Cameron Miranda
The Indian Contract Act, 1872, is the principal legislation regulating contract law in India. Section 2(d) of the Act defines consideration as a vital component of a contract, wherein the promisee or any other person performs an act, abstains from performing an act, or promises to do so at the desire of the promisor. This consideration can be past, present, or future and need not be adequate, but it must be lawful and made with the free consent of both parties. An agreement without consideration is void unless it meets specific exceptions outlined in the Act.
| Characteristics | Values |
|---|---|
| Definition | “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 promises to do or abstain from doing something, such act or abstinence or promise is called consideration for the promise". |
| Essential for a valid contract | Yes |
| Needs to be adequate | No |
| Needs to be lawful | Yes |
| Can be past, present or future | Yes |
| Can be from a third party | Yes |
| Can be gratuitous | Yes |
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What You'll Learn
Consideration must be lawful
Under Indian contract law, the consideration must be lawful. An illegal consideration is not valid and renders the contract void. For example, a contract where one party promises to obtain a government job for the other party through unlawful means is void as it involves an act forbidden by law.
A contract is also void if it involves injury to a person or their property, or if it is regarded as immoral or opposed to public policy. For instance, a contract between a husband and wife for future separation would be considered immoral and, therefore, void.
Additionally, the consideration must be desired by the promisor. If an action is taken at the desire of a third party or without the promisor's desire, it does not constitute valid consideration. For example, if someone saves another person's goods from a fire without being asked to do so, they cannot demand payment for their service as the act was not done at the desire of the promisor.
The consideration may, however, move from the promisee to any other person. It is not necessary for the promisee to supply the consideration. As long as there is free consent from both parties, the contract is valid even if one party negotiates poorly.
Past consideration is also valid in India, unlike in English law. This means that if one party has already provided a service or benefit to the other party before the promise or contract is made, it is still considered valid consideration.
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It must move at the desire of the promisor
In Indian contract law, consideration is an essential part of a contract. It is defined in Section 2(d) of the Indian Contract Act, 1872, as follows:
> "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 promises to do or abstain from doing something, such act or abstinence or promise is called consideration for the promise".
This means that for consideration to be valid, it must be done at the desire or request of the promisor. If an action is taken at the desire of a third party or without the promisor's desire, it is not considered good consideration.
For example, if someone saves another person's goods from a fire without being asked to do so, they cannot demand payment for their service as it was not done at the desire of the promisor.
Consideration must be something in return and can be offered by the promisee or a third party, but only if it is requested by the promisor. It is not necessary for the promisee to supply the consideration.
In addition, the consideration must be lawful. An illegal consideration is not valid and makes the contract void. For example, a promise to obtain a government job through unlawful means is prohibited and would not be considered valid consideration.
Past consideration, where the promisor received the consideration before the date of the promise, is also valid in Indian law, unlike in English law.
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It may move from the promisee to any other person
In Indian contract law, consideration is an essential part of a valid contract. It means 'something in return' and can be offered by the promisee or a third party, as long as it is at the request or desire of the promisor.
The Indian Contract Act, 1872, defines consideration as: "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 promises to do or abstain from doing something, such act or abstinence or promise is called consideration for the promise".
This means that the consideration may move from the promisee to any other person. It is not necessary for the promisee to supply the consideration. For example, Peter gifts his son, Oliver, an apartment with the condition that he pays a fixed amount of money to his uncle, John, every year. Oliver fails to pay, and John files a suit for recovery. Despite not being a party to the original contract, John is able to maintain his suit as he is a stranger to the consideration, but not a stranger to the contract.
Another example would be if A does some work for B in April without expecting any payment. In June, B promises to pay A for the work done previously. This constitutes a valid contract as A's work is of the nature of past consideration.
It is important to note that the consideration must be lawful. An illegal consideration is not valid and makes the contract void.
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Adequacy of consideration is not necessary
According to Indian contract law, the adequacy of consideration is not necessary for a valid contract. This means that the "something in return" does not need to be equal in value to the "something given". The law simply requires that a contract be supported by consideration.
Consideration is an essential part of a contract and is defined under Section 2(d) of the Indian Contract Act, 1872. It can be in terms of money, property, or any other form. Consideration is the price of a promise and is normally given to induce the promise. It can be offered by the promisee or a third party, but only at the request or desire of the promisor. If an action is taken at the desire of a third party, it does not constitute valid consideration.
The Indian law upholds the freedom of the parties to bargain. A poor negotiation by one party does not invalidate the contract. However, the decision must be made with the free consent of both parties. The adequacy of consideration is for the parties to consider when making the agreement, not for the court when it is sought to be enforced. The court will not inquire into the adequacy of consideration, but it may become relevant if one party claims that their consent was not freely given.
Consideration must have some value in the eyes of the law, even if it is not equal in value to the promise made. It must be real and possible, and it must not be uncertain or based on an uncertain event or condition. It must also be lawful and not immoral or against public policy.
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Past, present and future considerations
Consideration is an essential part of a contract. Section 2(d) of the Indian Contract Act, 1872 (ICA) defines the term 'consideration' as an act or abstinence, or a promise to act or abstain, done or made at the desire of the promisor, by the promisee or any other person. In other words, it is a bargained-for exchange where both parties get something they agreed to, usually something of value for something of value.
The consideration must be valid, lawful, and real and possible. Validity implies that the consideration must be at the desire of the promisor, and any act done voluntarily does not constitute valid consideration. Lawfulness means that an illegal consideration is not valid and makes the contract void. Real and possible mean that the consideration must be capable of being performed and must not be uncertain.
Past Consideration
Past consideration is when the consideration for any promise was given before, and the promise is made thereafter. In India, past consideration is a good consideration and can support a promise. For example, A's bike runs out of petrol on his way to the office. A requests B, a petrol seller, for petrol. B gives petrol to A. Later, A promises B to pay Rs. 500/- in consideration of his past consideration. Past consideration is not recognised under English law.
Present Consideration
The Indian Contract Act, 1872, does not explicitly define present consideration. However, it can be understood as a consideration that is given at the time the promise is made.
Future Consideration
Future consideration is when the consideration is given at a future date after the promise is made. For example, A agrees to supply wheat bags to B, and B agrees to pay for them on a future date.
In conclusion, consideration is a critical component of a valid contract under Indian contract law, and it can be past, present, or future. While the Indian Contract Act, 1872, specifically addresses past and future considerations, the present consideration is implied in the definition of 'consideration' and the understanding of contracts.
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Frequently asked questions
Section 2(d) of the Indian Contract Act, 1872, defines consideration as: "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 promises to do or abstain from doing something, such act or abstinence or promise is called consideration for the promise".
The essentials of a valid consideration include:
- It must move at the desire of the promisor.
- It must be lawful.
- It may move from the promisee or any other person.
Past consideration is when consideration is given before the promise is made by the promisor. It is considered good consideration under Indian law, but not under English law.
No, gratuitous promises are not enforceable by law. A gratuitous promise is one that is made without any economic exchange taking place.
