Introduction:
Consideration in the Indian Contract Act 1872 means that when at the desire of the promisor the promisee or any other person has done or abstained from doing or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise. [1]
Meaning of Consideration
Consideration forms a very essential ingredient of a contract to such an extent that Section 25 of The Indian Contract Act, 1872 declares that an agreement made without consideration is void. The exceptions listed in the same section list down certain points where consideration is not required. One of which is that if an agreement is based on natural love and affection. This means that if parties related by blood enter into an agreement out of love and affection it is not necessary to furnish any consideration to make that agreement valid. The necessary condition in this exception is “love and affection”.
As seen in the case of Rajlukhy Dabee v Bhootnath Mukherjee[2], the agreement between the parties was not found to be covered under this exception as there was no trace of love and affection. The facts of the case were that the defendant promised to pay his wife a fixed sum of money every month for her separate residence and maintenance. The agreement was contained in a registered document that mentioned certain quarrels and disagreements between the two. The Calcutta High Court refused to regard the agreement as covered by the exceptions. It is to be noted that although both the parties were related by blood the court could not find any trace of love and affection. The quarrels between the parties had compelled them to separate. Therefore, in this case, consideration and exception were absent of gift could not cover the transaction, the result being invalid contract. Therefore it can be concluded that consideration is not necessary in the case of giving gifts.
Meaning of Gift
Gift, as defined under Section 122 of the Transfer of Property Act, 1882, gift, is the transfer of any movable or immovable property that has been made by one person voluntarily and without any consideration to another person. The definition herein specifically focuses on the word “voluntarily” and “without consideration”. It is to be noted that in the Indian Contract Act consideration was an exception to gift and in the Transfer of Property Act, also gift does not include consideration. According to Section 4 of The Indian Contract Act,1872 and the transfer of property act are closely related. The chapters and section in the act which relates to contracts will be taken from the Indian Contract Act. Thus it can be inferred that gift and consideration are two separate things and have to be treated separately.
Shakuntala and Others V. State of Haryana
To understand the relation between consideration and gift the leading case is of Shakuntala and others v. State of Haryana[3]. In this case, the question before the Supreme Court was whether love and affection amounted to consideration in the transfer of gift according to the Section 32-FF of Pepsu Tenancy and Agricultural Lands Act, 1955 and whether gifts come under the ambit of saving under the same.
In this case, the appellants were aggrieved against the judgment of the Punjab and Haryana High Court which dismissed their writ petition upholding that the gifts to them did not fall under the ambit of the saving clause of Section 32-FF[4]. Section of 32-FF of the act states that Save in the case of land acquired by the State Government under any law for the time being in force or by an heir by inheritance or up to 30th July 1958, by a landless person, or a small landowner, not being a relation as prescribed of the person making the transfer or disposition of land, for consideration up to an area which with or without the area owned or held by him does not in the aggregate exceed the permissible limit, no transfer or other disposition of land effected after the 21st August 1956, shall affect the right of the State Government under this Act to the surplus area to which it would be entitled but for such transfer or disposition.[5] According to this section, consideration should be necessary for the transfer of property to come under the saving clause. The appellants contended that the transfer of property was out of love and affection which according to the Black’s Law Dictionary (44th edition) was good consideration. But it was clarified that “good” is generally used as the antithesis to valuable consideration which had to be necessary to be excluded in the case of a gift by virtue of its definition in Section 122 of the Transfer of Property Act.[6]
Analysis
Section 122 of the Transfer of Property Act defines a gift as a transfer of certain existing movable or immovable property made voluntarily and without consideration by one person called the donor and the other person called the done and accepted by or on behalf of the done. Thus, this section makes it clear that the transfer of property to be called a gift must be done without consideration. Although the definition of consideration is not given in the Transfer of Property Act, the definition is taken from section 2(d) of the Indian Contract Act[7].
Section 2(d) of the Indian Contract Act,1872 defines consideration as some act or abstinence or promise it does not mean that even a worthless act or act of gratitude can be called as consideration. The consideration must be of some value in the eyes of law. White v Bluett [8]is a leading case for this situation. In this case, the defendant owned a sum of money under the promissory note to his father. The defendant complaint to his father that he was not treated equally as compared to other children in the distribution of the property. So, to get rid of the complaints of the son the father promised to discharge him from all his liability if he stops complaining. It was held that there was no valid consideration.
Coming back to the case the Supreme Court upheld the decision of the High Court and dismissed their appeal with certain costs. The court explained that what Section 32-FF[9] saves is transfer or disposition of land for “consideration” up to the limit specified in it and as a gift is always without consideration, the gifts which are the subject matter of appeal did not fall within the purview of the section and have rightly been excluded from while calculating the surplus area under the saves clause.
Relation of Consideration with Gift
Therefore it can be concluded that a gift transfer should not have considered. Considering a deed of gift will merely make it a transaction like that of buying and selling which in turn will impose certain liabilities and obligation on both the parties and will have to be dealt with various acts such as that of Sales of Goods Act, Indian Contract act, etc. A gift is something that is given with natural love and affection and is given voluntarily. It does not include giving gifts unwillingly, that is by force, coercion, or undue influence. Often people take advantage of their position where he holds a real or apparent authority or where he holds a fiduciary relationship to take advantage of the prejudice of the other party. For example in the case of Mannu Singh v Umadat Pande[10], the case before Allahabad High Court, the defendant who was a spiritual adviser (guru) induced the plaintiff who was a devotee to gift him all of his property to secure benefits in the next world. It was held that there was undue influence over the plaintiff by the defendant and hence the transfer was held to be void. One way to differentiate between the transfer of property given genuinely because of love and affection or because of undue influence is a blood relation.
In Section 25 of the Indian Contract Act[11]also under exceptions consideration is not needed in gift if the parties are related by blood. It is also to be noted that the transfer of gifts to take proper paperwork and rules and regulation have also to be followed both in case of movable and immovable property. According to Section 123, of The Transfer of Property Act, 1882 a registered instrument must be signed by or on behalf of the donor and attested by at least two witnesses. For the purpose of making gifts for immovable property the same has to be followed or upon delivery. This makes it clear that there is a difference between the term gift as used in layman terms and according to the aforementioned act.
Conclusion
Thus it can be concluded that gift doesn’t form consideration and consideration does not form gifts. The gift is an exception to consideration and consideration cannot be included in a transaction of gift. Consideration can be passed, present future but gifts cannot be of existing or future property.
References:
[1] Section 2(d) , Indian Contract Act,1872
[2] (1899-00) 4 CWN 488
[3]( 1979) 3 SCC 226
[4] Pepsu Tenancy and Agricultural Lands Act, 1955
[5] ibid
[6] ibid
[7] 1872, Indian Contract Act
[8] (1853) 23 LJ Ex36
[9] Pepsu Tenancy and Agricultural Lands Act, 1955
[10] ILR (1888-90) 12 All 523
[11] ibid
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