Introduction:
The term “Consideration” is defined under Section 2(d) of the Indian Contract Act, 1872.
Generally, a contract without “consideration” stands declared void under Indian Law, However, under English Law, contracts may be valid even when consideration is not present as an element, such as in the case of: –
- Contracts in the form of a deed.
- Contracts under seal.
Definition Under Section 2(d)
“When, at the desire of the promisor, the promisee or any other person has done or abstained from doing or does or abstains 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]
The following essentials need to be present unequivocally for a consideration to be considered valid: –
Consideration Must be Given at the “Desire of the Promisor”
For consideration to be held valid it is essential that the consideration be provided at the “desire of the promisor”, rather than under duress, undue influence or just voluntarily at the instance of a Third Party as seen in the case of “Durga Prasad v. Baldeo”[2]where consideration had not moved at the desire of the promisor but at the instance of a Third Party and as result it was held that said consideration was insufficient in supporting the promise made.
The plaintiff sought permission from the district collector to construct several shops in his town, one of which was occupied by the defendant who agreed to an arrangement to pay 5% on all articles sold through the shop as consideration for the construction of the building. The defendant later was unable to hold up his arrangement and thus the plaintiff brought an action against the defendant. It was observed that this contract had no proper consideration, and under Indian Law a contract with no proper consideration stands declared void. As the consideration was made by the plaintiff at the instance of the District Collector who in this case was a Third Party to this contract, therefore as the consideration was not made at the desire of the defendant, it cannot be considered valid. Contract without consideration is void as it was not done at the desire of the promissory additionally, the promissory had no personal benefit. Hence the action brought by Plaintiff was dismissed.
Consideration by the Promisee or Any Other Person
According to Section 2(d) of the Indian Contract Act, consideration may be given by the promisee or any other interested third party, under English Law, consideration must move from the promisee to the promisor. For example, A promises to sell his cycle to B for a consideration of Rs 3000 which is to be given by another party C. This will be held valid under Indian Law under Section 2(d) of the Indian Contract Act, but it will be declared void under English Law.
As seen in the case of Chinnaya v. Ramaya[3] where an old lady granted her daughter some land through a gift deed in return for which the daughter had to pay an annual sum of Rs 653 to her aunt, after the old lady’s death, the daughter refused to pay the stipulated amount and hence and action was brought the plaintiff. The Madras High Court held that in this agreement the consideration had been made ready on the behalf of the plaintiff by her own sister (respondent’s mother) although the plaintiff although a stranger to the contract could enforce it on the behalf of his sister and under section 2(d) of the Indian Contract Act, consideration may be made by “the promisee or any other person”. The contract was held valid and the suit by the plaintiff was accepted.
Consideration Maybe Past, Present or Future
Section 2(d) of the Indian Contract Act recognizes past, present, and future considerations, it specifically says that when at the desire of the promisor, the promisee, or any other person: –
- Has done or abstained from doing, (Past consideration) – consideration for any promise that was given before the promise was made.
- Does or abstains from doing, (Present consideration) – when one of the parties of the contract performs his part of the promise and it constitutes the consideration for the promise by the other side.
Promises to do or to abstain from doing something. (Future consideration) – when two parties make promises to each other and the performance of said promises takes place after the formation of the contracts.
Under English Law, only Present Consideration is considered valid, but in the case of Lampeigh vs Brathwait[4], past consideration is given prior to the promise and the request of the promisor was considered valid. The defendant (Thomas Brathwait) committed murder, was convicted and was then awarded a death sentence, made requests to Lampeigh(plaintiff), to make requests with the King and get him pardoned which the plaintiff did of his own accord, in consideration of these efforts the defendant promised to pay 100 euros to the plaintiff. A question arose concerning the legality of the issue at hand, whether the plaintiff had a legal right to collect said consideration.
It was held that the plaintiff could enforce his claim and recover said consideration as at the time of the promise the amount had been present in the form of efforts by the plaintiff to procure a pardon for the defendant were present at the earlier request of the plaintiff. This case serves as an exception to the fact that under English Law, past consideration is considered no consideration at all.
Something i.e., An Act, Abstinence or Promise by the Promisee Constitutes Consideration
According to Section 2 (d), the definition of consideration, when at the desire of the promisor, the promisee or any other person has done, promises to do or abstained from doing in the past, present or will be doing or abstaining from doing in the future – such act or abstinence or promise is called consideration for the promise. If nothing is done in exchange for the promise, there is no consideration.
As seen in the cases of: –
Abdul Aziz v. Masum Ali[5]
The defendant promised to pay Rs 500 for repair and reconstruction work at the mosque, but nothing was done of the sort and so the defendant refused to pay the amount. It was held that nothing of substance was done on the faith of the said promise, there exists no consideration in this case, and therefore the defendant is not liable to pay the amount he promised.
Re Soames[6]
One Soames made a promise to the plaintiffs that he would leave a sum of 300 euros in his will for the maintenance of a school which was to be established by plaintiffs, but no provision existed in his will. It was held that the executors of the promise were liable to pay the stipulated and see the promise through.
Reciprocal Promises
When two promises are made as an exchange to each other, promises which serve as consideration or as a form of consideration for each other are called reciprocal promises. They are defined under section 2(f) in the Indian Contract Act,1872.
Types of reciprocal promises: –
- Independent and mutual reciprocal promise.
- Dependent and Conditional reciprocal promises.
- Concurrent and Mutual or Simultaneous reciprocal promise.
Conclusion
There are certain elementary fundamentals of a valid contract that are to be abided by for the purpose of forming a legitimate legal contract. Consideration is one of the fundamentals of the valid contract and is hereby the building block of the same. Non-fulfilment of any of the essentials will lead to the failure of the proper contract and the existence of a void agreement that has no legal significance according to Section 25(2) of the Indian Contract Act, 1872. 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[7]. 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 to binding on the parties. In Currie v. Misa[8], it was defined, “A valuable consideration in the sense of the law may consist either in some right, interest, forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other.
Therefore, the consideration remains one of the most essentials of a valid and among the three essentials (offer and acceptance being the other two) that must be present prima facie for an agreement of some sort to be declared a binding contract.
References:
- https://lexforti.com/legal-news/consideration-is-of-major-essence-in-a-contract/
- https://lawlex.org/lex-bulletin/case-summary-chinnaya-vs-ramayya/23389
- https://www.business.taxolawgy.com/discussions/topic/what-is-reciprocal-promise-list-any-two-types-of-reciprocal-promise-2/
- https://blog.ipleaders.in/reciprocal-promise/
- scconline.com
- IndianKanoon.com
- INDIAN CONTRACT ACT by Dr. RK Bangia, Allahabad Law Agency, 15th edition, 2016.
Other Sources:
[1]INDIAN CONTRACT ACT by Dr. RK Bangia, Allahabad Law Agency, 15th edition, 2016. INDIAN CONTRACT ACT, 1872 – Constitution of India.
[2]Durga Prasad v. Baldeo (1880) 3 Allahabad 221.
[3]Chinnaya v. Ramaya ILR (1876-82) 4 Mad 137
[4]Lampeigh vs Brathwait (1615) Hob. 105
[5]Abdul Aziz v. Masum Ali, A.I.R 1914 All. 22.
[6]Re Soames (1897),
[7]INDIAN CONTRACT ACT by Dr. RK Bangia, Allahabad Law Agency, 15th edition, 2016.
INDIAN CONTRACT ACT, 1872 – Constitution of India
[8] Currie v. Misa(1875) LR 10 Ex 153; (1875-76) LR 1 App Cas 554
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