📌 Table of Contents
Definition of Consideration – Section 2(d)
According to Section 2(d) of 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 abstain from doing something, such act or abstinence is called a consideration for the promisee.”
Essentials of Valid Consideration
1. Consideration must be at the Desire of the Promisor
Consideration can be offered by the promisee or a third-party only at the request or desire of the promisor. If an action is initiated at the desire of the third-party, it is not a consideration.
Case: Durga Prasad v. Baldeo [(1881) ILR 3 ALL 221] – In this case the plantiff constructed some shops in the market at the instance of the collector of that place. Then defendant occupied one of the shops. Since the plantiff had spent money for the construction of the market, the defendant decided to give some commission to the plantiff. But in mean time failed to give commission. Then the plantiff filed case against him and it was held that this is not a valid consideration because the shops were not made on the desire of the promisor but instead of the third party i.e. collector.
2. May Move from Promisee or Any Other Person
It is a possibility that consideration may be given by the promisee or any other person. In India it is a possibility that consideration for promise may not move from the promisee but to the third party that`s why privity of consideration is not applicable in India which states that the consideration must only move from promise and not the third party. For example A promises to give his watch to B and a consideration of Rs. 2000 for the same is given to A by X and not by B. This is a valid consideration
Case: Chinnaya v. Ramaya – In this case an old lady granted her estate to her daughter on the condition that the daughter should pay an annuity of Rs. 653 to her brothers. The daughter did not pay annuity as directed by A. Then her brother filed case against her for annuity and she argued that they didn’t have right to sue her as they were not party to the contract. In this case Madras High Court held that the brothers have right to sue her because there was valid consideration.
3. Past, Present, or Future Consideration
- Past Consideration: The line ‘ has done or abstained from doing’ in the section 2(d) of the Indian Contract Act, 1872 defines the past consideration. It is a kind of consideration which is already made before the promise was made.
Case (Past): Lampleigh v. Brathwait [(1615) Hobart 105] – In this case Thomas brathwait, the defendant, who was held guilty of murder requested Lampleigh, the plantiff to make efforts for his pardon. The plantiff made efforts for his pardon. In consideration of these efforts the defendant promised to pay plantiff 100 euros. The question in this case arose whether plantiff has right to recover the said amount or not and it was held that plantiff has right to recover the said amount.
- Present Consideration: The line ‘or does or abstains from doing’ defines present consideration. This is when you provide the promisor with the consideration simultaneously while entering into a contract. Example- Buying fruits and paying on the spot
- Future Consideration: The line ‘or promises to do or to abstain from doing’ defines future consideration. Future consideration is when the promisor, promisee, or both move the act to a future date. It means that the parties have not yet performed their obligations. Example- Promise to deliver goods next week against future payment.
Section 25: No Consideration, No Contract – Exceptions
Section 25 of the Indian Contract Act, 1872 lays down three important exceptions where a contract without consideration is still valid.
1. Natural Love and Affection
- The parties to the agreement must be in close relationship
- Promise should be made by one party out of love and affection
- Promise must be written and registered
Case: Rajlukhy Dabee v. Boothnath [(1900) 4 CWN 488] – In this case there were various quarrels between husband and wife and they decided to live separately. They make a written contract that husband will provide maintenance to her. Then the husband was sued for not performing his part of a promise by not giving separate residence and maintenance to his wife, it was not held to be a valid contract. The court ruled in favour of the husband stating that “the terms of the arrangement between the husband and wife clearly show that there was no affection between them and so, it was without consideration. Thus, it was void ab initio.
2. Past Voluntary Services
When someone does a promise to compensate for past voluntary service of others such an agreement will be binding on the parties.
Example: A finds B’s wallet and B promises to pay A – valid contract.
3. Promise to Pay Time-Barred Debt
Following conditions is to be satisfied to make a such a promise valid:
- Debt must be time-barred
- Promise to pay time barred debt must be in writing and signed
Case: Tulsi Ram v. Same Singh (AIR 1981 Delhi 165) – In this case it was held that mere acknowledgement of debt was not considered a valid promise.
References:
- Law of Contract-I by R.K. Bangia
- Indian Contract Act, 1872
