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Classification of Contracts

Contracts on the basis of creation:

a) Express contract: Express contract is one which is made by words spoken or written. Example
No. 1: X says to Y, will you buy a car for Rs. 100000? Y says to X, I am ready to buy you car for
Rs. 100000. It is an express contract made rally. Example No. 2: X writes a letter to Y, I offer to
sell my car for Rs. 100000 to you. Y send a letter to Y, I am ready to buy you car for Rs. 100000.
It is an express contract made in writing.

b) Implied contract: An implied contract is one which is made otherwise than by works spoken or
written. It is inferred from the conduct of a person or the circumstance of the particular case.
Example: X, a coolie in uniform picks up the bag of Y to carry it from railway platform to the ------
without being used by Y to do so and Y allow it. In this case there is an implied offer by the coolie
and an implied acceptance by the passenger. Now, there is an implied contract between the
coolie and the passenger is bound to pay for the services of the coolie.

c) Quasi or constructive contract: It is a contract in which there is no intention either side to make
a contract, but the law imposes contract. In such a contract eights and obligations arise not by
any agreement between the practice but by operation of law. e.g where certain books are
delivered to a wrong address the addresses is under an obligation to either pay for them or return
them.

Contracts on the basis of execution:

a) Executed contract: It is a contract where both the parties to the contract have fulfilled their
respective obligations under the contract. Example: X offer to sell his car to Y for Rs. 1 lakh, Y
accepts X offer. X delivers the car to y and Y pays Rs. 1 lakh to X. it is an executed contract.

b) Executory contract: It is a contract where both the parties to the contract have still to perform
their respective obligations. Example: X offers to sell his car to y for Rs. 1 lakh. Y accepts X offer.
It the car has not yet been delivered by X and the price has not yet been paid by Y, it is an
Executory contract.
c) Partly executed and partly executory contract: It is a contract where one of the parties to the
contract has fulfilled his obligation and the other party has still to perform his obligation. E.g X
offers to sell his car to y for Rs. 1 lakh on a credit of 1 month. Y accepts X offer. X sells the car to
Y. here the contract is executed as to X and Executory as to Y.

Contracts on the basis of enforceability:

a) Valid contract: A contract which satisfies all the conditions prescribed by law is a valid contract.
E.g. X offers to marry y. y accepts X offer. This is a valid contract.

b) Void Contract: the term void contract is described as under section 2(j) of I.CA, 1872, A contract
which cases to be enforceable by law becomes void when it ceases to be enforceable. In other
words, a void contract is a contract which is valid when entered into but which subsequently
became void due to impossibility of performance, change of law or some other reason. E.g. X
offers to marry Y, Y accepts X offer. Later on Y dies this contract was valid at the time of its
formation but became void at the death of Y.

c) Void Agreement: According to Section 2(g), an agreement not enforceable by law is said to be
void. Such agreements are void- ab- initio which means that they are unenforceable right from the
time they are made. E.g. in agreement with a minor or a person of unsound mind is void ab-initio
because a mino or a person of unsound mind is incompetent to contract.

d) Voidable contract: According to section 2(i) of the Indian contract act, 1872, arrangement which
is enforceable by law at the option of one or more of the parties thereon but not at the option of
the other or other, is a voidable contract. In other words, A voidable contract is one which can be
set aside or avoided at the option of the aggrieved party. Until the contract is set aside by the
aggrieved party, it remains a valid contract. For e.g. a contract is treated as voidable at the option
of the party whose consent has been obtained under influence or fraud or misinterpretation. E.g.
X threatens to kill Y, if the does not sell his house for Rs. 1 lakh to X. Y sells his house to X and
receives payment. Here, Y consent has been obtained by coercion and hence this contract is void
able at the option of Y the aggrieved party. If Y decides to avoid the contract he will have to return
Rs. 1 lakh which he had received from X. If Y does not exercise his option to repudiate the
contract within a reasonable time and in the meantime Z purchases that house from X for 1 lakh
in good faith. Y can not repudiate the contract.
e) Illegal Agreement: An illegal agreement is one the object of which is unlawful. Such an
agreement cannot be enforced bylaw. Thus, illegal agreements are always void ab- initio (i.e.
void from the very beginning) e.g. X agrees to y Rs. 1 lakh Y kills Z. Y kill and claims Rs. 1 lakh. Y
cannot recover from X because the agreement between X and Y is illegal and also its object is
unlawful.

f) Unenforceable contract: It is contract which is actually valid but cannot be enforced because of
some technical defect (such as not in writing, under stamped). Such contracts can be enforced if
the technical defect involved is removed.

Essential elements of a valid contract

According to section 10 All agreements are contracts if they are made by the free consent of the
parties competent to contract, for a lawful consideration and with a lawful object and are not hereby
expressly declared to be void. The analysis of the provisions of section 10 shows that a valid contract
must have certain essential elements. These elements are as given below:

1. Proper offer and acceptance: There must be at least two parties one making the offer and the other
accepting it. Such offer and acceptance must be valid. An offer to be valid must fulfill certain conditions
such as it must intend to create legal relations, its terms must be certain and unambiguous, it must be
communicated to the person to whom it is made, etc. An acceptance to be valid must fulfill certain
conditions, such as it must be absolute and unqualified, it must be made in the prescribed manner, it must
be communicated by an authorized person before the offer lapses.

2. Intention to create legal relationship: There must be an intention among the parties to create a legal
relationship. In case of social or domestic agreements, the usual presumption is that the parties do not
intend to create legal relationship, but in commercial or business agreements, the usual presumption is
that the parties intend to create legal relationship unless otherwise agreed upon. E.g. X invited Y to a
dinner. Y accepted the invitation. It is a social agreement. It X fails to serve dinner to Y, Y cannot go to the
courts of law for enforcing the agreement. Similarly, if Y fails to attend the dinner, X cannot go to the court
of law for enforcing the agreement.

1. Essential elements of a valid contract: According to section 10 all agreements are contracts if they
are made by free consent of the parties competent to contract, for a lawful consideration and with a lawful
object and are not hereby expressly declared to be void.
a) Proper offer and acceptance: There must be at least two parties one making the offer and other
accepting it. Such offer and acceptance must be valid and offered to the valid must fulfill certain
conditions. Such as it must intend to create legal relationship, in terms and must be certain and
unambiguous, it must be communicated to the person to whom it is made etc and acceptance to be valid
must fulfill certain conditions. Such as it must be absolute. It must be made in the prescribed manner; it
must be unauthorized person before the offer lapses.

b) Intention to create legal relationship: There must be an intention among the parties to create a
legal relationship. In case of social or domestic agreements, the usual presumption is that the parties do
not intend to create legal relationship but in commercial in business agreement, the usual presumption is
that parties intend to create legal relationship unless otherwise agreed upon.

c) Free consent: there must be a free consent of the parties to the contract. According to section 14,
consent is said to be free when it is not cause by

i) Order influence ii) Fraud iii) mistake iv) misinterpretation

If the consent of the party is not free then not valid contract comes into existence.

d) Capacity of parties: The parties to an agreement must be competent to contract. According to section
11 of ICA 1872 a person is competent to contract who is of the age of majority according to the law to
which he is subject and who is of a sound mind and is not disqualified from contract by any law to which
he is subject.

e) Lawful consideration: Lawful consideration is that in which both have mutual consideration.

f) Lawful object: When contract include some fraud or some illegal factor then both parties cannot file a
suit against each other.

g) Agreement not expressly declared void

h) Certainty of meaning: When terms and conditions are not clearly defined. Both the parties should
have clarity of contract.

i) Possibility of performance: Case which is not really possible a contract cannot take place contract
cannot come into existence unless until activities are not possible.
j) Legal formalities: Hand written documents, stamps or signatures etc are must for a contract. If legal
formalities are not fulfill it will not be considered as a valid contract.

Law

Law in simple terms implies rules or set of rules which govern the external human actions and conduct of
individuals, institutions and government with each other. These rules must be enforced by sovereign (The
Ruler or The Ruling Government) and must receive due recognition. Source of the law is sovereign
authority. Law is command of sovereign authority. People in the state have to follow these common rules
for the peaceful living. It is on e of the function of the state to regulate these rules by making necessary
arrangements and punish the people who do not follow these rules according the provisions of concerned
act in vogue.

Definition: -

Salmond: Law is the body of principles recognized and applied by the state in the administration of the
justice.

Austin: A law is rule of conduct imposed by the sovereign

Holland: Law is rule of external human action enforced by sovereign

Characteristics of the Law

a) Mainly law is related to external human action but sometimes internal action can also be the
subject of law,

b) Law is conduct imposed and enforced by sovereign the supreme authority the government. The
citizens have to follow these rules.

c) These rules of conduct are very essential for peaceful and prosperous living of the people. They
help all the people to have maximum freedom.

d) Law is supreme and applicable to all. It is same for poor and rich, for the rulers as well as
citizens.
Legal rules related to offer

a) Offer must be communicated: It is true that one cannot make an offer to oneself. The offer should be

communicated to the person to whom it is made. It is obvious that a promise cannot give any response to the offer

unless it is communicated to him. Communication is must when there it is specific or general offer.

b) Offer may be general or specific person: Even though it is mentioned in the definition of the offer that offer must

be made to a specific person but the court is the view that it can be made to a public at large. When offer is made to a

specific person then only that person is duly authorized agent has a right to accept it or not. When it is made to a

general public them it can be accepted by anyone.

a) Offer must be made to obtain the assent of another: An offer must be made with the motive of

obtaining the assent of the other party. A mere statement of intention to make an offer is not an offered.

b) Offer should be clear and specific: It means the terms of offer should be clear, specific and not vague. If

the terms are not clearly stated then even through accepted it will not create a valid contract. E.g. A said to

B, I will sell you oil at a reasonable price. Since the terms are not clear, hence no contract.

c) Different from imitation to offer: An offer must be distinguished from more imitation to offer sometimes

certain actions seems to be an offer but actually are not so. E.g. catalogues and price list.

d) No term the non compliance of which amount to acceptance: An offer should not contain any such

term the non compliance of which amounts to acceptance as one cannot say while making the offer that if

the offer is not accepted before a certain date, it will be presumed to have been accepted. E.g. A boy
proposes a girl for marriage and said if you dont reply I assume it to be yes from your side.

e) It should not be in the form of order: An offer should be in the mode of the proposal and not order. Order

is imposed on the promise while offer is first to obtain his or her willingness on the subject matter of

contracted e.g. A teacher said to student you have to take coaching from me else I will fail you in exam.

f) Counter offer is the rejection of original offer: Counter offer is the rejection of the original offer. Once

the counter offer is made at that very moment the original offer loses its significance.

Offer may be express or implied: i) Express offer: An offer in which terms are made clear by both the parties in

written or spoken words. ii) Implied offer: It is an offer which is not directly made to the second party but it is the result

of circumstances.
Contracts can be classified on a number of basis:
1. Classification on the basis of creation or formation:

A contract may be created - (i) expressly, (ii) impliedly.

(i) Express Contract:

An express contract may be created orally, i.e., by words spoken or written. When one party makes
the offer by words spoken or written and the other party accepts the same accordingly, there is an
express contract created.

(ii) Implied Contract:

An implied contract is created by the conduct of acts of the parties and not by words spoken or
written. For example, A boards a public bus, say a D.T.C. bus in Delhi or a M.E.S.T. bus in Mumbai.

(iii) Quasi-Contracts:

Indian Contract Act has named such contracts as "Certain relations resembling those created by
contracts." Such contracts are not created expressly or impliedly by the parties but are created by law
on the equitable principle that a person shall not be allowed to become rich at the expense of the
other. For example, A, a trader, leaves certain goods by mistake at B's house. B must either return the
goods or pay the price.

(iv) Unenforceable Contracts:

The term 'Unenforceable Contract' is used for those contracts which are perfectly valid but cannot be
enforced due to certain technical defects such as under stamping. These types of contracts cannot be
placed in the category of void or illegal agreement. Hence the new term "Unenforceable Contract" is
justified. If the defect can be removed, these contracts can be enforced. For example, if the requisite
stamp is affixed, the Court may enforce such a contract.

2. Classification on the basis of Execution:

(i) Executed Contract:

Where a contract has been performed by both the parties, it is called an executed contract. For
example, A agrees to sell a sofa set to B. A has delivered the sofa set and B has paid the price.

(ii) Executory Contracts:


A contract where both the parties have not yet performed their obligation, the contract is called
executory contract. If in the above example, both have to perform their obligations, it will be an
executory contract.

(iii) Partly executed and executory contract:

Where only one of the parties to the contract has performed its obligation, the contract is called
partly executed and executory. For example, in the above case if A delivered the sofa set, but B has
not made the payment, it will be a partly executed and executory contract.

(iv) Bilateral Contracts:

Executed and executory contracts are also called bilateral contracts as both the parties have either
performed or have to perform their obligation.

(v) Unilateral Contracts:

A partly executed contract is also called unilateral contract as the contract is to be performed by only
one of the parties i.e., unilaterally.

3. Classification on the basis of Formality:

(i) Formal Contracts:

A formal contract is one which is entered into in a particular or prescribed form. It is in writing and
is to be signed, sealed and delivered by the parties. In addition witness and attestation may also be
necessary. Formal contracts can be sub-divided into:

(a) Contracts of record which may take the form of a judgement of a court or recognizance. A court
judgement on being recorded is called a contract of record. Recognizance is a written
acknowledgement of debt due to the Crown or the State.

(b) Contracts under seal are written documents signed, sealed and delivered by the parties. Such a
contract is based on form alone. No consideration is necessary in such contract.

(ii) Simple Contract:

All contracts which are not formal contracts, i.e., which are not made under seal are simple contracts.
These can be made orally or in writing and must be supported by consideration.
Breach of Contract :-
Breach means violation of law. The breach of contract means to break the contract or not to act upon the
contract. When any party fails to perform its duties in a lawful contract it is called breach of contract. The
injured party has a right to take action against the party who has failed to perform his part of contract.

REMEDIES or RIGHTS OF AGGRIEVED PARTY :-


On the breach of contract following remedies are available to an injured party.

1. Claim for Damages :-


If contract is broken, the injured party has a remedy to claim for damages and losses suffered by him.
Injured party is entitled to receive compensation of loss from the party who has broken the contract.The
aim of this remedy is to provide the injured party the same benefits which it would receive in case of the
performance of contract.

Following are important types of damages :

i. :- Special Damage :- Under a special circumstances special damages takes place from breach of
contract.

Example :- If the machinery of any factory arrives late and due to this reason one party suffers a loss or
profits it is called special damage.

ii. General Damage :- If injured party suffers a loss due to non performance of the contract it is called
general damage. The injured party can recover from the guilty party the ordinary damages suffered by
him.

Example :- Mr. Robin contracts to pay 3 lac to Mr. Peter on 1st April. Mr. Robin does not pay the money
on that day. Mr. Peter is unable to pay her debts and suffer a loss. Mr. Robin is liable to pay Mr. Peter
principal amount and also interest on it.

iii. Exemplary Damages :- These damages are awarded in order to punish the guilty party for the breach
of contract and not to compensate the loss of the injured party.

These damages are awarded in dishonor of cheque and case of breach of contract to marry.
iv :- Nominal Damages :- When the injured party suffers no loss the contract may award him nominal
damages to recognize his right.

2. Suit For Injunction :-


Injunction means the order of the court. It may be used to prevent any wrongful act. In case of contract it
is used to prevent that act which is involved in breach of contract.

Example :- Suppose Mr. Yuvraj a film producer contracts with Miss. Neha to sign in his movies for ten
years and not to sign in any other film. After one year she contacts with other film producer Mr. Sethy
during the period of contract. The court may issue injunction on a suit by Mr. Yuvraj to restrain Miss. Neha
from signing in film of Mr. Sethy.

3. Specific Performance :-
A degree of specific performance is an order of the court. It is usually granted in those contracts related to
house, land and plot. In some cases compensation to pay. So court may issue the degree of specific
performance and can compel to defaulter party the performance of contract.

Example :- Mr. Tipu agrees to sell his house to Mr. Amir, who agrees to purchase. But due to some
reasons Mr. Tipu commits breach . At the suit of Mr. Amir court may ask Mr. Tipu to carry out the contract.

4. Recession Of The Contract :-


For the breach of contract it is an equitable remedy. When one party of the contract commits breach and
other party may rescued the contract that he may get free from all its obligations for the performance of
contract. Due to such recession and non performance injured party is entitled to get compensation for the
damages and loss.

Example :- Mr. Sanjay pledges the defence savings certificates to Mr. Panday and get loan. But Mr.
Sunjay does not return the loan. Mr. Panday may file a suit for recession of the contract responsibility to
return the defence savings certificates on payment.

5. Quantum Merit :-
It means"So much as deserves" we can explain it by the following example :

Example :- Suppose Mr. Ali entered into contract with Mr. Shawn that they will construct one room jointly.
Mr. Ali will construct the wall while Mr . Shawn will build the roof. Now Mr. Ali completes his job but Mr.
Shawn fails to build the roof of the room. Now in this case Mr. Ali is entitled to receive the award
according to his work done by him.This claim of Mr. Ali will be called a claim of "Quantum Merit." The
court will award to Mr. Ali keeping in view the work or services performed by him.
offer
Offer or Proposal and Acceptance
One of the early steps in the formation of a contract lies in arriving at an agreement
between the contracting parties by means of an offer and acceptance. Thus, when one party
(the offeror) makes a definite proposal to another party (the offeree) and/ the offeree accepts it
in its entirety and without any qualification, there is a meeting of the minds of the parties, and a
contract comes into being, assuming that all other elements are also present.

WhatisanOfferoraProposal?
An offer is a proposal by one person, whereby he expresses his willingness to
enter into a contractual obligation in- return for a promise, act or forbearance. Section
2(a) defines proposal or offer as "when one person signifies to another his willingness
to do or abstain from doing anything with a view to obtaining the assent of that other to
such act or abstinence, he is said to make a proposal."

RulesGoverningOffers
A valid offer must comply with the following rules:
(a) An offer must be clear, definite, complete and final. It must not be vague. For
example, a promise to pay an increased .price for a horse if it proves lucky to
promiser, is too vague and is not binding.

(b) An offer must be communicated to the offeree. An offer becomes effective only
when it has been communicated to the offeree so as to give him an opportunity to
accept or reject the same.
(c) The communication of an offer may be made by express words-oral or written-or it may be
implied by conduct. A offers his car to B for Rs. 10,000. It is an expre~s offer. A bus plying
on a definite route goes along the street.

This is an implied offer on the part of the owners of the bus to carry passengers at the
scheduled fares for the various stages.
(d) The communication of the offer may be general or specific. Where an offer is made to a
specific person it is called specific offer and it can be accepted only by that person. But
when an offer is addressed to an uncertain body of individuals Le. the world at large, it is a
general offer and can be accepted by any member of the general public by fulfilling the
condition laid down in the offer. The leading case on the subject is Carlill v. Carbolic
Smoke Ball Co. The company offered by advertisement, a reward of 100 to anyone who
contacted influenza after using their smoke ball in the specified manner. Mrs. Carlill did use
smoke ball in the specified manner, but was attacked by influenza. She claimed the reward
and it was held that she could recover the reward as general offer can be accepted by
anybody. Since this offer is of a continuing nature, more than one person can accept it and
can even claim the reward. But if the offer of reward is for seeking some information or
seeking the restoration of missing thing, then the offer can be accepted by one individual
who does it fi rst of all. The condition is that the claimant must have prior knowledge of the
reward before doing that act or providing that information.
Example: A advertise in the newspapers that he will pay rupees one thousand to anyone
who restores to him his lost son. B without knowing of this reward"finds A's
ost son and restore him to A. In this case since B did not know of the reward, he
~
cannot claim it from A even though he finds A's lost son and restores him to A.
In India also, in the case of Harbhajan Lal v. Harcharan Lal (AlA 1925 All. 539), the same
rule was applied. In this case, a young boy ran away from his father's home. The father issued a
pamphlet offering a reward of As. 500 to anybody who would bring the boy home. The plaintiff
saw the boy at a railway station and sent a telegram to the boy's father. It was held that the
handbill was an offer open to the world at large and was capable to acceptance by any person
who fulfilled the conditions contained in the offer. The plaintiff substantially performed the
conditions and was entitled to the. reward offered.

AnOffermustbeDistinguishedfrom
(a) An invitation to treat or an invitation to make an offer: e.g., an auctioneer's
request for bids (which are offered by the bidders), the display of goods in a shop
window with prices marked upon them, or the display of priced goods in a self-service
store or a shopke.eper's catalogue of prices are invitations to an offer.

(b) A mere statement of intention: e.g., an announcement of a coming auction sale.


Thus a person who attended the advertised place of auction could not sue for breach of
contact if the auction was cancelled (Harris v. Nickerson (1873) L.A. 8 QB 286).
(c) A mere communication of information in the course of negotiation: e.g., a
statement of the price at which one is prepared to conside( negotiating the sale of
piece of land (Harvey v. Facey (1893) A.C. 552).

An offer that has been communicated,properly continues as such until it lapses,


or until it is revoked by the offeror, or rejected or accepted by the offeree.
Lapse of Offer
Section 6 deals with various modes of lapse of an offer. It states that an offer

lapses if
(a) it is not accepted within the specified time (if any) or after a reasonable
time, if none is specified.
(b) it is not accepted in the mode prescribed or if no mode is prescribed in
some usual and reasonable manner, e.g., by sending a letter by mail when early
reply was requested
(c) the offeree rejects it by distinct refusal to accept it;
(d) either the offerer or the offeree dies before acceptance;
(e) the acceptor fails to fulfill a condition precedent to a acceptance.
(f) the offeree makes a counter offer, it amounts to rejection of the offer and an
offer by the offeree may be accepted or rejected by the offeror.
Revocation of Offer by the Offeror
An offer may be revoked by the offeror at any time before acceptance.
Like any offer, revocation must be communicated to the offeree, as it does not
take effect until it is actually communicated to the offeree. Before its actual
communication, the offeree, may accept the offer and create a binding contract.
The revocation must reach the offeree before he sends out the acceptance.

An offer to keep open for a specified time(option) is not binding unless it is


supported by consideration.

Acceptance
A contract emerges from the acceptance of an offer. Acceptance is the act of assenting
by the offeree to an offer. Under Section 2(b) of the Contract Act uwhen a person to whom the
proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal,
when accepted becomes a promise.".

Rules Governing Acceptance

(a) Acceptance may be express Le. by words spoken or written or implied


from the conduct of the parties.

(b) If a particular method of acceptance is prescribed~-Ae. offer must be accepted in the


prescribed manner. "

(c) Acceptance must be unqualified and absolute and must correspond with all the terms of
the offer.
(d) A counter offer or conditional acceptance operates as a rejection of the offer and
causes it to lapse, e.g., where a horse is offered for Rs. 1,000 and the offeree
counter-offers Rs. 990, the offer lapses by rejection.

(e) Acceptance must be communicated to the offeror, for acceptance is complete the
moment it is communicated. Where the offeree merely intended to accept but does not
communicate his intention to th.e offeror, there is no contract. Mere mental acceptance is
not enough.

(f) Mere silence on the part of the offeree does not amount to acceptance. Ordinarily, the
offeror cannot frame his offer in such a way as to make the silence or inaction of the
offeree as an acceptance. In other words, the offeror can prescribed the mode of
acceptance but not the mode of rejection. In Felthouse v. Bindley (1865), F offered by
letter to buy his nephew's horse for 30 saying: "If I hear no more about him I shall
consider the horse is mine at 30". The nephew did not reply, but he told an
auctioneer who was selling his horses not to sell that particular horse because it was
sold to his uncle. The auctioneer inadvertently sold the horse. Held: F had no claim
against the auctioneer because the horse had not been sold to him, his offer of 30
not having been accepted.
(g) If the offer is one which is to be accepted by being acted upon, no communication of
acceptance to the offeror is necessary, unless communication is stipulated for in the offer
itself.

Thus, if a reward is offered for finding a lost dog, the offer. is accepted by finding the
dog after reading about the offer, .and it is unnecessary before beginning to search for
the dog to give notice of acceptance to the offeror.

(h) Acceptance must be given within a reasonable time and before the offer lapses or is
revoked. An offer becomes irrevocable by acceptance.

An acceptance never precedes an offer. There can be no acceptance of an offer which is not
communicated. Similarly, performance of conditions of an offer without the knowledge of the
specific offer, is no acceptance. Thus in Lalman Shukla v. Gauri Duff (1913) where a servant
brought the boy without knowing of the reward, he was held not entitled to reward because he
did not know about the offer.
Legal rules regarding consideration

1. Consideration must move at the desire of the promisor:

The first important rule of consideration is that the act or forbearance must be done at the desire or
request of the promisor. If it is done without his request or at the request of a third party, it will not
be a valid consideration. It is very simple that unless a person offers to do something, how can he be
made liable to pay for that?

You will observe that if a person is made liable for acts done without his request, it will almost be
impossible for him to pay every person who does an act for him. Let us take another example. D
made certain improvements in the market at the request of the District Collector.

The shopkeepers agreed to pay commission to D on the articles sold in the market. Later on, B
refused to pay the commission. The court held that the agreement was without consideration because
the improvement was not made at the request of B but at the request of the District Collector. Hence
it was void, being without consideration and B was not liable to pay any commission.

2. Consideration may move from the promisee or any other person:

It means that the act or forbearance may be done by the promisee himself or any other person on his
behalf. In other words, consideration may be given by the promisee or any other person on his
(promisee's) behalf.

3. Consideration may be past, present or future:

The words, "has done", "does" or "promises to do" indicate respectively that the consideration may
be past, present or future.

(i) Past Consideration:

Where the act was done in the past or the promisor had received the consideration before the date of
the promise, it is called a past consideration.

(ii) Present Consideration:

Where the act is done in the present or the promisor receives the consideration along with his
promise, the consideration is present consideration. It is also called an executed consideration.

(iii) Future Consideration:


It is also called executory consideration. Where the act is to be done in future or the promisor is to
receive consideration after the date of promise, it is a future consideration.

4. Consideration must be real and not illusory:

Consideration must be real, i.e, it has some value in the eye of law. It should not be illusory.

(i) Forbearance to sue:

It has been pointed out earlier that consideration may be positive or negative. Negative consideration
implies forbearing some right. Thus forbearance to sue a debtor can be a good consideration.

(ii) Compromise or composition of claims:

Compromising bonafide disputed claim is a good consideration. In fact, it is also a kind of


forbearance on the part of the creditor. For example, a creditor agrees to accept less than what is
actually due to him. However, the claim should be bonafide. If the claim turns out to be frivolous or
unfounded, the consideration will fail and the debtor would be entitled to refund of the amount paid
by him.

5. Consideration must not be something which the promisor is legally bound to do:

A promise to do something which a person is legally bound to do is not a good consideration. As


such, preexisting legal and contractual obligations cannot be regarded as good consideration.

6. Consideration must not be illegal, impossible, uncertain, ambiguous, fraudulent,


immortal or opposed to public policy:

The law does not compel anybody to do something illegal, impossible, immortal or opposed to public
policy. On the countrary, the law punishes a person who does something illegal, immortal or opposed
to public policy.

(i) Illegal Consideration:

Illegal consideration means doing an act which is prohibited by law. Example:

A promises to pay B Rs. 500 if he bears C. It is illegal.

(ii) Impossible consideration:

Impossibility may be physical or legal. In both the cases, the consideration would not be a good
consideration.

(iii) Uncertain consideration:


A promises to pay an uncertain amount is not a good consideration.

(iv) Immoral consideration:

Immoral consideration means an act against positive morality as recognized by law.

Example:

A lets out his house to a prostitute. A cannot recover the rent as consideration is immoral.

7. Consideration need not be adequate:

It is not necessary that there must be full return for the promise. There must be something rather
than nothing. For example, A agrees to sell his watch worth Rs. 100 only for Rs. 10. A's consent to the
agreement was given freely. The agreement is enforceable even though the watch is being sold for
just one-tenth of its price. The law has left the quantum of consideration to be decided by the
respective parties. Hence the law will not object to the inadequacy of consideration. The law will not
enforce a promise only if it is without consideration.

However, inadequacy of consideration may be taken into account by the Court in determining the
question whether the consent of the promisor was given freely, i.e., it was not caused by coercion or
undue influence, etc. Hence in the absence of any such thing, the Court will not object to the
inadequacy of consideration. Therefore, in many cases it has been remarked well, "the doctrine of
consideration is a mere technicality irreconcilable either with business expediency or common
sense."