The Doctrine of Consideration Under Indian Contract Act
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The Doctrine of Consideration Under Indian Contract Act
According to section 2(d) When at the desire of the promisor the promise or any other person has done or abstained from doing, 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.
Thus “Consideration” means to do something in return.
In short, Consideration means quid pro quo i.e. something in return.
An agreement must be supported by a lawful consideration on both sides. Essentials of valid considerations are
- It must move at the desire of the promisor. An act constituting consideration must have been done at the desire or request of the promiser. If it is done at the instance of a third party or without the desire of the promisor, it will not be good consideration. For example, “A” saves “B”‘s goods from fire without being ask him to do so. “A” cannot demand payment for his service.
- Consideration may move from the promisee or any other person. Under Indian law, consideration may be from the promisee of any other person i.e., even a stranger. This means that as long as there is consideration for the promisee, it is immaterial, who has furnished it. English law of Privity of Contract strictu Sensu wouldn’t apply in India.
However. Also. In India al Privity of contract as in England is followed
except in the following cases.
1)Trust or charge
2.Marriage settlement, Partition or other family Arrangement.
- Acknolwledgememnt or estoppels
4.Covenant running with the land
Consideration which is present or past is called executed consideration and in so far promise in future for consideration is called prospective or executory consideration.
- Consideration must be an act, abstinence or forbearance or a returned promise.
- Consideration may be past, present or future. Past consideration is not consideration according to English law. However it consideration as per Indian law. Example of past consideration is, “A” renders some service to “B” at latter’s desire. After a month “B” promises to compensate “A” for service rendered to him earlier. When consideration is given simultaneously with promise, it is said to be present consideration .. For example, “A” receives Rs.50/- in return for which he promises to deliver certain goods to “B”. The money “A” receives is the present consideration. Present and past together are called executed consideration according to Mulla. When consideration to one party to other is to pass subsequently to the maker of the contract, is said to be future consideration. Or prospective or executory consideration. For example. “A” promises to deliver certain goods to “B” after a week. “B” promises to pay the price after a fortnight, such consideration is future.
- Consideration must be real. Consideration must be real, competent and having some value in the eyes of law. For example, “A” promises to put life to “B”‘s dead wife, if “B” pay him Rs.1000/-. “A”‘s promise is physically impossible of performance hence there is no real consideration.
- Consideration must be something which the promiser is not already bound to do. A promise to do something what one is already bound to do, either by law, is not a good consideration., since it adds nothing to the previous existing legal consideration.
- Consideration need not be adequate. Consideration need not be necessarily be equal to value to something given. So long as consideration exists, the courts are not concerned as to adequacy, provided it is for some reasonably good value. And not illusory.
The consideration or object of an agreement is lawful, unless and until it is:
- forbidden by law: If the object or the consideration of an agreement is for doing an act forbidden by law, such agreement are void. for example,”A” promises “B” to obtain an employment in public service and “B” promises to pay Rs one lakh to “A”. The agreement is void as the procuring government job through unlawful means is prohibited.
2.If it involves injury to a person or property of another: For example, “A” borrowed rs.100/- from”B” and executed a bond to work for “B” without pay for a period of 2 years. In case of default, “A” owes to pay the principal sum at once and huge amount of interest. This contract was held void as it involved injury to the person.
- If courts regards it as immoral:An agreement in which consideration ir object of which is immoral is void. For example, An agreement between husband and wife for future separation is void.
4Is of such nature that, if permitted, it would defeat the provisions of any law:
5is fraudulent, or involves or implies injury to the person or property of another, or
6.Is opposed to public policy. An agreement which tends to be injurious to the public or against the public good is void. For example, agreements of trading with foreign enemy, agreement to commit crime, agreements which interfere with the administration of justice, agreements which interfere with the course of justice, stifling prosecution, maintenance and champerty.
7.Agreements in restrained of legal proceedings: This deals with two category. One is, agreements restraining enforcement of rights and the other deals with agreements curtailing period of limitation.
8.trafficking in public offices and titles:agreements for sale or transfer of public offices and title or for procurement of a public recognition like padma vibhushanor padma sree etc. for monetary consideration is unlawful, being opposed to public policy.
9.Agreements restricting personal liberty: agreements which unduly restricts the personal liberty of parties to it are void as being opposed by public policy.
10.Marriage brokerage contact: Agreements to procure marriages for rewards are void under the ground that marriage ought to proceed with free and voluntary decisions of parties.
- Agreements interfering marital duties: Any agreement which interfere with performance of marital duty is void being opposed to public policy. An agreement between husband and wife that the wife will never leave her parental house.
12.consideration may take in any form-money,goods, services, a promise to marry, a promise to forbear etc.
Contract Opposed to Public Policy can be Repudiated by the Court of law even if that contract is beneficial for all of the parties to the contract- What considerations and objects are lawful and what not-Newar Marble Industries Pvt. Ltd. Vs. Rajasthan State Electricity Board, Jaipur, 1993 Cr. L.J. 1191 at 1197, 1198 [Raj.]-Agreement of which object or consideration was opposed to public policy, unlawful and void- – What better and what more can be an admission of the fact that the consideration or object of the compounding agreement was abstention by the board from criminally prosecuting the petitioner-company from offense under Section 39 of the act and that the Board has converted the crime into a source of profit or benefit to itself. This consideration or object is clearly opposed to public policy and hence the compounding agreement is unlawful and void under Section 23 of the Act. It is unenforceable as against the Petitioner-Company.
|My Conclusion: Consideration is some value or some benefit to the promisor and some detriment or sufferance to the promisee according to Mulla. It’s a matter of quid pro quo.
Consideration which Is illegal, immoral or opposed to public policy remain unenforceable in law.
The below given section 25 of provision and the rest of my conclusion is also part of the conclusion only. Please read on.
Let us examine section 25 of Indian Contract Act provisions: 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.—An agreement made without consideration is void, unless— —An agreement made without consideration is void, unless—”
1.it is expressed in writing and registered under the law for the time being in force for the registration of 1[documents], and is made on account of natural love and affection between parties standing in a near relation to each other; or unless
- it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless.
- It is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract. Explanation 1.—Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made. Explanation 2.—An Agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given. Illustrations
(a) A promises, for no consideration, to give to B Rs. 1,000. This is a void agreement. (a) A promises, for no consideration, to give to B Rs. 1,000. This is a void agreement.”
(b) A, for natural love and affection, promises to give his son, B, Rs. 1,000. A puts his promise to B into writing and registers it. This is a contract. (b) A, for natural love and affection, promises to give his son, B, Rs. 1,000. A puts his promise to B into writing and registers it. This is a contract.”
© A finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract. (c) A finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract.”
(d) A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract. (d) A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract.”
(e) A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract. (e) A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract.”
(f) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A’s consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration. (f) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A’s consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration.”
(g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies that his consent to the agreement was freely given. (g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies that his consent to the agreement was freely given.” The inadequacy of the consideration is a fact which the Court should take into account in considering whether or not A’s consent was freely given.
The above provisions of Indian contract Act are crystal clear that without the doctrine of consideration we can’t think of contract law at all , such as Making or unmaking of contract. Consideration must be of some value and it should not be illusory or ridiculous. If one party to the contract raises inadequacy of consideration the court would accordingly take inadequacy of consideration into account and decide the case. Otherwise ,the court wouldn’t normally go into the question of inadequacy of consideration.
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