MODULE 3

ESSENTIALS OF
CONTRACT
 All agreements are not contract but all
contracts are agreements

S.10:All agreements
are contracts if they
are made by the free
consent of parties
competent to
contract, for a lawful
consideration and
with a lawful object,
and are not hereby
ESSENTIALS OF A CONTRACT
 TYPES OF CONTRACT
VALIDITY FORMATION PERFORMANCE

Valid Express Excecuted

Void Executory
agreement
Implied
Unilateral
Void contract Quasi Bilateral
Voidable Tacit
Illegal
 DOCTRINE OF
CONSIDERATION
S.25: An agreement
made without
consideration is void
bargain element of
the contract, also
known as the price of
a promise or
obligation
QUID PRO QUO -
("something for
something" in Latin)
BLACKSTONE: consideration is the
recompense given by the party contracting
to the other

POLLOCK: consideration is the price for which the

promise of the other is brought, and the promise
thus given for value is enforceable

Justice PATTERSON: consideration means something

which is of some value in the eyes of the law. It may be
some benefit to the plaintiff or some detriment to the
defendant
S.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

1
A promise to carry Bs goods free of charge and B
allows A to itcarry
Therefore the same. B does not offer any
can be
consideration
concluded that:towards A. is this a valid contract?
1.CONSIDERATION =
PROMISE/PERFORM
ANCE THAT PARTIES
EXCHANGE WITH
EACH OTHER
2.FORM OF
CONSIDERATION =
SOME BENEFIR,
RIGHT OR PROFIT
TO ONE PARTY/
SOME DETRIMENT,
LOSS OR
 TOPICS TO BE COVERED
1.Legal requirements for

consideration

2.Exceptions to consideration
 LEGAL RULES FOR
CONSIDERATION
1.
1.AT
ATTHE
THEDESIRE
DESIREOF
OFTHE
THEPROMISOR
PROMISOR

Durga Prasad vs Baldeo, (1880) 3 All 221

Acts done at
request
Kedar Nath vs Gorie Mohammed,1886 ILR
14 Cal 64
CWT vs Her Highness Vijayaba, (1979) 2
SCC 213
Promises of
Charitable Nature

Madras High Court:

Perumal Mudaliar vs Sendanatha Mudaliar,
AIR 1918 Mad 311
Doraswami Iyer vs Arunachala Ayyar, AIR
1936 Mad 135

Unilateral Promises

Abdul Aziz vs Musum Ali, AIR 1914

All 22
Revocation of
Unilateral Promises

Errington vs Errington, (1952) 1 KB

290
HOUSE OF LORDS: the mere
commencement of prformance does not
convert the offer into a contract in the
sense that the promisor is bound to stay
with his promise, but that if he revokes it,
he may be sued for damages.
 PROMISSORY
ESTOPPEL
An equitable doctrine
evolved to avoid
injustice
Relatively new
development in the
area of estoppel
Earlier known as
raising equity
Lord Denning gave a
The true principle of promissal
estoppel is where one party has by his
words or conduct made to the other a
clear and unequivocal promise which
is intented to create legal relation or
effect a legal relationship to arise in
the future , knowing or intenting that
it would be acted upon by the other
party to whom the promise is made
and it is in fact so acted upon by the
other party, the promise would be
binding on the party making it and he
S.115- ESTOPPEL: When one
person has by his declaration, act
or omission, intentionally caused
or permitted another person to
believe a thing to be true and to
act upon such belief, neither he
nor his representative shall be
allowed, in any suit or proceeding
between himself and such person
or his representative, to deny the
truth of that thing.
GOVERNMENT AGENCIES AND
PROMISOOTY ESTOPPEL

C. SANKARANARAYAN vs STATE OF
KERALA, AIR 1980 SC 1283
MULAMCHNAD vs STATE OF M.P, AIR
1968 SC 1218
MOTILAL PADAMPAL SUGAR MILLS vs
STATE OF U.P, AIR 1979 SC 621
STATE OF RAJASTHAN vs MAHAVIR OIL
MILLS, AIR 1979 SC 621
POURNAMI OIL MILLS vs STATE OF
KERALA, (1986)
ESTOPPEL OF LICENSEE

COLCHESTER BOROUGHT COUNCIL vs SMITH, (1991) 2 All ER 29

Ch D
2. PROMISEE OR ANY OTHER PERSON
2. PROMISEE OR ANY OTHER PERSON

DUTTON vs POOLE, (1677)

83 ER 523
Position of third party/ origin of privity of
contract
Tweddle vs Atkinson, 123 ER
762

Dunlop Pneumatic Tyre Co vs

Selfridge & Co, (1915) AC 847
shopkeeper supplier manufacturer
Fundamental propositions of
english :
1.Consideration from promisee
only PRIVITY OF
CONSIDERATION
2.Third party
CRITICISMS:
cannot have a
benefit
In from
1937 the Law a contract-
Revision PRIVITY
Committee
OF CONTRACT
recommended abolition of the concept of
privity of contract
Beswick vs Beswick, (1966) 3 All ER 1
 Position in India

Non application of the rule in

Khwaja Muhammad Khan vs
Hussaini Begum, (1910 12 Bom LR
632
The rule extended in Jamna Das
vs Ram Autar, (1911) ILR All 34
Later Supreme Court affirmed in
M.C Chacko vs State Bank of
Travancore, (1969) 2 SCC 343
 PRIVITY OF CONSIDERATION

Chinnaya vs Ramayya, (1882) 4

Mad 137
EXCEPTIONS TO PRIVITY
RULE
BENEFECIARIES UNDER TRUST OR

CHARGE
Khwaja Muhammad Khan vs
Hussaini Begum, (1910) 37 IA
152
Rana Uma Nath Bakhsh Singh vs
Jang Bahadur., AIR 1938 PC 245
Gregory & Parker vs Williams,
(1817) 36 ER 224
Touche vs Metropolitan Rly
Warehousing Co, (1871) 6 Ch App
 TRUST

ACTUAL CONSTRUCTIV
E
FAMILY ARRANGEMENTS

Daropti v Jaspat Rai, (1905) PR

171
ACKNOWLEDGMENT OR ESTOPPEL

Devaraja Urs vs Ram Krishnaiah,

AIR 1952 Mys 109
Kshirodebehari Datta vs
Mangobinda Panda, (1933) 62 Cal
841
COVENANTS RUNNING WITH LAND

Tulk vs Moxhay, (1919) 88 LJKB

861 HL
3. ..has done or abstained from
3. ..has done or abstained from
doing.
doing.

Consideration is an act or abstinence

which has already been done at the
desire of the promisor, or is in progress
or is promised to be done in future
 Consideration is an act or abstinence
which has already been done at the
desire of the promisor, or is in progress
or is promised to be done in future

Past Present Future

consideratioconsiderati consideration
n on
 PAST CONSIDERATION
Xs son was
rescued from
drowning by Y
on 15th August
at the request
of X.
subsequently
on 17th , X
promised to
pay Rs.500 for
the service
rendered in the
past. Ys
consideration in
 PAST CONSIDERATION

Past Voluntary Past service at

service request
England Law: According to
England Law, Consideration
must be either present or
future. Thus in England
past Consideration is not
Valid but act done at
request is valid
Mc Ardle, In re (1951) 1 Ch 669
If past act made at request, then it can be
considered as a good consideration.-
Lampleigh v Brathwait, 1980 ER 255
Indian Law: According to
Indian law, Consideration
may be past, present or
future. So here past
consideration is Valid but act
done at request not covered
under any provision
S.25(2): a promise to compensate, wholly
or in part, a person who has already
voluntarily done something for the
promiser
EXECUTED CONSIDERATION

EXECUTED CONSIDERATION MEANS AN ACT

WHICH HAS BEEN DONE IN RESPONSE TO A
POSITIVE PROMISE.

EG: Reward for finding a lost article

EXECUTORY CONSIDERATION

Liability is outstanding on
both the sides
An act which has been
already been, or is in the
procss of being done.
4. such act, abstinence or promise is
4. such act, abstinence or promise is
called
calledconsideration
consideration

Whether worthless act make good

consideration?

WHITE VS BLUETT, (1853) 23 LJ Ex 36

ADEQUECY OF CONSIDERATION
- Effect of inadequacy:
explanation under S.25(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.

De La Bere v Pearson, (1908) 1 KB 280

OTHER FORMS OF CONSIDERATION:

Forbearence to sue
Compromising a suit