consideration

1. Consideration
1.1. Definition of Consideration:
Consideration is an essential element in a contract. Subject to certain exceptions,
an agreement is not enforceable unless each party to the agreement gets
something. This “something” is called consideration. It is used to the sense, of
quid pro quo i,e something in return.
Consideration was defined as, “some right, interest, profit or benefit accruing to
one party or, some forbearance, detriment, loss or responsibility given, suffered or
undertaken by the other party.”[Currie V. Misa]
According to Sir Frederick Pollock, “Consideration is the price for which the
promise of the other is bought and the promise thus given for value is
enforceable.”
Definition: [Sec-2 (d)] of the contract Act defines consideration as follows,
“When, at the desire of the Promisor, the promise 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 or promise is called a consideration
for the promise.”
1.2. Rules (Essential factors) of consideration.
1. Consideration must move at desire of the promise: An act must have been
done at the desire of the promisor only. Any act performed at the desire of the
third party cannot be valid consideration.
2. From the promisor or any other person: To constitute a valid consideration
there must be some consideration, it immaterial who furnished it. Consideration
can be furnished by contract but stranger to the consideration can sue, because he
is party to that contract, though consideration has been given by some third person.
3. Consideration may be past, present or future:
(a) Past Consideration: A consideration for the act done in past is a past
consideration. Past consideration valid in Indian Contract Act, but it is no
consideration in English Law.
(b)Present Consideration: When both the parties are ready to move consideration
at the same time, it is a present consideration.

2. (c) Future Consideration: When a party promises to or abstains from doing
something in future, it is a future consideration.
4. Consideration need not to be adequate: Law only requires the presence of
consideration in a valid contract, it adequacy is not required in the Act. In
adequacy may create the doubt about the free consent of two parties but it is valid
if free consent is proved.
Example: - Mr. Kullo agrees to sell his house for Rs. 25 lac. If the consent of Mr.
Kullo is free then agreement is valid contract, without consideration.
5. Consideration must be lawful: In valid contract it is necessary that the
consideration should be lawful, otherwise it will become void and unenforceable.
6. The consideration must be real: Consideration must be realistic and
competent. If consideration is physically impossible, illegal and uncertain it will
be not valid.
The consideration must have some value in the eye of law. It must not be sham or
illusory. The impossible acts and illusory or non-existing goods cannot support a
contract. Therefore, real consideration comes from good consideration.
7. The Consideration must not be illegal, immoral or opposed to public
policy: If either the consideration of the object of the agreement is illegal, the
agreement cannot be enforced. The same principle applies if the consideration is
immoral or opposed to public policy
# What is good consideration?
The rules or the necessary factors for consideration can be summed up as follows:
(1)There must be desire of the promisor, (2) From the promisor or any other
person, (3) Present, past or future, (4) Consideration need not to be adequate
(5) Consideration must be lawful, (6) It must be real, (7) Reasonable, (8) Not
illegal, immoral or opposed to public policy.
Subject to the above essential factors, a good consideration can be any of the
following: (1) Physical goods; (2) Services; (3) Forbearance; (4) Arbitration or the
compromise of disputed claims and (5) Settlement or composition with creditors.

3. 1.3. Exceptions to the rule of ‘No consideration, No contract’ or,
‘No consideration no contract’- exceptions to the rule.
Consideration being one of the essential elements of a valid contract, the general
rule is that ‘an agreement made without consideration is void’, But there are a few
exceptions to the rule, where an agreement without consideration will be perfectly
valid and binding. These exceptions are as follows:
1. Agreement made on account of natural love and affection [Sec. 25 (1):]
An agreement though made without consideration will be valid if it is in writing
and registered and is made on account of natural love and affection between
parties standing in a near relation to each other. An agreement without
consideration will be
Valid provided:
(a) It is expressed in writing;
(b) It is registered under the law for the time being in force;
(c) It is made on account of natural love and affection;
(d) It is between parties standing in a near relation to each other.
All these essentials must be present to enforce an agreement made without
consideration.
2. Agreement to compensate for past voluntary service [Sec. 25 (2)]. A promise
made without consideration is also valid, if it is a promise to compensate, wholly
or in part, a person who has already voluntarily done something for the promisor,
or done something which the promisor was legally compellable to do.
3. Agreement to pay a time-barred debt [Sec. 25 (3)]. Where there is an
agreement, made in writing and signed by the debtor or by his authorized agent, to
pay wholly or in part a debt barred by the law of limitation, the agreement is valid
even though it is not supported by any consideration. A time-barred debt cannot be
recovered and therefore a promise to repay such a debt is without consideration.
4. Completed gift: The rule “no consideration, no contract” does not to Complete
gifts. Section 25 states that, ‘Nothing in this section shall affect the validity as
between the donor and the donee, any gift actually made.”

4. Thus if a person gives certain properties to another according to the provision of
the Transfer of Property Act, he cannot subsequently demand the property back on
the ground that there was no consideration.
5. Contract of agency. Section 185 of the Contract Act lays down that no
consideration is necessary to create an agency.
6. Remission by the promisee, of performance of the promise (Sec. 63). For
compromising a due debt, i.e., agreeing to accept less than what is due, no
consideration is necessary. In other words, a creditor can agree to give up a part of
his claim and there need be no consideration for such an agreement. Similarly, an
agreement to extend time for performance of a contract need not be supported by
consideration.
7. Contribution to charity. A promise to contribute to charity, though gratuitous,
would be enforceable, if on the faith of the promised subscription, the promisee
takes definite steps in furtherance of the object and undertakes a liability, to the
extent of liability incurred, not exceeding the promised amount of subscription.
6. Guarantee (Sec 127): A contract of guarantee is made without consideration.
1.4. Discuss the Types of consideration.
Types of Consideration: Consideration may be classified into three types:
1. Past Consideration: When the Consideration of one party was given before the
date of the promise, it is said to be past. Suppose that X does not some work for Y
in the month of January (without expecting any payment). In February Y promises
to pay him some money. The consideration of X is past Consideration.
Under English law past Consideration is no Consideration and a contract based on
past Consideration is void. But under Indian law a past Consideration is good
Consideration because the definition of Consideration in Section 2(d) includes the
words “has done or abstained from doing.”
2. Present Consideration: Consideration which moves simultaneously with the
promise is called Present Consideration or Executed Consideration. B buys an
article from a shop and pays the price immediately. The consideration moving
from B is present or executed Consideration.

5. 3. Future Consideration: When the Consideration is to move at a future date, it is
called Future Consideration or Executory on both sides. A promise may support a
promise. Thus a promise to pay money at a future date for goods to be delivered at
a future date is valid contract.
“Past Consideration is no Consideration”- Comment.
The Consideration which had already being passed before formation of Contract is
called Past Consideration.
Indian Law: According to Indian law, Consideration may be past, present or
future. So here past consideration is Valid.
England Law: According to England Law, Consideration must be either present
or future. Thus in England law past Consideration is not valid.

6. 3. Future Consideration: When the Consideration is to move at a future date, it is
called Future Consideration or Executory on both sides. A promise may support a
promise. Thus a promise to pay money at a future date for goods to be delivered at
a future date is valid contract.
“Past Consideration is no Consideration”- Comment.
The Consideration which had already being passed before formation of Contract is
called Past Consideration.
Indian Law: According to Indian law, Consideration may be past, present or
future. So here past consideration is Valid.
England Law: According to England Law, Consideration must be either present
or future. Thus in England law past Consideration is not valid.