1. CONSIDERATION AND VALID CONSIDERATION
It is a essential element for formation of a valid contract .
A contract is void without consideration.
According to Sir Pollock-” Consideration is the price for
which the promise of the party is brought”.
11
2. For Ex-
A agrees to sell his factory to B for Rs. 50,000.
Here for A’s promise, the consideration is the
price of his factory i.e. Rs. 50,000 and for B’s
promise, consideration is A’s factory
22
3. Essential elements of Valid or Lawful
Consideration
A) Consideration may be an act to do something of doing
something.
B) Consideration may be past, present or future.
C) Consideration must be real & not illusory.
D) Consideration should move at the desire of the
promisor.
E) Consideration may move from any person including the
promisee.
F) For supporting each independent promise, there
33
must be an independent consideration.
4. G) Consideration need not be adequate.
H) Consideration must be something which the
promisor is not already bound to do.
I) Consideration must be valuable in the eyes of
laws.
44
5. Kinds of Consideration
1) Present or Executed Consideration
2) Past Consideration
3) Future or Executory Consideration
4) Unlawful Consideration
5) Illusory or Unreal Consideration
55
6. 1) Present or Executed Consideration-
A present Consideration is something which is
already actually done . It is done in response to some
promise by the promisee. In this, one party has
already performed its part of the promise while the
other party has to perform its part of the promise.
66
7. 2) Past Consideration -
A past consideration is something that is wholly done
by the promisee even before making of the
agreement. It is always supported by the future
promise.
EX-
X was an infant & at his desire, Y provided him
certain essential commodities. After attaining the
majority X promises Y to compensate for what Y
did in the past.
77
8. 3) Future Consideration-
A Consideration is said to be future when it is to
be done in future.
A future Consideration is always a promise to do or
for bear or suffer at a future date only.
88
9. 4) Unlawful Consideration
1) When forbidden by law
2) When defeat the provisions of law
3) When they are fraudulent
4) When cause injury to other persons or their
property
5) When opposed to public policy
99
10. 5) Illusory or Unreal Consideration-
When a consideration subsist in wards only & is
physically or legally impossible to perform a
promise, such consideration is known as illusory
or unreal.
1010
11. Capacity of Parties
All agreements are contracts provided that:
a) they are made by the free consent of parties.
b) these parties must be competent to contract
c) the contract must be for a lawful consideration
and with a lawful object
d) they must not be expressly declared to be void
1111
12. As per section 11 declares the following persons to
be incompetent to enter into a contract:
1) Minor- A person who has not completed his 18th of
age is considered to be minor in the eyes of law & his
minority
a) where a guardian of a minor’s person or property is
appointed by the court under the Guardians & Ward Act
1890.
b) Where the property of a minor is taken over by the
court of wards for management under the Court of
Wards Act
1212
13. Agreement with the Minors:
1) Agreement with or by a minor is absolutely void:
An agreement with a minor is not voidable but
absolutely void ab initio.
2) No Ratification of Minor’s contract: A minor’s
agreement or contract cannot be ratified by him when he
becomes a major. A consideration given by a person
when he was a minor is no consideration in the eye of law
& therefore a consideration given under earlier contract
cannot be implied into the contract which the minor
enters on attaining majority. Minor can enter into a fresh
contract on attaining majority.
1313
14. 3) A minor can be a promisee :
A If minor has carried out his obligations on
entering into a contract, he gets every right to
bring a suit against the other party for the
enforcement of the other party’s obligation.
Suppose , if a minor delivers some goods under a
contract a sale of Mr. X & if Mr. X does pay, the
minor is entitled to bring a suit for the recovery of
the price of the goods sold.
1414
15. 4) No restitution in agreements with a minor:
If a minor receives any benefit or advantage under
an agreement or a contract which is void, he
cannot be asked or compelled to pay the amount
benefit received.
Ex- suppose a minor gets a loan from a money
lender by mortgaging his property neither a minor
nor his property can be held liable for recovering
the loan given to him.
1515
16. 5) Minors Insolvency-
A minor cannot be declared as an insolvent because
of his or her incapacity to enter into a contract . He
cannot be held personality liable even for necessities
of life.
1616
17. 6) No estoppels in the case of a minor -
A minor can always plead minority & is not bound by
his misrepresentation or fraudulent behavior the rule
of estoppels is not applicable against minor.
1717
18. 7) Minor as a partner-
A minor cannot be a partner or cannot enter into
partnership contract as a partner. However , he can be
admitted to the benefit of the partnership firm already
in the existence with the prior consent of other
partners. Even though he is admitted to the benefit of
the partnership firm, he does not get any right to
participate in the management of the firm or inspect the
books of the firm.
1818
19. 8) A person working as a surety for a minor -
Any person may stand as a surety for any liability
incurred by a minor. Such person is held
responsible to a minor’s creditor but not a minor.
1919
20. 9) Liability of minor for necessities -
If the contracts are entered into for the
supply of the necessaries of life and other
necessary services, all such contracts are
valid and a minor is liable to pay out his
property for the same.
2020
21. 10) Responsibility of parents or guardians of a
minor-
Parents and guardians are not liable for any
contract entered into by a minor; even though the
contracts entered into are for the supply of
necessities and essential services to a minor.
2121
22. PERSONS OF UNSOUND MIND
Idiots, lunatics, drunkards are considered as the
persons of unsound mind.
According to section 12 “ A person is said to be of
sound mind for the purpose of making a contract if,
at the time when he makes a contract, he is capable
of understanding
it & of forming a rational judgment as to its effect
upon his interest. A person who is usually of
unsound mind , but occasionally of unsound mind,
may make contract when he is sound mind. A person
usually of sound mind but occasionally of unsound
mind may not make a contract when he is of unsound 2222
23. Types of unsound Mind
(I) Permanent Unsoundness (II) Temporary
1) Illness
2) Shock
3) Accidental
4) Intoxication
Congenital Non-congenital
Right from birth
Accidental Disease
23
24. Persons Disqualification from Contracting by the Law-
Alien enemies
Foreign sovereign, their diplomatic staff &
accredited representative s
Insolvents
Convicts
Corporations
24
25. FREE CONSENT
All agreements are contracts if they are made by
the free consent of the [arties competent to
contract, for a lawful consideration and with a
lawful object & are not hereby expressly declared to
be void. Thus a free consent is one of the essentials
of a valid contract.
25
26. CONSENT IS SAID TO BE FREE WHEN IT IS NOT
CAUSED BY
Coercion- It is committing or threatening to
commit, elements of physical pressure any act
forbidden by the Indian Penal Code.
Undue influence- It is a mental which is put upon
the other party to the contract.
2626
27. Fraud- Fraud means any act by a party to a contract or
with his connivance, by his agent with intent to deceive
another party thereto or his agent
1) The suggestion as a fact of that which is not true by
one who does not believe it to be true.
2) The active concealment of fact by one having
knowledge or belief or the fact.
3) A promise made without any intention of
performing it.
4) any other act fitted to deceive.5) Any such act or
omission as the law specially declares to be fraudulent.
27
28. Misrepresentation-
1) The positive assertion in a manner not warranted
by the information of the person making it, of what
which is not true though he believes it to be true.
2) Any breach of duty which without an intent to
deceive, gains an advantage to the person
committing it or any one claiming under him , by
misleading another to his prejudice, or to the
prejudice of any one claiming under him.3) Causing
however innocently a party to an agreement to
make a mistake as to the substance of the thing
which is the subject of the agreement.
28
29. Mistake by Law-
Mistake by Law Mistake of fact
Unilateral Mistake Bilateral Mistake
Mistake of the
Law of the country Mistake of Law
of the foreign
country
Mistake as to possibility Mistake as to
of Performing the contract the subject
matter
regarding
Existence Identity Quantity Quality Subject Matter Title Price
29
30. Unilateral Mistake- Where one of the parties to a
contract is at mistake about the value or quality of
the subject matter & about understanding the terms
& conditions effects of the agreement known as
' unilateral mistake'
For Ex- X sells his motor car to Y for an intended
amount of Rs. 95,000 but by mistake, he informs Y
in writing the price of a car as Rs 85,000 . X cannot
plead mistake as his defense to avoid the
agreement
31. Bilateral mistake-When both the parties to an
agreement are under a mistake, there is said to be
the bilateral mistake & if a mistake is bilateral the
agreement is void.
32. VOID AGREEMENT-
1) Agreement by incompetent parties
2) Agreement made under mutual mistake of facts
3) Agreement, the consideration or object of which is
unlawful
4) Agreement, the consideration or object of which is
partly unlawful
5) Agreements entered into without any consideration
6) Agreements made in restraint of marriage
7) Agreements made in restraint of trade, business,
occupation
8) All agreement s, the meaning of which is not certain
9) Wagering agreements
10) Agreement contingent on impossible events
11) Agreement to do an act impossible in itself.
33. CONTINGENT CONTRACTS – CONTRACTS ARE TWO
TYPES
1) Absolute contracts- In an Absolute contracts a promiser binds himself
to perform an act or whatsoever without any condition or conditions.
Ex – X agrees to sell Y his cycle for Rs. 500 on 5th August 2008 the contract is
absolute.
In contingent contract a promisor agrees to perform a particular act at the
happening of a particular event. If the event does not happen, the contract is not
enforceable