Consideration: The essential element of Valid contract

A Report for the course

Legal Aspects of Infrastructure Business

Submitted to: Submitted by:

Dr. R. K. Singh Saketkumar Jha

Adani Institute of Infrastructure Management PGDM (2018-20), Roll no:31

 Consideration: The Essential Elements for a Valid Contract

1.) Definitions:-
Consideration has been defined as various ways. According to Blackstone the simplest definition is,
”Consideration is the recompense given by the party contracting to the other”. In the words of Pollock,
“Consideration is the price for which the promise of the other is bought and the promise thus given for value is
enforceable”. Consideration is the cause of all promises. Law supplies no means nor affords any remedy to
compel the performance of an agreement made without consideration. An agreement without consideration is a
bare or a naked promise and ex nudo pacto non oritio action i.e. cannot be held to be binding upon the parties.

The best definition available so far is given in an English case of Currie v. Misa as under:

Atiyah has suggested that consideration can simply be seen as „a reason for the enforcement of promises„, with
that reason being „the justice of the case„.

2.) Promisor and Promise

In most contracts two promises will be exchanged, so each party is both a promisor and a promise. In a contract
case, the claimant will often be arguing that the defendant has broken the promise made to the claimant, arguing
that the defendant has broken the promise made to the claimant, and therefore the claimant will usually be the
promise, and the defendant will be the promisor. So if A contracts to paint B„s promise to pay A £ 200. If A fails
to pant the bathroom, B can sue her, and if the issue of consideration arises, B will seek to prove that her
promise to pay £ 200 was consideration for A„s promise to paint the bathroom. In that action, A will be the
promisor, and B the promise. On the other hand, if a does the work but B does not pay the price, B can be sued
by A, and if consideration is at issue, A will have to prove that her promise to paint the bathroom was
consideration for B„s promise to pay. In that action, A will be the promise and B the promisor.

3.) Kinds of Consideration

Kinds of Consideration are as follows -
(1) Past Consideration
(2) Present (Executed) Consideration
(3) Future (Executory) Consideration
Consideration is often divided into two categories: Present (Executed) Consideration & Future (Executory)
Consideration. Present (Executed) consideration is the performance of an act in return for a promise – if I
promise to give £ 20 to anyone who finds my lost handbag, returning the bag is both acceptance of my
offer, and Present (Executed) consideration of my promise. Present (Executed) consideration usually
occurs in unilateral contracts.
Consideration is called Future (Executory) when the defendant makes a promise, and the plaintiff offers
a counter-promise – you promise to deliver some goods to me and I promise to pay for them when
they arrive. The promise is executory because it is something to be done in the future. A bilateral
contract usually involves Future (Executory) rather than Present (Executed) consideration.

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 (1) Past Consideration:
In case of past consideration, the promisor had received the consideration before the date of promise,
such consideration is called Past Consideration.

Example –
A's Bike on his way to office is stopped due to lack of petrol. A requested B who was petrol seller, B
gave petrol to him. Later A promised B to pay Rs. 500/- in consideration of his past consideration.
In English Law past consideration is no consideration.

(2) Present consideration:

Present consideration is one in which one of the parties to the contract has performed his part of the
promise, which Constitutes the consideration for the promise by the other side it is known as present consideration
.
Example :
A lost his Bicycle, he makes an offer of the reward of Rs. 200 to anyone two finds his lost Bicycle. B finds
the lost Bicycle and delivers to A . Here A is bound to pay Rs. 200 . The consideration, in this case, is the
present consideration.

(3) Future Consideration:

Future Consideration is one in which one party makes a promise in exchange for the promise by the other
side the performance of the obligation by each side to be made subsequent to the making of the contract the
consideration is known as Future Consideration.

Example :
A agrees to supply wheat bags to B and B agrees to pay for them on a future date. This Consideration is the
future consideration

4.) Lawful Consideration

The consideration or object of an agreement is lawful, unless and until it is:

 Forbidden by law: If the object or the consideration of an agreement is for doing an act forbidden by law, such
agreement are void. The agreement is void as the procuring government job through unlawful means is
prohibited.
 If it involves injury to a person or property of another.
 If courts regards it as immoral- An agreement in which consideration is object of which is immoral is void. An
agreement between husband and wife for future separation is void.
 Is of such nature that, if permitted, it would defeat the provisions of any law:
 Is fraudulent, or involves or implies injury to the person or property of another, or

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 Is opposed to public policy. An agreement which tends to be injurious to the public or against the public good is
void. Agreements of trading with foreign enemy, agreement to commit crime, agreements which interfere with
the administration of justice, agreements which interfere with the course of justice, stifling prosecution,
maintenance and champerty.
 Agreements in restrained of legal proceedings: This deals with two category. One is, agreements restraining
enforcement of rights and the other deals with agreements curtailing period of limitation.
 Trafficking in public offices and titles: agreements for sale or transfer of public offices and title or for
procurement of a public recognition like padma vibhushanor padma sree etc. for monetary consideration is
unlawful, being opposed to public policy.
 Agreements restricting personal liberty: agreements which unduly restrict the personal liberty of parties to it are
void as being opposed by public policy.
 Marriage brokerage contact: Agreements to procure marriages for rewards are void under the ground that
marriage ought to proceed with free and voluntary decisions of parties.
 Agreements interfering marital duties: Any agreement which interfere with performance of marital duty is void
being opposed to public policy. An agreement between husband and wife that the wife will never leave her
parental house.
 Consideration may take in any form-money, goods, services, a promise to marry, a promise to forbear etc.

 Contract Opposed to Public Policy can be Repudiated by the Court of law even if that contract is beneficial
for all of the parties to the contract- What considerations and objects are lawful and what not-Newar Marble
Industries Pvt. Ltd. Vs. Rajasthan State Electricity Board, Jaipur. Agreement of which object or
consideration was opposed to public policy, unlawful and void- – What better and what more can be an
admission of the fact that the consideration or object of the compounding agreement was abstention by the
board from criminally prosecuting the petitioner-company from offence under Section 39 of the act and that
the Board has converted the crime into a source of profit or benefit to itself. This consideration or object is
clearly opposed to public policy and hence the compounding agreement is unlawful and void under Section
23 of the Act. It is unenforceable as against the Petitioner-Company.