Define Consideration. What are the Legal Rules Regarding Consideration?

Consideration

One of the essential elements of a valid contract is that it must be supported by some consideration. The term consideration is used in the sense of quid pro quo. It means that when a party to an agreement promises to do something, he must get something in return. This something which a party gets in return is the consideration. In simple words, Consideration is what a promisor demands as the price for his promise. Section 2 (d) 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 to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.

Section 2 (d) requires three things:

  • The act or abstinence should be done at the desire of the promisor,
  • That it should be done by the promisee or any other person, and
  • That the act or abstinence may have been already executed or be in the process of being done or may still be executory, i.e., it is promised to be done.

A valuable consideration, in the sense of law, may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.

So consideration may be a benefit to one party or some detriment to the other. It may be an act or abstinence or promise. A agrees to sell his house to B for Rs. 5,00,000. Here B’s promise to pay the sum of Rs. 5,00,000 is the consideration for A’s promise to sell the house and A’s promise to sell the house is the consideration for B’s promise to pay Rs. 5,00,000.

Legal Rules Regarding Consideration:

Following are the rules as to consideration:

Every contract must be supported by consideration: No valid contract can arise without consideration. According to Salmond A promise without consideration is a gift; one made with consideration is a bargain. Except for certain exceptions provided in Section 25 of the Indian Contract Act, the rule is, no consideration, no contract.

Consideration must move at the desire of the promisor: An act shall not be a valid consideration for the promise unless it is done at the desire of the promisor. So the act or abstinence must be done or promised to be done at the desire of the promisor. It is not necessary that the promisor himself should be benefited by his act, but his desire is essential. Example: D, on the order of the Collector of a district, built at his own expense certain shops in a bazar. The shops were occupied by different shopkeepers who promised to pay D a commission on articles sold. In a suit filed by D to recover the commission it was held. that the promise was not supported by consideration since the market was not constructed at the desire of the shopkeeper but the District Collector.

Consideration may move either from the promisee or any other person: It is not necessary_that the consideration must move from the promisee. As long as there is a consideration, it is not important who has given it. Therefore, a stranger to consideration can sue on a contract provided he is not a stranger to contract.

Consideration may be past, present or future: Where the promisor has received consideration before the date of the promise, it is past consideration. When the promisor receives consideration simultaneously with his promise, it is present consideration. Where the promisor has to receive consideration in future for his promise, it is future consideration.

Consideration need not be adequate: Section 25 clearly provides that an agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate. This means that consideration need not be adequate to the promise.

Consideration may be an act or abstinence or promise: Consideration may be a promise to do something or not to do something. So it may be either positive or negative.

Consideration must be lawful: According to Section 10, all agreements are contracts if they are made for a lawful consideration’. So consideration should be lawful, otherwise the agreement is void. Every agreement of which the consideration is unlawful is void, Section 23. It means that an agreement must be supported by lawful consideration. Section 23 also gives certain instances of unlawful consideration. It means that should not:— Be forbidden by law,

  • — Defect any provision of any law.
  • — Imply injury to the person or property of another person.
  • — Be immoral or opposed to any public policy.

Consideration must be real and not illusory or impossible: The consideration must be real and not illusory. Real consideration is one which is not physically or legally impossible. Illusory means it may give the impression of a consideration which is not actually there

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