CONSIDERATION

The life blood of every contract

 CONSIDERATION
It is ‘quid pro quo’ i.e. something in return. It is the price
of promise.
e.g. X agrees to sell his TV set to Y for Rs. 8000. TV set is
the consideration of Y and Rs. 8000 is the consideration of
X.
Section 2 (d) Indian contract act… “ When at the desire of
the promisor, the promisee or any other person has done
or abstained from doing, or does or abstain from doing, or
promises to do or abstain from doing, something, such act
or abstinence or promise is called consideration”
• “Consideration means something which is of some value in
the eye of law…It may be some benefit to the plaintiff
or some detriment to the defendant.”
• An abstinence or forbearance, i.e., abstaining or refraining
from doing something. In this sense consideration is in a
negative form.
Example: A promises B not to file a suit against him if he
pays him [Link] abstinence of A is the consideration
for B’s payment.
 Legal Rules as to Consideration

1. It must move at the desire of the promisor.

2. It may move from the promisee or any other person
3. It may be an act, abstinence or a return promise.
4. It may be past, present or future.
5. It need not be adequate.
6. It must be real and not illusory
7. It must be something which the promisor is not
already bound to do.
8. It must not be illegal, immoral or opposed to public
policy (Sec.23).
1. It must move at the desire of the promisor:
An act constituting consideration must have been done at the desire or request
of the promisor . If it is done at the instance of a third party or without the
desire of the promisor , it will not be a good consideration.
Example: A saves B’s goods from fire without being asked to do so. A cannot
demand payment for his services.

2. It may move from the promisee or any other person.

Consideration may move from promisee or any other person, i.e., even a
stranger. This means that as long as there is consideration for a promise it is
immaterial who has furnished it.
But the stranger to consideration will be able to sue only if he is a party to the
contract

X pays Rs. 50000 to Y directing him to build a house for Z. Y agrees to do so.
Hence, Z is a party to a contract but stranger to consideration & he can enforce the
contract.
 [Link] may be an act, abstinence or a return
promise.
(1) Forbearance to sue: If a person who could sue another for the enforcement of a
right agrees not to pursue his claim, this constitutes a good consideration for the
promise by the other person.

This results in a benefit to the person not sued and a detriment to the person who
could sue.
Ex: A borrows from B Rs.1million at 20 percent p.a., and fails to pay the amount.
When B is about to file a suit, A agrees to pay a higher rate of interest. B, as a result,
does not file the suit. This forbearance on the part of B to file a suit is a sufficient
consideration and B can enforce the promise by A to pay the higher rate of interest.

Compromise with creditors: A debtor who is financially embarrassed may call a

meeting of his creditors and request them to accept a lesser amount in satisfaction of
their debt. If the creditors agree to it, the agreement is binding both upon the debtor
and the creditors as this amounts to a compromise of the claims of the creditors.
• It may be past, present or future.
(1) Past Consideration: When consideration by a
party for a present promise was given in the past, i.e.,
before the date of the promise, it is said to be past
consideration.
Example: A renders some service to B at latter’s desire.
After a month B promises to compensate A for services
rendered to him. It is past consideration. A can recover
promised amount.
(2) Present or Executed Consideration:
When consideration is given simultaneously with promise, i.e., at the time of
promise, it is said to be present consideration. In case of sale, for example,
consideration is present or executed.

Example: A receives Rs. 500 in return for which he promises to deliver certain
goods to B. The money A receives which he promises to deliver certain goods to
B. The money A receives is the present consideration for the promise he makes to
deliver the goods

(3) Future or executory consideration:

When consideration from one party to the other is to pass subsequently to the
making of the contract, it is future or executory consideration.

Example: D promises to deliver certain goods to P after a week; P promises to

pay the price after a fortnight. The promise of D is supported by the promise
of P. Consideration in this case is future or executory
 [Link] need not be adequate.
Consideration, as already explained, means “something in
return”.
This something in return need not necessarily be equal to
“something given”.
The law simply provides that a contract should be supported
by consideration.
So long as consideration exists, the Courts are not concerned
as to it’s adequacy, provided it is of some value.
5. Uncertain consideration – X agrees to pay an
adequate amount for a certain work… ‘adequate’ &
‘certain’ is uncertain elements.
 6. It must be real, and not illusory.
Although consideration need not be adequate, it must be
real, competent and of some value in the eyes of the law.
There is no real consideration in the following cases:
(1) Physical Impossibility: A promises to put life in to B’s
dead wife should B pay him Rs.5 million. A’s promise is
physically impossible of performance.
(2) Legal Impossibility: A owes Rs 100 to B. He promises to
pay Rs.20 to C, the servant of B, who in return promises to
discharge A from the debt. This is legally impossible because
C cannot give discharge for a debt due to B, his master.
7. It must be something which the promisor is not already
bound to do.
A promise to do what is already bound to do, either by
general law or under an existing contract, is not a good
consideration for a new promise, since it adds nothing to the
pre-existing legal or contractual obligation.
Likewise a promise to perform a public duty by a public
servant is not a consideration

8. It must not be illegal, immoral or opposed to public

policy.
The consideration given for an agreement must not be
unlawful. Where it is unlawful, the Courts do not allow an
action on the agreement
Consideration May be :
 An act - means doing of something.
 An abstinence – promising not to do something .
 A promise – the promise of each party is the consideration
for each other
 Exceptions to the rule
Natural love & affection . [Sec 25(2)] – is valid if it
satisfies the following conditions :
1. It is in writing
2. It is registered under law
3. It is made out of love & affection
4. It is between parties standing in a near relation to
each other.
X promises his son to give Rs. 100000 after his death
in writing & get it registered.
 STRANGER TO CONTRACT
• It is general rule of law that only parties to a
contract may sue and be sued on that contract.
This rule is known as the “Doctrine of privity of
contract. ”
• Privity of contract means relationship subsisting
between the parties who have entered in to
contractual obligations.
• It implies a mutuality of will and creates a legal
bond or tie between the parties to contract.
• Two Consequences of the “Doctrine of Privity of
Contract”
(1) A person who is not a party to a contract cannot
sue upon it even though the contract is for his benefit
and he provided consideration.
(2) A contract cannot confer rights or impose
obligation arising under it on any person other than
the parties to it.
Thus, if there is a contract between A and B, C cannot
enforce.
 Example
• S bought tyres from the Dunlop Rubber Co. and sold
them to D, a sub-dealer, who agreed with S not to
sell below Dunlop’s list price and to pay the Dunlop
Co. 5 pounds as damages on every tyre D
undersold. D sold two tyres at less than the list price
and thereupon the Dunlop Co. sued him for the
breach.

• Held, the Dunlop Co. could not maintain the suit as

it was a stranger to the contract.