Introduction to Consideration

Introduction to Consideration

Consideration is an essential element for the formation of a contract. It may consist of a promise to perform a desired act or a promise to refrain from doing an act that one is legally entitled to do. In a bilateral contract--an agreement by which both parties exchange mutual promises--each promise is regarded as sufficient consideration for the other. In a unilateral contract, an agreement by which one party makes a promise in exchange for the other's performance, the performance is consideration for the promise, while the promise is consideration for the performance

Consideration must have a value that can be objectively determined. A promise, for example, to make a gift or a promise of love or affection is not enforceable because of the subjective nature of the promise.

Traditionally, courts have distinguished between unilateral and bilateral contracts by determining whether one or both parties provided consideration and at what point they provided the consideration. Bilateral contracts were said to bind both parties the minute the parties exchanged promises, as each promise was deemed sufficient consideration in itself. Unilateral contracts were said to bind only the promisor and did not bind the promisee unless the promisee accepted by performing the obligations specified in the promisor's offer. Until the promisee performed, he or she had provided no consideration under the law.

The section 25 of the Indian Contract Act, 1872 openly declares that "an agreement made without consideration is void..."

1. In other words the presence of consideration is an essential for a contract to be valid.

2. In England too "promises without consideration are not enforced, because they are gratuitous".

3. In England the contracts are divided into two categories:

1.Contracts under seal, or contracts in the form of a deed. Such contracts are valid even without consideration.

2.Simple contracts or parol contracts. For validity of such contracts the presence of consideration is needed. Consideration in simple words means something in return of a promise which may either be benefit gained by one party or something lost by the other. So generally there can be no doubt that for a valid contract, there must be consideration, and also free consent.

4 Definitions of Consideration According to Blackstone"Consideration is the recompense given by a party contracting to the other."Or the price of the promise.

5. Sir Fredrik Pollock summarized the position of words adopted by the House of Lords in1915: "An act of forbearance of one party or the promise thereof is the price for which the promise of the other is bought, and the promise thus given for value is enforceable."

Definitions of Consideration under Section 2(d)

Section 2 (d), The Indian Contract Act, 1872 defines consideration as given under:"When, at the desire of the promisor, the promise 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 a consideration for the promise."

Essentials of Consideration

consideration must move at the desire of the promisor: the act or forbearance must be done at the desire of the promisor. If it is done at the instance of third party or without the desire of the promisor, it is for a consideration. Act done at the desire of a third party is not a consideration. Act must be done voluntarily at the desire of the promisor.

If A does any act without the desire of B or without B offering, it will not amount to consideration. There should be a proposal for an acceptance to follow and then, when the other person does something in consequence of such a proposal acceptance would be valid and such an act or forbearance of doing or not dong something will be consideration.

A promised by letter to pay B a certain sum of money. In that letter, C promised to give her daughter for marriage with B. A failed to pay B and C filed a suit on A to recover the amount. C cannot force A to pay the money to B because C's promise to marry his daughter to B did not move at the desire of A, the promisor.

In Durgaprasad v Baldeo (1880-3 All221) , D promised to pay a commission on the articles sold through their agency in a bazaar in which they occupied shops, in consideration of B having extended money for the construction of such bazaar. Such money had been expended by B at the desire of the Collector of the District. It was held that such expenditure was not consideration since it was not made at the desire of D.

Consideration may move from the promisee or any other person -- Stranger to a contract: A consideration may move from promisee or any other person. Consideration from a third party is a valid consideration. Under English law, however, consideration must move from the promises only.

A gifted property to her daughter with the condition that the daughter should pay an annuity to A's brother B. However the daughter failed to keep her promise and the bother sued the daughter to claim the annuity.

Consideration may be past present or future: Law as to past consideration. Where the promise has done or abstained from doing something , it is a case of a past consideration: In India, a past consideration is sufficient to sustain a valid contract. If given at a request of a promisor it will support a subsequent promise.

Consideration may be an act of doing or abstaining from doing something or it may be an act of forbearance or abstinence. To repeat, a person may promise to do seething or not to do something or not to do something, or refrain from doing something or a promise. an act, abstinence or promise is called a consideration for the promise. To do or not to do something in return is consideration. Similarly, the party may drive benefit, suffer loss or damage or inconvenience, it will yet be regarded in law as a consideration for the promise.

Consideration need not be adequate: Consideration need not be adequate but must be of some value in the eyes of law Court will not sit to decide the adequacy of consideration. Adequacy of consideration is for the parties consider at the time of making the agreement and not for the Court when it is sought to be enforced. However, there should be some value, because the law will not enforce a promise given for nothing, except in cases provided under section 25 of the Act.

Consideration must be real and not illusory: