This document defines consideration and its essential elements under contract law. Consideration is something of value that is exchanged between parties to a contract, such as money or goods. It must move from the promisee or third party at the desire of the promisor. While consideration is generally required for a valid contract, there are some exceptions, such as natural love and affection between relatives, compensation for past services rendered, or promises to pay time-barred debts in writing. The doctrine of promissory estoppel also allows aggrieved parties to recover damages resulting from reasonable reliance on a significant promise.

1. CONSIDERATION
CHAPTER # 4

2. What is Consideration
Consideration is an essential element in a
contract.
Subject to certain exceptions, an agreement is not
enforceable by law unless each party gets
something. This “something” is called
consideration.

3. What is Consideration
Section 2d of the Contract Act 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 consideration for the promise.
The term consideration is used in the sense of quid pro
quo i.e. something in return.
Quid Pro Quo means ‘I want something, you want
something. You give me what I want, I will give you what
you want’.

4. Essential Elements of a valid
consideration
It must move at the desire of the promisor:
The act or the abstinence must have been done at the desire of
the promisor. Any act performed at the desire of the third party
cannot be consideration.
It must move from the promisee or any other person:
As long as there is a consideration for a promise, it is
immaterial who has given it. It may move from the promisee or
if the promisor has no objection, from any other person.

5. Essential Elements of a valid
consideration
It may be past, present or future:
Past Consideration: When the consideration for a present promise
was given before the date of promise, it is said to be past
consideration.
Present Consideration: When the consideration for a promise is
given simultaneously with the promise it is called present
consideration.(executed consideration)
Future Consideration: A future or executory consideration is a
promise to do or give something in return in future for the promise
then made.

6. Essential Elements of a valid
consideration
It needs not be adequate:
Inadequacy of the consideration is no ground for refusing the
performance of the promise.
 Consideration must be real:
Consideration must be real and not illusory. If it is physically
impossible, vague or legally impossible, the contract cannot
be enforced.

7. Essential Elements of a valid
consideration
Consideration must be lawful:
An agreement is void if it is based on unlawful object. An
agreement is considered unlawful if:
It must not be something which the promisor is already bound
to do:
A promise to do what one is already bound to do, either by
general law or under an existing contract, is not a good
consideration for a new promise.

8. Stranger to Consideration
While discussing rules regarding consideration, we have seen that
consideration may be given by the promisee or by a third party.
When consideration is given by a third party then the promisee is
called stranger to consideration. Under the Contract Act, a stranger
to consideration can file a suit to enforce the promise.
However, under the English law, a stranger to a consideration
cannot enforce the contract.

9. Stranger to Contract
If a person is not a party to a contract, he is called a stranger to
contract.
This is a cardinal principle of law that only a party to a contract
can sue. If a person is not a party to a contract, he cannot sue
even if the contract is for his benefit.
To create legal relationship, privity of contract (contractual
relationship) is necessary.

10. Stranger to Contract
A contract cannot confer any right nor impose any liability
upon a person who is not a party to it.
For example, A agrees with B to give Tk. 5,00,000 to C. C
cannot file a suit against A to recover Tk. 5,00,000 as there is
no contract between A and C (Contract is between A and B)
and C is a stranger to the contract.

11. No Consideration No Contract:
Exception
A promise without consideration is a gift. A promise
without consideration is a gratuitous (free of charge)
undertaking and cannot create a legal obligation.
Under the Contract Law, the presence of
consideration is, as a rule, essential to the validity of
contracts.

12. No Consideration No Contract:
Exception
Natural love and affection:
A written or registered agreement based on natural love
and affection between the parties standing in near relation
to each other is enforceable without consideration.
Example, Mr. A agreed to pay Tk. 5,00,000 to his younger brother
out of natural love. This promise was made in writing and
registered. If Mr. A refuses to pay Tk. 5,00,000 to his younger
brother, the latter can enforce the promise in the Court.

13. No Consideration No Contract :
Exception
Compensation for services rendered:
A promise to compensate, wholly or in part, a person who has
voluntarily done something for the promisor is enforceable without
consideration.
Example, Mr. A found Mr. B's purse and gave it to him. B promised
to pay a reward of Tk. 1000 to A. Later on, B cannot refuse payment
on the ground that there was no consideration.

14. No Consideration No Contract :
Exception
Time barred debt:
A promise made in writing to pay a time-barred debt is
enforceable even without consideration.
A time-barred debt is an unpaid debt which is no longer
legally collectable because too many years have passed.
Example, A owed B Tk. 1,00,000 but the debt has
already been time-barred. Now, A signs a written
promise to pay B the sum of Tk. 1,00,000. This is a
valid contract.

15. No Consideration No Contract :
Exception
Completed gifts:
Any gift actually made is valid. Thus, gifts do not
require consideration.
Example:
A gave a watch as a gift to B on his birthday. Later on, A cannot
demand his watch (gift) back on the ground that there was no
consideration (as A did not get anything in return for the watch).

16. No Consideration No Contract :
Exception
Agency:
No consideration is required to create an agency.
Remission:
No consideration is required for an agreement to receive less than
what is due. This is called remission in the law.
Guarantee:
There is no consideration required in the case of a contract of
guarantee.

17. Doctrine of Promissory Estoppel
Promissory means conveying or implying a promise.
Estoppel means legal principle/rule of law that prevents one from
denying a fact.
 Promissory estoppel is a legal principle that prevents an
individual/party to deny his/her promise.

18. Doctrine of Promissory Estoppel
This doctrine can help you to recover your losses. It states that
an aggrieved party can recover damages if those damages were
the result of a promise made by a promisor and the promise
was significant enough to move the promisee to act on it.
Example : Mr. X establishes an industrial unit on the faith of tax
concession announced by the government for a particular
period of time. The govt. is bound by the estoppel and cannot
withdraw tax concession earlier than the promised time.

19. THE END OF THE CHAPTER