Types of Consideration

June 14, 2022

The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h) as “An agreement enforceable by law”.

In section 2 (e), the Act defines the term agreement as “every promise and every set of promises, forming the consideration for each other”.

The Act in its section 2(b) defines the term “promise” here as: “when the person to whom the proposal is made signifies his assent thereto, the proposal becomes an accepted proposal. A proposal when accepted, becomes a promise”.

Promise is the condition which is agreed by one party to perform for the other party in a contract.

Promisee is the person to whom the promise has been made.

Promisor is the person who makes the promise.

Contract is basically any agreement proposal which is offered by one party and is accepted by the one who is offered and is enforceable by law.

Contracts which are backed by consideration are enforceable by law as the agreements which lack considerations are generally forced upon parties, are abusive or rash in nature. For example – A gives B his house, B doesn’t do anything or abstains from doing anything i.e. doesn’t fulfil any promise. This makes the contract unenforceable by law. This can be categorized under gift but not contract.

Consideration:

According to Section 2(d) of the Indian Contract Act, consideration can be defined as when on the desire of the promisor the promisee

Has done something or abstained from doing something
Does something or abstains from doing something
Will do or promises not to do in future

It means “something in return” i.e. ‘QUID PRO QUO’

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.” An agreement without consideration is a bare promise and exnudo pacto non aritio actio, i.e., cannot be held binding on the parties.

Consideration should be at the desire of the promisor, it cannot be on demand of the promisee or any third party.

According to Section 23 of the Indian Contract Act it is given that consideration should not be illegal, immoral or against public policy.

Consideration can move from promisee to any other person. Chinaya v. Ramayya, A, by a deed of gift, made over certain property to her daughter, with a direction that the daughter should pay an annuity to A’s brother. On the same day the daughter executed a deed in writing in favour of the brother and agreed to pay the annuity. After that the daughter declined to fulfil her promise and the brother sued to recover the amount. The defendant (sister) contended that as there was no consideration from the side of the brother, and that he being the stranger to the consideration had no right to sue. It was held that it is not necessary that consideration must move from the promisee himself. Therefore, the brother was entitled to maintain the suit.

There are three main types of consideration namely:

Past Consideration
Present Consideration
Future Consideration

Past Consideration

Past Consideration can be defined as the condition where the promisor had received the consideration before the date it was promised.

Illustration – B took care of A’s cat while he was away. Now that he’s back, he pays B for the same reason.

Lampleigh vs. Brathwait

In the case of the Lampleigh vs. Brathwait, the defendant, requested the plaintiff to help him get a pardon from the king. The plaintiff put in efforts, travelled up to the king, etc. his request was not sanctioned. The defendant promised to pay him for the same. Later he refused to do so. Plaintiff sued him in a court of law. The court held that the defendant must pay the plaintiff because he has himself requested him to help him. Hence the act of the plaintiff, although done in the past, would still be regarded as a valid consideration.

Section 25(2) of the Indian Contract Act,1872 states that “An agreement made without consideration is void 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.”

Present Consideration

Present Consideration can be defined as the condition where the consideration is done as in the same the promise is made.

Illustration – B sold his car to A and A gave B cash as demanded by him.

Future Consideration

Future Consideration can be defined as the condition where consideration is done in the future but the promise is made in the present.

Illustration – A promises to pay B when B will bring groceries.

Consideration for a promise is a main criteria for the contract. Consideration can be considered as the motive of any contract but motive of a contract cannot be taken as the consideration.

There are exceptions to Section 25 of the indian Contrct Act ,1872 where even if the contract does not have consideration does not lose its validity.

They are :

Natural Love and Affection
Past Voluntary Services
Time Barred Debt

Chinaya v. Ramaya (1882) ILR (1876-82) 4 Mad 137

In Chinaya v. Ramaya, A by a deed of gift, made over the certain property to her daughter, with a direction that the daughter should pay an annuity to A’s brother, as had been done by A. On the same day, the daughter executed writing in favour of the brother agreeing to pay the annuity. The daughter declined to fulfil her promise and the brother sued to recover the amount. The defendant argued that there was no consideration from the brother and that he had no right to sue because he was stranger to this consideration. It was held that it is not mandatory that consideration must move from the promised himself . A contract can be supported even by a consideration from a person other than the promised. Thus, the brother was entitled to sustain the suit.

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June 14, 2022