Consideration

Chapter 3

J J Maini, MIMIT Malout 1

 Foundation of every contract
 In the absence of consideration a promise or
undertaking is purely gratuitous- creates no
legal binding


 Section 2(d) 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 to
abstain from doing, something, such act or
abstinence or promise is called a
consideration for the promise.


 Pollock “ Consideration is the price for which
the promise of the other is bought and the
promise thus given for value is enforceable”.
 It is something which is of some value in the
eyes of law.
 It may be some benefit to the plaintiff or
some detriment to the defendant.
 Also called Quid- pro-quo i.e. something in
return

Section 2(d) of the Indian Contract Act defines
consideration as –
A) when at the desire of the promisor
B) the promisee or any other person
C) has done or abstained from doing , does or
abstains from doing, or promises to do or
abstain from doing,
D) something, such act or abstinence or
promise is called a consideration for the
promise.

1. It must move at the desire of the promisor Case
Durga Prasad vs. Baldeo
 An act constituting consideration must have
been done at the desire or request of the
promisor ,if it is done at the desire of the third
party or without the desire of the promisor it will
not be a good consideration.
 E.g., A saves B goods from fire without being
asked to do so. A cannot demand consideration
for his services.

Durga Prasad Vs. Baldeo, (1880) The Plaintiff on the order of collector
constructed a Ganj, def. promised to pay commission on items sold in
lieu his construction of the shop.
B spent some money on the improvement of a market at the desire of the Collector of the
district. In consideration of this D who was using the market promised to pay some money
to B.
Held: The agreement was void being without consideration as it had not
moved at the desire of D.

Kedar Nath Vs.Gouri Mohamed Commissioners of Howrah sought
charitable subscription to construct Town Hall at Howrah . Charitable
subscription Rs.100.Work started. Promissory Estoppel?. Held liable.
Abdul Aziz Vs. Masum Ali Charitable subscription Rs.500 for Mosque
repair. Repairs not started as yet. Held not liable.


1 .Abdul Aziz vs. Masum Ali, (1914).
The secretary of a Mosque Committee filed a suit to enforce a promise which the
promisor had made to subscribe Rs. 500 to the re-building of a mosque.
Held: “the promise was not enforceable because there was no consideration in the
sense of benefit”, as “the person who made the promise gained nothing in return for
the promise made”, and the secretary of the Committee to whom the promise was
made, suffered no detriment as nothing had been done to carry out the repairs.
Hence the suit was dismissed.

2.Kedar Nath vs. Gauri Mohamed, (1886)
The facts of this case were almost similar to those of the above case, but the
secretary in this case incurred a liability on the strength of the promise.
Held: The amount could be recovered, as the promise resulted in a sufficient
detriment to the secretary. The promise could, however, be enforced only to the
extent of the liability (detriment) incurred by the secretary. In this case, the promise,
even though it was gratuitous, became enforceable because on the faith of the
promise secretary had incurred a detriment.


2.It may move from the Promisee or any other Person:
consideration may move from the Promisee or any other
Person, i.e., even a stranger. This means that as long as there is
a consideration for a promise it is immaterial who has furnished
it. But a stranger to the consideration will be able to sue only if
he is a party to the contract.
 Case law: an old lady, by a deed of gift, made over certain
property to her daughter D, under the direction that she should
pay her aunt, S (Sister of old lady), a certain some of money
annually. The same day D entered into an agreement with her
aunt S to pay her the agreed amount. Later, D refused to pay
the amount on the plea that no consideration has moved from
S to D.
 Held, S was entitled to maintain suit as consideration had
moved from the old lady, sister of S, to the daughter, D.
(Chinnaya v/s Ramayya)

Tweddle Vs. Atkinson (1861) 123 ER 762
The plaintiff was to be married to the daughter of
one G and in consideration of this intended
marriage G and the plaintiff ‘s father entered in
to a written agreement by which it was agreed
that each would pay the Plaintiff a some of
money. G failed to do so and the plaintiff sued
his executors. Whitman J considered it to be an
established principle that a person can not take
advantage of a contract, who is stranger to the
contract.


3. It may be Past, Present or Future: the word used in Section 2(d)
are”… has done or abstained from doing (Past), or does or abstains
from doing (Present), or promises to do or to abstain from doing
(Future), something,”
 Past consideration: when the consideration by the party for the
present promise was given in the past, i.e., before the date of
promise, it is said to be past consideration.
 Present consideration: when consideration is given
simultaneously with promise, i.e., at the time of the promise, it is
said to be present consideration. E.g., cash sale.
 Future consideration: when consideration for one party to the
other is to pass subsequently to the making of the contract, it is
future consideration.


4. It need not be adequate: consideration as said
“some thing in return” and something this some
thing in return need not be equal in value to
“Something given”. The law requires that the
contract must be supported by consideration
and not the adequate consideration. The
adequacy of the consideration is to be
determined by the parties to the contract at the
time of entering into it, but the court has no
right to determine the adequacy of the
consideration.


5. It must be real: although consideration need not be
adequate, it must be real and of some value in the eye of
law. There is no real consideration in the following cases:
 Physical impossibility: A promises to put life into B’s dead
wife on the consideration of Rs.999. A’s promise is
physically impossible to perform.
 Legal impossibility: A owes Rs.500 to B. he promises to
pay Rs.50 to, C the servant of B, who in return promise to
discharge A from the liability. This is legally impossible,
because C cannot discharge A from the debt due to B.
 Uncertain consideration: A engages B for doing a certain
work and promises to pay a “Reasonable some”. There is
no recognized method of ascertaining the “Reasonable
Some”. The promise is unenforceable due to uncertainty.


6. It must be lawful: the consideration given for an agreement must
not be unlawful. A consideration to the contract must not be
against Public Policy, Immoral and illegal
7. It must be something which the promisor is not 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 the new promise, since it adds nothing to the
pre-existing legal or contractual obligation.
 CL: There was a promise to pay to the vakil an additional sum if
the suit was successful. Held, the promise was void for the want of
consideration. The vakil was under a pre-existing contractual
obligation to render the best of his services under the original
contract. (Ramachandra Chintaman vs. Kalu Raju)


 Ramchandra Chintaman vs. Kalu Raju, (1877)
There was a promise to pay to the Vakil an
additional sum if the suit was successful.

 Held: The promise was void for want of
consideration. The Vakil was under a pre-
existing contractual obligation to render the
best of his services under the original
contract.


 Under the English law the consideration must
move from the promisee and not from the
stranger, and a stranger to a consideration
cannot enforce it.
 The Indian law is different from the English
law and the definition of consideration under
the Indian Contract Act clearly provides that
consideration may move from the promisee
or any other person. So consideration may
flow from a stranger.

 It is a general law of contract that a person
who is not a party to the contract can’t sue on
it.
 A stranger to a contract can’t sue in England
as well as in India though it may be for his
benefit.
 It means that unless there is privity of
contract a party can’t sue on a contract.


 Privity of contract means the relationship
subsisting between the parties to a contract.
 It means that no one but the parties to a
contract can be bound by it or be entitled
under it.
 Only parties to a contract can sue each other
or be sued upon.


1. Trust

1. Provision is made in a marriage settlement
2. Where provision is made in a partition or
family arrangement for maintenance or
marriage expenses of female members
3. Where a charge is created in favour of a
stranger on specific immovable property


5. Where the promisor by his conduct has
created privity of contract with the stranger
6. Where it is conducive to justice
7. Contract entered into by an agent can be
enforced by the principal
8. Covenants running with the land


 Agreement without consideration, void, unless it is in writing
and registered or is a promise to compensate for something
done or is a promise to pay a debt barred by limitation law
 An agreement made without consideration is void, unless –
 Love and Affection: where an agreement is
expressed in writing and registered under the
law for the time being in force for the
registration of the documents and is made on
account of natural law and affection between
parties standing to the near relation to each
other, it is enforceable even is there is no
consideration (Ram Dass vs. Krishan Dev)

A Hindu husband, after referring to quarrels
and disagreement between him and his wife
executed a registered document in favour of
his wife agreeing to pay her maintenance.
But no consideration moved from the wife.
Held, the agreement was void for want of
consideration (Rajlukhy vs. Bhoothnath)


Promise to pay a time-bared debt: A promise to
pay a time-bared debt by the debtor is enforceable
provided it is made in writing and signed by the
person to be charged therewith or by his agent
generally or specially
authorised in that behalf, to pay
wholly or in part debt. The debt
must be such “of which the creditor
might have enforced payment but
for the law for the
limitation of suits”

 Completed gift: that nothing in this
section shall affect the validity, as
between the donor and donee, of any
gift actually made.
Explanation 2 to Section 25 provides
that an agreement to which the
consent of the promisor is freely given
is not void merely because the
consideration is inadequate; but the
inadequacy of the consideration may be
taken into account by the Court in
determining the question whether the
consent of the promisor was freely
given.

 Agency: Section 185 of the
contract Act provides that no
consideration is necessary for
creation of agency.

 Charitable Subscription


 Debi Radha Rani vs. Ram Dass, (1941)
D is ready to sue her husband for maintenance
allowance. On husband’s agreeing to pay her a
monthly allowance by way of maintenance, she
forbears to sue.
 Held: The wife’s forbearance to sue amount to
consideration for the husband’s agreement for
payment of maintenance allowance.


 Dunlop Pneumatic Tyres Co. Ltd. Vs. Selfridge &
Co. Ltd., (1915)
S bought tyres from the Dunlop Rubber Co. &
sold them to D, a sub-dealer, who agreed with S
not to sell these tyres below Dunlop’s list price
and to pay the Dunlop Co. £5 as damages on
every tyre D undersold, D sold two tyres at less
than the list price and thereupon the Dunlop Co.
Sued him for the breach.
 Held: The Dunlop Co. Could not maintain the suit
as it was stranger to the contract.


Consideration

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