CONSIDERATION

INDIAN CONTRACT ACT, 1872

TABLE OF CONTENTS

S.NO 1 2

TOPIC INTRODUCTION ESSENTIALS OF THE CONSIDERATION

PAGE NO. 3 4

KINDS OF CONSIDERATION

REAL OR GOOD CONSIDERATION

NO CONSIDERATION NO CONTRACTEXCEPTONS

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CONCLUSION BIBLOGRAPHY

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INTRODUCTION
Consideration is one of the most important essentials of a valid contract. In simplest terms consideration is what a promisor demands as the price for his promise. Consideration is which for what- something that a person givesfor Section 2 (d) of the Indian contract act defines consideration as when at the desire of the promisor , the promise or any other person has done or abstained from doing or does or abstrains 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. In simple words the consideration is the price of the promise. The term is used in the sense of quid-pro-quo i.e something that he receives in return. In currie vs misa1 (1875) a consideration was defined as a valuable consideration in the sense of law may consist either in some right , interest , profit , or benefit accruing to one party , or some forebearence, determinant, loss or responsibility given , suffered or undertaken by the other.

1.

Com. Dig. Action on the Case, Assumpsit, B. 115

ESSENTIAL PARTS OF THE CONSIDERATION

 The consideration is an act, or abstinence  Such act or abstinence should be done at the desire of the promisor.  Such act or abstinence may be done by the promisee or any other person.  Such act or abstinence is either already executed, or is in the process of execution or may be still executory.  Consideration must move at the desire of the promisor: the act or forbearance must be done at the desire of the promisor. If it is done at the instance of third party or without the desire of the promisor, it is for a consideration. Act done at the desire of a third party is not a consideration. Act must be done voluntarily at the desire of the promisor.  There should be a proposal for an acceptance to follow and then, when the other person does something in consequence of such a proposal acceptance would be valid and such an act or forbearance of doing or not doing something will be consideration.  Consideration may move from the promisee or any other person Stranger to a contract: A consideration may move from promisee or any other person. Consideration from a third party is a valid consideration.  Consideration may move from the promisee or any other person Stranger to a contract: A consideration may move from promisee or any other person. Consideration from a third party is a valid consideration.


Consideration may be past present or future: Law as to past consideration. Where the promise has done or abstained from doing something , it is a case of a past consideration: In India, a past consideration is sufficient to sustain a valid contract. If given at a request of a promisor it will support a subsequent promise.
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 Consideration need not be adequate: Consideration need not be adequate but must be of some value in the eyes of law Court will not sit to decide the adequacy of consideration. Adequacy of consideration is for the parties consider at the time of making the agreement and not for the Court when it is sought to be enforced. However, there should be some value, because the law will not enforce a promise given for nothing, except in cases provided under section 252 of the Act.  Consideration must be real and not illusory: Consideration must be real and of some value in the eyes of law although it need not be adequate. Consideration is not real when it is uncertain illusory or when it is physically or legally impossible to perform. It is sufficient if the consideration is of slight value as long as it is not unreal and illusory.  Performance of exiting obligations is no consideration: The performance of an act by a person who is already bound to perform the same either as a pubic duty or under the existing contractual obligation cannot be consideration for a contract.  Forbearance is sue is a good consideration: Forbearance to sue or a promise to forbear, when requested will support a promise by another. It is abstinence within the meaning of section 2(d).

2. The Indian Contract Act, 1872

Sec 25. Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law.

Some examples of consideration

Example1: Ahmed agrees to sell his Omers promise to pay the sum of Ahmeds promise to sell the house, house is the consideration for Omers house to Omar for Rs.20,000,here, Rs20,000 is the consideration for and Ahmeds promise to sell the promise to pay Rs.20,000.

Example 2: A promises to maintain Bs child and B promises to pay A Rs.1000 per month for the purpose. Here the promises of each party is the consideration for the promise of the other party.

Kinds of Consideration:
1) Past consideration: where the promisor had received the consideration before the date of the promise, the consideration is termed as past consideration. It means a past act or forbearance. Examples: a) A renders some services to B in the month of June. In July, B promises to pay A Rs.100 the consideration of A is past consideration. b) A teaches the son of Bs request in the month of January and in February B promises to pay A Rs.200 for his services.The services of A will be past consideration. 2) Present consideration: where the promisor receives consideration along with his promise, the consideration is termed as present consideration. in other words, when the consideration and the promise are simultaneous, it is called present consideration. Present consideration is also called executed consideration. Example: a) A agrees to sell his car to B for a sum of Rs.5000. B pays money to A at the time of making of the contract consideration will be taken as present for A.
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b) A receives Rs.200 in return for which he promises to deliver goods to B. The money A receives is the present consideration for the promise he makes to deliver the goods. 3) Future consideration: This is also called executory consideration where the promisor has to receive consideration in future for his promise, the consideration is said to be Future consideration it is a promise for the promise. Mutual promises to marry, or promise to work return of promise of payment are examples of future consideration. Example: a) A promises to deliver car to B after a week. B promises to pay the price after a month. The promise of A is supported by the promise of B. The consideration in this case is future. Exceptions: There are, however, certain exceptions to the rule that past consideration is no consideration. Under the exceptions, past consideration is as good as present or future consideration. The exceptions are as follows: 1) Services rendered at the request of the promisor. When the consideration consists of services rendered at the request of the promisor, it is a good consideration. The request may be either express or implied. 2) Promise to pay a time-barred debt: where a debt is bound by limitation, the debtor can waive the benefit of that plea and promise to discharge the debt. Such a promise is enforceable. A time-barred debt can be taken as valid consideration for a subsequent promise.

3) Negotiable instrument: where a negotiable instruments is given in consideration of some past act, that past act will form as a good consideration for the issue of the negotiable instrument and the party who gets the instrument can validly enforce it. 4. Unreal Considerations: In the following cases, the consideration is not legal because of physical or legal impossibility or uncertainty. The following are not real considerations. 1) Physical impossibility: If a person agrees to perform an impossible act for a consideration, the promise is not enforceable. The promise is unreal. Discovering treasure by magic or making two parallel straight lines meet or putting life back into a dead body cannot be enforced as promises because of impossibility. 2) Legal impossibility: whenever the performance of a promise is legally impossible, consideration is not real. 3) Uncertain consideration: Consideration is not real and is not enforceable if it is uncertain or ambiguous. Examples: A engages B for doing a certain work and promises to pay a reasonable sum. There is no recognized method of ascertaining the reasonable remuneration. The promise is not enforceable as it is uncertain. 4) Illusory consideration: An illusory consideration is not real and is unenforceable. Example: A promises to give B one ton of gold brought from the sun. the consideration is sham and illusory. 5) Pre-existing legal obligations: A promise to do what one is already bound to do, either by general law or under an existing contract, is not a good consideration for a new promise. Similarly, a promise to perform a public duty by a public servant is not a consideration.

Real or Good Consideration:

The following are real or good considerations: 1) Forbearance to sue: forbearance to sue is a kind of abstinence. It means a person who has a right of action against another person refrains from bringing the action. Forbearance to sue may be forever or for a short or limited time. Forbearance to sue at the desire of the debtor is a good consideration. Example: A has a right to sue his debtor B for Rs.5000. But he postpones suing as B agreed to pay Rs 2000 more. Such forbearance is a valuable consideration for the promise of B. 2) Compromise of a disputed claim: Compromise is a kind of forbearance. The compromise of a disputed claim is a good consideration for the fresh agreement of compromise. Example: A sues to recover a debt of Rs.2000 from B. B denies the whole debt and promises to pay Rs.500 to A as a sort of compromise. This compromise of B is supported by consideration and is valid. 3) Composition with Creditors: A person who is not in a position to pay his debts fully may call a meeting of his creditors and request them to accept a lesser amount. If the creditors and request them to accept a lesser amount. If the creditors agree to it, the agreement is binding upon the debtor and creditors.

NO CONSIDERATION NO CONTRACT
EXCEPTION TO THE RULE

General rule states that an agreement without consideration is void. Section 25 deals with the exceptions to this rule. Where a contract even without consideration , is enforceable. They are a s follows: 1. Natural love and Affection: sec 25(1) of the Indian contract act, An agreement without consideration is void unless it is expressed in writing and registered under the law for the time being in force of the registration of the documents and is made on account of natural love and affection between parties standing in near relation to each other. Example: Rajlukhy debee vs bhootnath (1990)3

2. Voluntary compensation: A promise made without any consideration is valid, if it is a promise to compensate wholly or in part, a person who has already voluntary done something for the promisor , or something which the promisor was legally compellable to do. 3. Agency: No consideration is required between the principal and the agent to create an agency. 4. Completed gift: Nothing in this section shall affect the validity as between the donor and the done of nay gift actually made.

3 . Rajlukhy debee vs bhootnath (1990): An agreement entered into by a husband with his wife during quarrels and disagreement, whereby the husband agreed to give some property to his wife, the agreement is void because under such circumstances ,ther is no natural love and effection between the parties.

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CONCLUSION

Consideration is the concept of legal value in connection with contracts. It is anything of value promised to another when making a contract. It can take the form of money, physical objects, services, promised actions, abstinence from a future action, and much more. Under the notion of "pre-existing duties," if either the promisor or the promisee already had a legal obligation to render such payment, it cannot be seen as consideration in the legal sense. Although consideration is very important part of a contract and it is said that there exits no contract without consideration but there are still certain exceptions to the law. Consideration is the most important essentials of a valid contract but a contract does not becomes void , in the absence of consideration .

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BIBLOGRAPHY
SOURCE : WEBSITES (INTERNET)  www.citeman.com  http://www.vakilno1.com/bareacts/indiancontractact/s25.html  http://www.indiankanoon.org  www.netlawman.co.in  http://profj.us/wlac/considerationtext.htm  http://chestofbooks.com/business/law/American-Commercial-LawSeries/Chapter-5-Consideration.html  WWW.studentlaw.com  www.lawweb.html

SOURCE : BOOKS  Business law : by R.S.N Pillai and Bagavathi  Business law for management: by P.Saravanavel and S.Sumathi
 LAW FOR BUSINESS by A. JAMES BARNES, TERRY M. DWORKIN and ERIC L. RICHARDS.  Law and business

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