The document discusses the concept of consideration in contracts. It defines consideration as something bargained for and received by the promisor from the promisee in exchange for the promise. Consideration can be in the form of an act, abstinence from an act, or a return promise. It must be something of value in the eyes of law and move at the desire of the promisor. Consideration can be past, present or future. There are exceptions to the privity rule that allow third parties to enforce contracts under certain conditions like trusts or intended benefits.

1. Consideration
By
Dr Sridevi Krishna
Asst Professor
VVLC

2. What is consideration?
• In simplest terms, consideration is what a
promisor demands as the price for his
promise.
• Sir Frederick Pollock defines consideration as
“an act or forbearance of one party or the
promise thereof is the price for which the
promise of the other is bought and the
promise thus given for value is enforceable.”

3. Continued..
• It is in a form of ‘quid pro quo’ which means
something in return.
• This ‘something’ may be some benefit, right,
interest or profit or it may also be some
forbearance, detriment, loss or responsibility
upon the other party.
• Nudum Pactum- A contract without
consideration

4. Definition
• Section 2 (d) of the Indian Contract Act, 1872. It
reads:
• “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 promises to abstain
from doing something, such act or abstinence or
promise is called a consideration for the
promise.”
• A agrees to sell his house to B for Rs. 10,000.
Here B’s promise to pay the sum of Rs. 10,000 is
consideration for A’s promise to sell the house;
and A’s promise to sell the house is the
consideration for B’s promise to pay Rs. 10,000.

5. Essentials
• (1) Consideration must move at the desire of the promisor.
• Accordingly, an act done at the desire of a third party is not
a consideration.
• Durga Prasad V Baldeo
• The Plaintiff constructed a market at the instance of the
Collector of a District. The occupants(Defendants) of the
shops in the said market promised to pay Plaintiff a
commission on articles sold through their shops. The
defendants failed to pay the promised amount and Plaintiff
filed a suit for its recovery. It was observed that the
consideration for the promise to pay the commission was
the construction of the market by the plaintiff. Such
construction had not been done at the desire of the
defendants but on the order of the collector.
• Held- since consideration did not move at the desire of the
defendants, they are not liable for the same.

6. 2. Consideration may move from the promisee or any other person
• Although it is necessary that consideration must move at
the desire of the promisor, it may be supplied either by the
promisee or any other person.
• The case of Chinnayya v. Ramayya,
• In that case, A, a lady, by a deed of gift transferred certain
property to her daughter (defendant), with a direction that
the daughter should pay an annuity to A’s brother(Plaintiff),
as had been done by A. On the same day the daughter
executed a writing in favour of the brother, agreeing to pay
the annuity. Afterwards, she declined to fulfil her promise
saying that no consideration had moved from her uncle (A’s
brother).
• The Court, however, held that the words ‘the promisee or
any other person’ in Section 2(d) clearly show that the
consideration need not necessarily move from the
promisee, it may move from any other person. Hence, A’s
brother was entitled to maintain the suit.

7. Continued..
• Thus, in India, stranger to the consideration
may maintain a suit.
• In England, however, the position is different.
A stranger to the consideration, in England,
cannot maintain a suit.

8. Privity of contract
• The rule of privity of contract means that only
those persons who are parties to the contract
can enforce the same.
• A stranger to the contract cannot enforce a
contract even though the contract may have
been entered into for his benefit.
• Ex- In a contract between A & B some benefit
has been conferred upon X. X cannot file a suit
to enforce contract because A &B are the only
parties to the contract whereas X is stranger
to the contract.

9. English Law & Indian Law
• Stranger to the Contract v. Stranger to Consideration. A
stranger to the consideration must, however, be
distinguished from a stranger to a contract. A stranger to a
contract cannot sue in England as well as in India.
• A stranger to the consideration, in England, cannot
maintain a suit.
• Tweddle V Atkinson
• Plaintiff A married a girl B After this marriage there was a
contract in writing between A’s father and B’s father that
each would pay a certain sum of money to A and that A will
have the power to sue for such sums. After the death of the
two fathers, A brought an action against the executors of
B’s father to recover the promised amount.
• Held- that A could not sue for the same

10. Dunlop Pneumatic Tyre Co ltd V Selfridge & Co Ltd
• In Dunlop’s case the appellants who were
manufacturers of motor car tyres, sold tyres to one
Dew & Co with an agreement that these tyres will not
be sold below the list price. Dew & Co in their turn sold
some of these tyres to the respondents (Selfridge &
Co) with an agreement between Dew & Co and the
respondents shall observe conditions as to price and
the respondents also promised that they would pay to
the appellants a sum of 5 pounds for every tyre sold
below the list price. The respondents sold some tyres
below the list price, and the appellants brought an
action against the respondents to recover damages for
the same.

11. Continued..
• Held – Dunlop Co could not bring an against
Selfridge Co because there was no contract
between the two parties. It was further
observed that even if it is taken that Dew co
were acting as agents for Dunlop the latter still
cannot maintain an action as there was no
consideration between Dunlop and Selfridge
since the whole of the purchase price was
paid by Selfridge & Co to Dew & Co.

12. Indian Law
• Even though the definition of consideration is
wider than under English law, yet common law
principles of privity of contract is generally
applicable in India.
• Jamna Das V Ram Avtar
• X had mortgaged some property to Plaintiff. X
then sold this property to Defendant where
he(defendant) agreed to pay off the mortgage
debt to Plaintiff. Plaintiff brought an action
against Defendant to recover the mortgaged
money
• Held- Privy council that since there was no
contract between P& D he cannot enforce the
contract to recover the amount from defendant.

13. Exceptions
• 1. In the case of trusts, the beneficiary may enforce the contract.
• where a contract between X and Y is intended to secure benefit to
Z. Z may sue in his own right to enforce the trust.
• In Hussaini Begum V Khwaja Muhammad Khan
• There was an agreement between the father of the boy and a girl
that if the girl (plaintiff inthis case) married a particular boy, the
boy’s father (here the defendant in this case)would pay certain
personal allowance known as Kharchi-i-pandan (bettle-box
expenses)or pin money to the plaintiff. It was also mentioned that a
certain property had been setaside by the defendant and this
allowance would be paid out of the income of the property. The
plaintiff married the son but defendant failed to pay the allowance
paid to him. In an action by the plaintiff to claim this allowance, the
defendant contended that his contract to pay the allowance had
been made only with the plaintiff’s father and not with the plaintiff;
she being a stranger to the contract cannot sue.
• Held: since, the basis of the plaintiff’s claim being a specific charge
on immovable property in her favor,she was entitled to claim the
same as a beneficiary, and as such, the Common Law rulewas not
applicable to the facts and circumstances of the present case

14. Narayani Devi v. Tagore Commercial Corporation Ltd
• A held various shares of value of Rs. 40,500. It was agreed
that A would sell his shared to B and in return B will pay A
Rs.500/month and after his death Rs.250/month to his A’s
widow during her life. C stood a surety for B. some payments
were made by C to A and after his death to A’s widow.
Thereafter the payments were stopped. A’s widow brought
action against B and C to recover the amount. One of the
defendants pleaded that the plaintiff was not a party to the
contract and it was entered into by his husband and the
defendants, she was not legally entitled to sue in respect of
this agreement being a stranger to the contract.
• The Calcutta High Court rejected this and held that from the
facts and circumstances of the case the obligation in the nature
of trust was in favor of the plaintiff, and equity was created in
her favor and she was entitled to it even if she was not
the party to the contract.

15. 2. Conduct, Acknowledgment, or Admission
• Sometimes there may be no Privity of contract between the two
parties, but if one of them by his conduct, acknowledgment, or
admission recognizes the right of the other to sue him, he may
be liable on the basis of the law of estoppel.
• In the case of Narayani Devi v Tagore Commercial Corporation
Ltd discussed earlier had no contract between the plaintiff and the
defendants but the defendants in their agreement had agreed to
pay some money to them even after her husband’s death. Here the
question to sue the defendants arose. After the death of the
husband same payments were received. Apart from this the
defendants had also called the plaintiff to administer some
documents in the same respect recognizing her rights. It was,
therefore, held that the had created Privity with the plaintiff by
their conduct and by acknowledgment and admission of her rights
hence the plaintiff was entitled to the action.

16. 3. Provision for marriage expenses or maintenance under family agreement
• Where, under a family agreement, the contract is
intended to secure a benefit to a third party, he may sue
in his own right as a beneficiary.
• In the case of Sundara Aiyangar v. Lakshmiammal
under a family agreement, the male members of the
family made a provision for the expenses of her marriage
to be contributed by the defendants, i.e.,
her father and brothers. She brought an action to
enforce the agreement between the defendants.
held- that even though the plaintiff was not a party to
the contract, yet the contract constituted a situation like
trust in her favor and therefore, she was entitled to the
amount.

17. 4. Covenants Running with Land
• A person who purchases a land with notice that the owner of land is
bound by certain duties created by an agreement or covenant
affecting the land, shall be bound by them although he was not a
party to the agreement.
• Smith & Snipes Hall Farm Ltd V River Douglas Catchment Board
• The defendants agreed with certain landowners adjoining a stream to
improve the banks of the stream and to maintain them in good
condition. The agreement was made for the benefit of all the
landowners and subsequent buyers of the same. The landlords on
their part, paid proportionate costs. Subsequently one of the landlords
sold his land to the plaintiff. There was negligence on the part of the
Board in maintaining the banks, which burst and the land was flooded.
• Held: Here the plaintiffs were strangers to the agreement with the
Board, but even then they were allowed to sue the Board for breach
of contract, for the whole arrangements was for the benefit of the
landowners who ever they might be and not merely the parties to the
agreement.

18. Consideration may be past, present & Future
• Section 2(d) of the Indian Contract Act, 1872,
recognizes three types of consideration
• 1.Has done or abstained from doing, (the
consideration is Past.)
• 2.Does or abstains from doing, (the
consideration is Executed or present.)
• 3.Promises to do or abstain from doing, (the
consideration is Executory or future.)

19. Past Consideration
• Past consideration means that the
consideration for the promise had been given
earlier and the promise has been made
afterwards.
• if A promises to pay B for something that B
has already performed (before the promise
was made), the performance of B's act is past
consideration .

20. Past services voluntarily rendered S 25(2)
• S25. Agreement without consideration, void-
• (2) it is a promise to compensate, wholly or in part,
a person who has already voluntarily done
something for the promisor, or something which the
promisor was legally compellable to do.
• Avoluntaryservice means a service rendered withou
t any request and there is no subsequent promise
for the same.
• For example if a person A has lost his watch and
another person B finds it and returns it to A and
now asks A to give him a reward for the same, A is
not liable for the same as A has not made any prior
promise for the reward.

21. • A finds B’s purse and gives it to him. B
promises to give A Rs.50. This is contract
• A supports B’s infant son. B promises to pay
A’s expenses in so doing. This is a contract

22. English Law Regarding to Past Consideration
• According to English law if the act has been
done before any promise is made later, it is
called past consideration and a past considerati
on is no consideration.
• The past act may explain why the promise was
given and may, thus, be a motive for the
promise, but it furnishes no legal consideration

23. McArdle, In re
• In accordance with the will of a father, his five children were
entitled to an equal share in a house after their mother’s death.
During the mother’ lifetime one of the testator’s son and his wife
lived in that house. At that time the wife made some improvements
in the house, incurring an expense of 488 pounds. Subsequently, all
the five children, who were to inherit the house, signed a document
in her favour stating that in consideration of your carrying out
certain alteration and improvements to the property, we hereby
agree that the executors shall repay to you from the said estate, the
sum of 488 pounds in settlement of the amount spent on such
improvements. On the mother’s death, the promisee claimed 488
pounds from the executors on the strength of the above promise,
but except her husband all the other promisors refused to pay.
• Held- since the expenditure had been incurred before the
document was signed, the consideration was past and therefore the
promise could not be enforced.

24. Past consideration at the promisor’s request
• Past consideration though given prior to the promise, but at
the request of the promisor, is deemed to be good
consideration for the promise.
• Lampleigh V Brathwait
• Thomas Braithwait, the defendant, who was guilty of
having committed a murder, requested Lampleigh , the
plaintiff to make efforts to obtain pardon for him from the
king. The plaintiff made efforts to secure the pardon, going
from one place to another, at his own expense. In
consideration of these efforts, the defendant promised to
pay 100 pounds to the plaintiff. The question was, whether
the plaintiff had a legal right to recover this amount.
• Held- the Plaintiff had right to enforce the promise and
recover the said amount because for this promise the
consideration in the form of efforts by the plaintiff to
obtain the pardon, had been there at the earlier request of
the defendant.

25. b. Present Consideration
• When one of the parties to the contract has performed
his part of the promise, which constitutes the
consideration for the promise by the other side, it is
known as executed consideration.
• EX - A makes an offer of reward of rs 500to anyone
who finds his lost dog and brings the same to him. B
finds the dog and delivers it to A. when B does so, that
amounts to acceptance of offer , which results in a
binding contract under which A is bound to pay Rs 500
to B and also giving consideration for the contract.

26. c. Future Consideration
• Consideration may also consists of an act
which is only promised to be done at some
future time.
• Ex- A agrees to sell and B to buy a quantity of
goods at a stated price. Here A has promised
to sell and B has promised to pay.

27. Such Act, abstinence or promise is called Consideration
• This means that if nothing is done in exchange for the
promise , i.e, when there is no act, abstinence or promise ,
there is no consideration.
• Consideration must be of some value in the eyes of law.
• White V Bluett
• The defendant owned a sum of money under a promissory
note (ಭರವಸೆ ಪತ್ರ) to his father. The defendant perpetually,
day and night, complained to his father that he had not
been treated equally with other children in the distribution
of his property. Thereupon the father promised to
discharge him from all liability in respect of loan provided
he would stop complaining against him, which the
defendant did. Whether the defendant’s promise to cease
his complaints was sufficient to sustain his father’s promise.

28. Held
• There was no consideration in reality. A
contract found upon such illusory
consideration appears to be as invalid as a
promise by a father made in consideration
that his son would not bore him.
• Even in India it is provided that consideration
must be good or valuable to sustain a
contract. It must be real and not illusory.

29. Subscription for charitable purpose
• A mere promise to contribute amount for charitable
purpose may not be enforceable. But if in exchange of
such a promise something is done then the same will
be enforceable.
• Abdul Aziz V Masum Ali the defendant promised to
pay a sum of Rs 500 as donation for the repair and
reconstruction of a mosque. Nothing was done to carry
out the repairs for the reconstruction of the mosque.
The defendant refused to pay the amount.
• Held- since nothing was done on the faith of the
promise, there was no consideration in this case and
therefore the defendant was not liable to pay the
subscription promised by him.

30. Continued..
• If something is done on the faith of the promise or some obligation
is incurred, that constitutes consideration for the promise and only
then it can be enforced.
• Kedar Nath V Gorie Mohamed
• there was a proposal to construct a town hall at Howrah provided
sufficient funds would be available by way of subscription. The
defendant was one of the subscribers, having promised to pay Rs
100 by signing his name in the book for the purpose. On the faith of
the promised subscription, the plaintiffs engaged a contractor for
the purpose of construction and started the construction work of
the proposed town hall. The defendant refused to pay his
subscription on the ground that he was not legally bound by his
promise because there was no consideration for the same.
• Held: engaging a contractor and starting the construction on the
faith of the promise was sufficient consideration to enforce the
promise and therefore the defendant was bound to pay the amount
promised by him.

31. English Law
• The English law are also similar in nature on this
point.
• Re Mountgarret case
• the promisor assured that certain school
authorities could depend upon him for expenses
towards cost of certain additions and
improvements in the school building. Designs
were prepared in the lifetime of the promisor and
shown to him, and he approved them. before the
plan could be executed, the promisor died.
• Held- his estate was liable in respect of the
expenses covered by the assured given by the
promisor.

32. Consideration need not be adequate
• Section 25 Explanation 2 - 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.

33. Illustration
• A agrees to sell a horse worth Rs. 1,000 for Rs. 10.
A’s consent to the agreement was freely given.
The agreement is a contract notwithstanding the
inadequacy of the consideration.
• Although inadequacy of consideration by itself is
not a ground for treating the contract as invalid
but it may be a factor which the court may take in
to consideration to know whether the consent of
a party was free or not.

34. Performance of existing legal duty is no consideration
• The person must promise to do something more than
what a person is already bound to do. Doing of
something which a person is already legally bound to
do is no consideration.
• Collins V Godefroy
• The plaintiff received a subpoena to give evidence in a
case. Thereafter defendant promised to pay him
money for the trouble which was to be taken by him in
appearing in that case. Plaintiff sued Defendant to
recover the amount promised by defendant.
• Held- Plaintiff having already received the subpoena
was already under a public duty to give evidence and
therefore the promise by defendant to pay did not
constitute consideration for the promise.

35. Performance of an existing duty to a third party
• Shadwell V Shadwell
• The plaintiff had already promised to marry on Miss Nicholl. One
day Plaintiff’s uncle wrote a letter to him stating as under-
• I am glad to hear of your marriage with Ellen Nicholl and as I
promised to assist you at starting, I am happy to tell you that I will
pay to you 150 pound yearly during my life, or until your annual
income derived from your profession of a chancery barrister shall
amount to 6 hundred guineas of which your own admission shall be
the only evidence that I shall receive or require.
• Thereafter Plaintiff married Miss Nicholl. He could not earn 600
guineas from his profession but no annuity was paid by his uncle to
him. He brought an action against his uncle’s executors after his
death to recover the amount.
• Held- promise was enforceable as it was supported by
consideration. Consideration in this case was benefit to uncle as
marriage of a near relative could be of interest to him, and also
detriment to Plaintiff as he might have incurred liabilities on the
faith of the promise.

36. Gopal Co Ltd V Hazarilal Co
• The Plaintiff entered into a contract with a textile mill to
purchase some bales of cotton part of which were to be
lifted in May 1948 and remaining in June 1948. the Plaintiff
lifted only part of the bales to be lifted in May 1948 but
refused to take further delivery on the ground that the
price of the cloth had fallen and lifting rest of the cotton at
the contracted price will result in huge loss to him.
• The defendants who were the sole selling agents of the mill
had guaranteed to the mill that the plaintiff would perform
the contract. They approached the plaintiff to request him
to take delivery of the remaining bales of the May quota,
assuring that the defendants will get the contract for June
quota cancelled. The defendant also assured that they
would purchase a part of the bales taken by the plaintiff for
May quota or pay to the plaintiff Rs 25000 instead, at the
option of the plaintiff.
• The plaintiff then took further of the cotton bales and
exercising an option brought an action defendant to
recover rs 25000.

37. Continued..
• Held- defendant guaranteed to the mill to procure the
performance of the contract by the plaintiff was good
consideration as they were interested in getting the
contract performed and further mutual promises i.e
promise by the defendant to pay the sum and the
promise by the plaintiff to lift the bales were
enforceable.
• MP High Court observed that second agreement brings
into existence new contract between the parties and
therefore a promise to do a thing which the promisee
is already bound to do under a contract with a third
party can be a good consideration

38. Promise to Pay less amount than due
• English Law :Rule in Pinnel’s Case(PinnelV Cole)
Doctrine of Part Performance.
• Whether part payment of a debt can be good
consideration.
• The defendant, Cole, owed the plaintiff, Pinnel, the
sum of £8 10s. Pinnel sued Cole for recovery of the
debt. Cole had, at Pinnel’s request, paid £5 2s 6d one
month before the debt was due to be paid and stated
that they had an agreement that this part payment
would discharge the entire debt.
• Held- Pinnel will succeed as that part payment of a
debt cannot be satisfaction for the whole. It was also
stated that original debt could be discharged only by
the introduction of a new element in the contract at
the creditor’s request i.e tender of chattel etc.

39. Exceptions to Pinnel’s Rule
• Payment in Kind- when promise is made to
deliver some chattel in lieu of a sum due, the
promise is valid even if the chattel is worth a
smaller sum than amount due.
• Payment before due date- when there is
payment and acceptance of the smaller sum of
money than originally due in satisfaction of the
whole debt before due date.
• Part Payment by a third party- payment of part
of sum due, by a third party is enough to
discharge whole debt.

40. Continued..
• Composition with the creditors- compromise
between the debtor and creditor, according to
which the creditors agree to be satisfied with
a percentage of the amount due in satisfaction
of the whole debt.
• Doctrine of Promissory Estoppel- The person
making the representation or promise
becomes bound by the statement asserted.

41. Indian Law
• Section 63: Every promisee may dispense with
or remit, wholly or in part, the performance of
the promise made to him, or may extend the
time for such performance,or may accept
instead of it any satisfaction which he thinks
fit.
• A owes B 5,000 rupees. A pays to B, and B
accepts, in satisfaction of the whole debt,
2,000 rupees paid at the time and place at
which the 5,000 rupees were payable. The
whole debt is discharged.

42. Forbearance to Sue
• S 127- Anything done, or any promise made, for
the benefit of the principal debtor, may be a
sufficient consideration to the surety for giving
the guarantee.
• A sells and delivers goods to B. C afterwards
requests A to forbear to sue B for the debt for a
year, and promises that, if he does so, C will pay
for them in default of payment by B. A agrees to
forbear as requested. This is a sufficient
consideration for C’s promise.

43. When no consideration is necessary?
• S 25- Agreement without consideration, void, unless -
• 1) it is in writing and registered or/and is made on account of
natural love and affection between parties standing in a near
relation to each other
• 2) is a promise to compensate for something done wholly or in part,
a person who has already voluntarily done something for the
promisor, or something which the promisor was legally compellable
to do
• 3) is a promise to pay a debt barred by limitation law.
• Explanation 1.—Nothing in this section shall affect the validity, as
between the donor and donee, of any gift actually made.
• Explanation 2.—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.

44. Exceptions to section 25
• 1. Promise made on account of natural love and
affection
• (i) When a contract is made on account of
naturl love and affection between the parties.
• (ii) The parties are standing in a near relation to
each other, and
• (iii) The contract is in writing and registered
under the law for the time being in force for the
registration of documents.
• (a) Examples: A, out of love and affection,
promises to give his wife, Rs.10,000. This promise
is put into writing and is registered. It will be a
valid contract without consideration.

45. Continued..
• 2. Promise to compensate for voluntary
services: When a contract is made to
compensate a person who has already done
something voluntarily for the promisor, or
done something which the promisor was
legally compellable to do. Here two conditions
must be fulfilled.
• First, the act must have been done voluntarily
and for the benefit of the promisor,
• Secondly, the intention of promisor must
have been to compensate the promisee.

46. Continued..
• 3. Promise to pay a time barred debt: According
to section 25(3), a promise by a debtor to pay a
time barred debt is enforceable it is made in
writing and is signed by the debtor or by his
agent generally or specially authorized in that
behalf. The promise may be to pay the whole or
any part of the debt. The debt must be such, of
which the creditor might have enforced payment
but for the limitation of suits.
• For example, A owes B Rs. 2,000 but the debt is
barred by the Law of Limitation. A signs written
promise to pay B Rs. 1,000 on account of the
debt. This is a valid contract.