Essentials of Consideration

Presence of consideration is one of the requisites of Valid Contract. Consideration must be

of two directional nature. That means both parties should get benefited mutually. Then only
the Contract becomes capable of creating legal relations. Consideration may be in the form
of cash, goods, act or Abstinence.

Definition of Consideration
When at the desire of the promissor, the promisee or any other person has done or
abstained from doing or does or abstains from doing or promise to do or abstain from
doing something, such act or abstinence or promise is called consideration for the
promise. - Sec.2 (d), Indian Contract Act.

Essentials of Consideration
Consideration should be passed at the request of offerer: Offeree should send only
such consideration which is wanted by offerer. In case where offeree sends un-wanted
consideration, he has no right to claim counter consideration.

A case on this point is Durga Prasad Vs Baldeo. In this case there is a contract
between A and B according to which A has to provide for all requirements to B to run a
market and the profits are to be shared between them. Upon C`s request B makes the
market 24 hours market for a consideration from C. There after C refuses to give
remuneration to B on the ground that he (C) has no consideration from B. Afterwards B
claims remuneration from A for rendering additional work to which A refuses. Here Court
decides that the additional work done by B is not wanted by A and hence B cannot claim
anything from A.
Consideration may move from promise or any other person:According to Indian
law, consideration may move from promise or any other person. It is specified in Section
2(d) of Indian Contract Act definition itself. But according to England law Consideration
should move from promise only. Though it is said so England law has given an exception
where consideration may move from a person other than promise. Here condition is there
should be blood relationship between promisee and that other person who is sending the
consideration.

A case on this point is Dutton Vs Poole. In this case A has a son called B and a
daughter called C. A wants to conduct his daughter`s marriage out of the sale proceeds of
branches of mango plantation which is inherited property. But B does not like it. A Contact
gets formed between A and B according to the terms of which B has to conduct C`s marriage
out of his (B`s) own savings and A should not destruct the plantation. Afterwards B says to
C that it is his (B`s) obligation to perform her marriage to which C has given her acceptance.
Thereafter A becomes no more and B does not render her (C) marriage on the ground that
he (B) has no consideration from C. Here Court decides that there is blood relation between
C and A. B had already obtained consideration from A in the form of abstinence. There it is
decided that B has to perform C`s marriage.

Consideration may be Past, Present or Future: Consideration are of three types

namely Past, Present and Future consideration. The consideration which is sent before
formation of contract is called past consideration. The consideration which gets passed at
the time of formation of contract is called Present Consideration. The Consideration which
is to be passed in future i.e. after the contract is called Future Consideration. As per Indian
Law three types of considerations are Valid. But as per England law Past Consideration is
not valid.
Consideration need not be adequate: Consideration of the Contract need not have
equal magnitudes. In adequacy of consideration will not infect Validity of the Contract.

A case on this point is Thomas Vs Thomas. In this case there is a Contract between A
and B according to the terms of which A has to provide his house to B at a rent of one rupee.
Court decides that it is a Valid Contract because Consideration need not be adequate.
Consideration must be Lawful: Presence of unlawful Consideration makes the Contract
illegal and hence Void.

Example: there is a Contract between X and Z according to which Z has to murder Y

for a Consideration of Rs. 10000 from X. Here Consideration from Z to X is unlawful and it
is illegal contract.
Consideration Must be Real: Consideration should not be of illegal contract. It must be
a believable concept.

Consideration in Contract
No Consideration, No Contract
To attain Validity and to create legal relations, the Contract should be with two directional
consideration. In the absence of two directional consideration, it can be said that there is no
contract at all (only Social agreement). But, the following are situations where Contract
attains Validity with one directional consideration.

Affection based Contracts

Promise to pay time bared debt

Charities

Completed Gifts

Extension of Time

Negotiable Instruments

Voluntary Services

Agency Contracts

Affection based Contract: If the contract is an outcome of affection, one directional

consideration is sufficient to bring Validity to the Contract.

A case on this point is Raj Lukhy (Vs) Bhoothnadh. In this case A and B are husband
and wife respectively. There are frequent clashes and misunderstandings between them. As
a result, on one day, a contract has formed between them according to which they have to
live separately and for B`s livelihood, A has to Contribute amounts to B. Upon breach of
Contract by husband, wife files a suit. Here only one directional consideration can be
observed. At the same time it can be confirmed that their Contract is not at outcome of
affection. Thus the Contract is held to be Void.
Another case on this point is Venkata Swamy (Vs) Ranga Swamy in this case A and B
are brothers. A, as a consequence of affection on B, Promises to discharge B`s debts. In the
court it is held that it is a Valid Contract due to presence of affection. Same decision is made
in poon bee bee (Vs) Faiz Bhiksh and Bheema (Vs) Shivaram.
Promise to pay time bared debt: Limitation Act has specified durations to perform the
Contract. It is called limitation period. In case of pro-note limitation period is three years.
After expiry of three years from the date of Pro-note, the debt becomes time bared debt.
Where creditor cannot proceed legally to recover the amount. If debtor promises to pay time
bared debt, then a new Contract gets formed between Creditor and debtor, where there will
be one directional consideration only. i.e. From debtor to Creditor only. But it is Valid
Contract.
Charities: In case of Contracts relating to Charities, there will be only one directional
Consideration. Such a Contract is at times Valid and at times Void. If the party who has to
get the amount of charity, comes across any suffering, then it is Valid Contract. In the
absence of loss, the Contract is Void.

A case on this point is Kedarnadh (Vs) Ghorie Mohammad. In the case a Contract
gets formed between A and B according to which A has to donate certain amount to B for
construction of a town hall. Having trust in A`s promise, B borrows money temporary and
commences the construction work. Thereafter A refuses to pay and B sues. As B has come
across laws court decides that the contract is Valid and hence, he can recover the amount.
Completed Gifts: Gifts are of two types namely Promised Gifts and Completed Gifts. In
case of Promised Gift, The Contract is Void and in case of Completed Gifts the Contract is
Valid. If promised gift is not given, the other party cannot proceed legally to get that gift.
The person who has handed over the gift, cannot get it back by proceeding legally.
Extension of Time: In case where extension of time to settle the debt is agreed between
debtor and creditor, A new contract comes into operation. In such contract there will be
only one directional consideration. But it is Valid.
Negotiable Instruments: In case of negotiable instruments, as per the provisions of
Negotiable Instruments Act 1881, Consideration will be presumed. So a Contract relating to
negotiable instrument attains Validity with one directional consideration.

Voluntary Services: In case where a party renders voluntary service, the contract which
gets formed after such service, attains Validity with one directional consideration.
Agency Contracts: In case of Agency Contracts also one directional Consideration is
sufficient to bring Validity to the Contract.