partnership firm already in the existence with the prior consent of other partners. Even though he is admitted to the benefit of the partnership firm, he does not get any right to participate in the management of the firm or inspect the books of the firm.
  • 20. 8) A PERSON WORKING AS A SURETY FOR A MINOR Any person may stand as a surety for any liability incurred by a minor. Such person is held responsible to a minor’s creditor but not a minor
  • 21. 9) LIABILITY OF MINOR FOR NECESSITIES If the contracts are entered into for the supply of the necessaries of life and other necessary services, all such contracts are valid and a minor is liable to pay out his property for the same.
  • 22. 10) RESPONSIBILITY OF PARENTS OR GUARDIANS OF A MINOR Parents and guardians are not liable for any contract entered into by a minor; even though the contracts entered into are for the supply of necessities and essential services to a minor.
  • 23. PERSONS OF UNSOUND MIND Idiots, lunatics, drunkards are considered as the persons of unsound mind. According to section 12 “ A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes a contract, he is capable of understanding it & of forming a rational judgment as to its effect upon his interest. A person who is usually of unsound mind , but occasionally of unsound mind, may make contract when he is sound mind. A person usually of sound mind but occasionally of unsound mind may not make a contract when he is of unsound
  • 24. PERSONS DISQUALIFICATION FROM CONTRACTING BY THE LAW Alien enemies Foreign sovereign, their diplomatic staff & accredited representative s Insolvents Convicts Corporations
  • 25. FREE CONSENT All agreements are contracts if they are made by the free consent of the [arties competent to contract, for a lawful consideration and with a lawful object & are not hereby expressly declared to be void. Thus a free consent is one of the essentials of a valid contract.
  • 26. CONSENT IS SAID TO BE FREE WHEN IT IS NOT CAUSED BY Coercion It is committing or threatening to commit, elements of physical pressure any act forbidden by the Indian Penal Code. Undue influence It is a mental which is put upon the other party to the contract.
  • 27. Fraud Fraud means any act by a party to a contract or with his connivance, by his agent with intent to deceive another party thereto or his agent 1) The suggestion as a fact of that which is not true by one who does not believe it to be true. 2) The active concealment of fact by one having knowledge or belief or the fact. 3) A promise made without any intention of performing it. 4) any other act fitted to deceive. 5) Any such act or omission as the law specially
  • 28. Misrepresentation 1) The positive assertion in a manner not warranted by the information of the person making it, of what which is not true though he believes it to be true. 2) Any breach of duty which without an intent to deceive, gains an advantage to the person committing it or any one claiming under him , by misleading another to his prejudice, or to the prejudice of any one claiming under him.3) Causing however innocently a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.
  • 29. VOID AGREEMENT 1) Agreement by incompetent parties 2) Agreement made under mutual mistake of facts 3) Agreement, the consideration or object of which is unlawful 4) Agreement, the consideration or object of which is partly unlawful 5) Agreements entered into without any consideration 6) Agreements made in restraint of marriage 7) Agreements made in restraint of trade, business, occupation 8) All agreement s, the meaning of which is not certain 9) Wagering agreements 10) Agreement contingent on impossible events 11) Agreement to do an act impossible in itself.