2. Consideration
• Definition of Consideration under Sec. 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
abstain from doing something, such act or abstinence
or promise is called a consideration for the promise.”
3. Contd…
1) Consideration only at the desire of the promisor
It is essential that the consideration must have been
given at the desire of the promisor, rather than
merely voluntarily or at the instance of some third
party.
2) Consideration by Promisee or any other person
(Privity of Consideration)
According to Indian law, consideration may be given
by the promisee or any other person. In England, the
position is different. There the rule is the
consideration must be move from the promisee and
nobody else.
4. Privity Of Contract
The doctrine of Privity of Contract means that only
those persons who are parties to the contract can
enforce the same.
A stranger to a contract cannot enforce a contract
even though the contract may have been entered for
his benefit.
The rule that Privity of Contract is needed and a
stranger to a contract cannot bring an action is
equally applicable in India as in England.
5. Exceptions to the Rule that
Stranger to a contract cannot sue
Trust of Contractual Rights of Beneficiary under a
contract: If in a contract between A and B, beneficial
right in respect of some property is created in favour
of C, then C can enforce his claim on the basis of the
right conferred upon him.
Conduct, Acknowledgement or Admission:
Sometimes there may be no privity of contract
between two parties, but if one of them by his
conduct or acknowledgement recognises the right of
the other party to sue him, he may be liable on the
basis of Law of estoppel.
6. Contd..
Provision for marriage expenses or maintenance
under family arrangement: Where, under a family
arrangement, the contract is intended to secure a
benefit to a third party, he/she may sue his/her own
right as a beneficiary. Such an action has been
allowed in many cases, where on the partition of a
joint family property between the male members, a
provision is made for the maintenance for the female
members.
Similar is the case when at the time of the partition
the parties agree to incur the marriage expenses of a
female who is not a party to the contract.
7. Types of Contract
• Bilateral contract: an agreement by which both
parties exchange mutual promises, each promise is
regarded as sufficient consideration for the other.
• Unilateral contract: an agreement by which one
party makes a promise in exchange for he other's
performance, the performance is consideration for
the promise, while the promise is consideration for
the performance.
8. Contd…
• Consideration must have a value that can be
objectively determined. A promise, for example, to
make a gift or a promise of love or affection is not
enforceable because of the subjective nature of the
promise.
9. Example
• if someone offered to drive you to work on Mondays
and Tuesdays in exchange for your promise to return
the favor on Wednesdays and Thursdays, a Bilateral
Contract would be formed binding both of you once
you provided consideration by accepting those terms.
• But if that same person offered to pay you $10 each
day you drove him to work, a unilateral contract
would be formed, binding only upon the promisor until
you provided consideration by driving him to work on
a particular day.
10. Failure of Consideration
• " When the intended consideration is found to worth
less than expected, is damaged or destroyed, or
performance is not made properly (as when the
mechanic does not make the car run properly).
• Acts which are illegal or so immoral that they are
against established public policy cannot serve as
consideration for enforceable contracts. Examples:
gambling where outlawed, hiring someone to break a
skater's knee or inducing someone to breach an
agreement (talk someone into backing out of a
promise.)
