Consideration

Consideration is what a promisor demands as the price for his promise. consideration is used in the sense 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. Consideration under the Indian Contract Act, 1872 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. Examples
A agrees to sell his house to B for Rs. 10,000. Bs promise to pay the sum of Rs. 10,000 is consideration for As promise to sell the house; & As promise to sell the house is the consideration for Bs promise to pay Rs. 10,000.

Consideration
Importance of Consideration A promise without consideration cannot create a legal obligation.

Contract consists of
(i) the promise & (ii) the consideration for the promise. A contract cannot be thought of without consideration. No consideration, no contract

Rules as to Consideration
(1) Consideration must move at the desire of the promisor
An act done at the desire of a third party is not a consideration. Example D constructed a market at the instance of the Collector of a District. The occupants of the shops in the said market promised to pay D a commission on articles sold through their shops. Held : There was no consideration because the money was not spent by the plaintiff at the request of the defendants, but voluntarily for a third person and thus the contract was void [Durga Prasad v. Baldeo (1881) 3 All. 211].

Rules as to Consideration
(2) Consideration may move from the promisee or any other person
The consideration must move at the desire of the promisor, it may be supplied either by the promisee or any other person.
Example A, a lady, by a gift deed transferred certain property to her daughter, with a direction that the daughter should pay an annuity to As brother, as had been done by A. The daughter agreed to pay the annuity. Afterwards, she declined to fulfil her promise saying that no consideration had moved from her uncle (As brother). The Court, however, held that the words the promisee or any other person clearly shows that the consideration need not necessarily move from the promisee, it may move from any other person. Hence, As brother was entitled to maintain the suit. Chinnayya v. Ramayya,

Rules as to Consideration
(3) Consideration need not be adequate
Adequacy of consideration is always the lookout of the promisor. Courts do not see whether every person making the promise has recovered full return for the promise. Example Thus, if A promises to sell a house worth Rs. 80,000 for Rs. 20,000 only, the inadequacy of the price in itself shall not render the transaction void.

But where a party pleads coercion, undue influence or fraud, inadequacy of consideration will also be a piece of evidence to be looked into.

Rules as to Consideration
(4) Consideration must be real and competent
Consideration must be real. If it is illusory, e.g., if a man promises to discover treasure by magic, the transaction is void. The consideration must also be competent, that is, it must be something to which law attaches some value. Thus, an agreement to do something which the promisor is already under a duty to do, is void being without competent consideration. Examples A promises to pay an existing debt punctually if, B, the creditor, gives him a discount. The agreement is without consideration and the discount cannot be enforced.

(5)

Consideration must be legal

Illegal consideration renders a contract void.

Rules as to Consideration
1. 2. 3. 4. 5. 6. Consideration must move at the desire of the promisor. Consideration may move from the promisee or any other person, i.e., a stranger to consideration may maintain a suit. A stranger to the contract cannot maintain a suit. Consideration need not be adequate. Consideration must he real and competent. Consideration must be legal.

Kinds of Consideration

1.

Executed or Present.
Consideration which moves simultaneously with the promise is called present consideration. Cash Sales is present consideration.

2.

Executory or Future.
When the consideration is to move at a future date, it is called future or executory consideration. It takes the form of a promise to be performed in the future.

Example A promises B to deliver him 100 bags of wheat at the future date. B promises to pay for it on delivery.

Kinds of Consideration
3. Past.
A past consideration is something wholly done, forborne, or suffered before the making of the agreement.
Example A saves Bs life. B promises to pay A Rs. 1,000 out of gratitude. The consideration for Bs promise is a past consideration, something done before making of the promise. Past consideration is a good consideration.

Exceptions to no Consideration
Exceptions to the Rule No Consideration No Contract
The general rule of law is that an agreement without consideration is void. A contract, even though without consideration, is enforceable. 1. An agreement made without consideration is valid if (a) it is expressed in writing, and ( b) it is registered (under the law for the time being in force for registration of documents), and (c) it is made on account of natural love and affection, and ( d) made between parties standing in a near relation to each other.

Examples
An elder brother, on account of natural love and affection, promised to pay the debts of his younger brother. The agreement was put to writing and was registered

Exceptions to no Consideration
2. A promise made without consideration is valid if, 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 [Section 25 (2)].

Examples A finds Bs purse and gives it to him. B promises to give A Rs. 50. This is a valid contract. A supports Bs infant son. B promises to pay As expenses in so doing. This is a valid contract. 3. A promise to pay, wholly or in part a debt which is barred by the law of limitation can be renewed & enforced if (a) it is in writing, and (b) is signed by the debtor or his authorised agent A debt barred by limitation cannot be recovered.

Exceptions to no Consideration
4. 5. Consideration is not necessary to effect bailment No consideration is required to create an agency. Notice, however, that if no consideration has passed to the agent, he is only a gratuitous agent and is not bound to do the work entrusted to him, although if he begins the work, he must do it to the satisfaction of his principal.

6.

The rule no consideration no contract does not apply to completed gifts. Gifts once made cannot be recovered on the ground of absence of consideration.