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PROJECT
What is consideration?
Consideration – Introduction
WHAT IS CONSIDERATION?
Consideration is, in a sense, the price agreed to be paid by the promisee for
the obligation of the promisor. Consideration has, therefore, been defined in
an English judgment as “some right, interest, profit or benefit accruing to one
party (i.e. promisor) or forbearance, detriment, loss or responsibility given,
suffered or undertaken by the other (i.e., the promisee)” at the request of
the promisor. The word consideration was described in a very popular English
case of Currie v. Misa.
For example, A promises to carry B’s goods free of charge, and B allows A to
carry the same. Here A will be the promisor and B will be the promisee. The
question that arises in this case is, does B offer any consideration as against
A’s promise to carry his goods? The answer must be in the affirmative,
because the detriment or the disadvantage which B suffers in parting with the
goods so that goods may be carried by A is sufficient consideration as against
A’s promise to carry. So the essence of consideration is detriment suffered or
burden taken by the promisor. The promisor may or may not derive any
benefit from the consideration given by the promisee. But in most cases, the
promisor derives some benefit from the consideration which may be said to
be quid pro quo from the promise of the promisor.
Examples: (i) A promises to maintain B’s child, and B promises to pay A `1000
yearly for the purpose. Here, the promise of each party is the consideration
for the promise of the other party.
(ii) ‘C’ promises his debtor ‘D’ not to file a suit against him if he agrees to pay
` 10,000 more on the Principal amount. Here the abstinence of ‘C’ is the
consideration for ‘D’ promise to pay.
Example: R saves S’s goods from fire without being asked to do so. R cannot
demand any reward for his services, as the act being done voluntary.
Example: ‘A’ by gift deed transferred certain property to her daughter with
the direction that the daughter should pay an annuity to ‘A’s brother as had
been done by ‘A’. Whereas daughter executed a writing in favour of brother to
pay the annuity. Afterwards she refused to fulfil her promise saying that no
consideration had moved from A’s brother. The court held that ’A’s brother
was entitled to maintain the suit.(Chinnayya v. Ramayya)
Past Consideration: The words “has done or abstained from doing” [as
contained in Section 2(d)] are a recognition of the doctrine of past
consideration. In order to support a promise, a past consideration must
be moved by a previous request. It is the general principle that
consideration is given and accepted in exchange for the promise. The
consideration, if past, may be the motive but cannot be the real
consideration of a subsequent promise. But in the event of the services
being rendered in the past at the request or the desire of the promisor,
the subsequent promise is regarded as an admission that the past
consideration was not gratuitous.
Example: ’A’ performed some services to ‘B’ at his desire. After a week, ‘B’
promises to compensate ‘A’ for the work done by him. It is said to be present
consideration and A can sue B for recovering the promised money.
Example: X promises to sell a house worth `6 lacs for `1 lacs only, the
adequacy of the price in itself shall not render the transaction void, unless the
party pleads that transaction takes place under coercion, undue influence or
fraud.
Though under the Indian Contract Act, 1872 the consideration for an
agreement may proceed from a third party, the third party cannot sue on
agreement. Only a person who is party to a contract can sue on it. Thus, the
concept of stranger to consideration is a valid and is different from stranger
to a contract which means contract by the person who is not a party to the
contract.
1. In the case of trust, a beneficiary can enforce his right under the trust,
though he was not a party to the contract between the settler and the
trustee.
6. In the case of covenant running with the land, the person who purchases
land with notice that the owner of land is bound by certain duties
affecting land, the covenant affecting the land may be enforced by the
successor of the seller.
7. Contracts made by the agent: The principal can enforce the contracts
entered by his agent where the agent has acted within the scope of his
authority and in the name of the principal.
Example: P finds R’s purse and gives it to him. R promises to give P ` 1,000.
This is a valid contract.
3. Promise to pay time barred debt: Where a promise in writing signed by
the person making it or by his authorised agent, is made to pay a debt barred
by limitation it is valid without consideration [Section 25(3)].
Conclusion