Section 25 of the Indian Contract Act opens with the declaration that an
agreement made without consideration is void…. This section then goes on to
provide certain exceptions to the rule. The questions of consideration do not
arise unless there is an agreement.
Consideration is the sixth essential element necessary for the formation of a
Definition and its Requirements:
Consideration has been differently defined by many.
The simplest definition is
by Blackstone :
Consideration is the recompense given by the party
contracting to the other. In other words, it is the price of the promise. The
definition of consideration as a price of the promise has been commended by
Cheshire and Fifoot. The Calcutta High Court in a case made the observation
that, consideration is the price of a promise, a return or quid pro quo,
something of value received by the promisee as inducement of the promise. 
Although, the most widely accepted definition is the one attempted by LUSH J
in Currie v Misa :
A valuable consideration in the sense of the law, may
consist either in some right,interest, profit or benefit accruing to the one
party, or some forbearance, detriment, loss or responsibility given, suffered or
undertaken by the other.
In section 2(d) of the Indian Contract Act, consideration is defined 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 to
abstain from doing, something, such act or abstinence or promise is called a
consideration for the promise.
It is a rather practical definition and lays emphasis on the fact that
consideration is any act done or abstained, promised to do or abstain from
doing, at the desire of the promisor.
The definition of section 2(d) requires:
- that the act or abstinence which is to be consideration is to be done at
the desire of the promisor; and
- it should be done or executed by the promisee or any other third
party subject to prior consent of the promisor; and thirdly, the act or
abstinence may have been executed, in the process of being executed or may be
still executory, which is promised to be done.
Promissory Estoppel: At the desire of the promisor
The definition of consideration laid down by Section 2(d) lays great emphasis on
the fact that an act shall not be considered to be a good consideration for a
promise unless it is executed at the desire of the promissor.
In Durga Prasad v Baldeo 
At the order of the collector, on his own expense, the plaintiff built certain
shops in a bazar. The shops came to be occupied by the defendants who, as a
consideration to the plaintiff for having expended finances for the construction
of the shops, promised to pay him a commission on certain articles sold by their
agency in the bazar. The action of the plaintiff to recover the commission was
The only ground for the making of the promise is the expense incurred by the
plaintiff in establishing the Ganj (market) but it is clear that anything done
in that way was not ‘at the desire’ of the defendants so as to constitute
consideration. The act was not the result of the promise but of the collector’s
Whereas, on the other hand, an act done or abstained from doing at the desire of
the promisor, furnishes a good consideration for a promise even if it is of no
personal significance to him (the promisor).
In Kedarnath Bhattacharji v Gorie Mahomed 
A town hall was to be erect at Howrah, for the purpose of which the municipality
commissioners thought appropriate to obtain necessary and sufficient funds
through public subscription. On the faith of promised subscriptions, the
plaintiff established a contract with the contractor and entered into the
performance of the act.
The defendant being a subscriber to this fund for Rs.
100 and having signed his name in the subscription book for this purpose and
amount, failed to pay the amount and contended that there was no consideration
for his promise.
He was however held liable as persons were asked to subscribe knowing the
purpose of such subscription and knowing well in advance that the on the faith
of the subscription an obligation to pay the contractor for the work was to be
The act of the plaintiff in entering into contract with the contractor was done
at the desire of the defendant (the promisor) so as to constitute consideration
within the meaning of Section 2(d).
A unilateral promise can be defined to be a promise from one side only and is
intended to induce some action by the other party. a unilateral contract refers
to a gratuitous promise where only one party makes a promise without any return
In this case, the promisee is not bound to act for he had given no promise from
his side. But if he carries out the act at the desire of the promisor, he can
hold the promisor to his promise.
It should be notes that a liability arises only when the promisee held by doing
some act, on the faith of the promise. Therefore, no liability arises if the
promisee has done nothing, hence, there is no consideration.
In Abdul Aziz v Masum Ali 
The defendant promised to pay an amount of Rs. 500 for the purpose of
reconstruction of a mosque, though nothing had been done to carry out the
repairs and initiate reconstructions. Therefore, the subscriber was not held
Revocation of Unilateral Promises
It is a known fact that a promise given in return for an act is revocable before
the promisee begins to act upon it. Although, it is impossible to revoke a
promise if the promisee has entered into performance of the promise.
Privity of Contract and of Consideration:
The rule of privity of contract’ which means that a stranger to a contract
cannot sue takes its roots from the English Common Law.
Promisee or any other person
Another notable feature highlighted in the definition of consideration in
Section 2(d) is that the act which is to constitute a consideration must be done
by the promisee or any other person. Therefore, in other words, as long as
there is a consideration for a promise, it is immaterial as to who has
furnished. It may be moved by the promisee or from a third party at the consent
of the promisor.
In Duttan v Poole 
A person who had a daughter to marry, in order to provide for her marriage
portion, he intended to sell wood that he had in his possession at the time. His
son (the defendant) promised that if ‘the father would forbear to sell at his
request he would pay the daughter £1000’. The daughter and the husband sued the
defendant for such amount.
The defendant here was held liable as it was clear that he gave his promise to
the father and it was the father who furnished consideration for the promise by
abstaining to sell such wood. The plaintiff was neither privy to the contact nor
interested in the consideration but it becomes equally clear the whole purpose
of the contract was to provide a portion to the plaintiff as it would have been
inequitable to deprive the sister of the portion and yet allow the son to keep
Promise of Beneficiary who is not Party
In Tweddle v Atkinson 
The bench in this case refused to follow the principle mentioned above.
The plaintiff was to marry the daughter of G, against which G and the
plaintiff’s father entered into a written contract to provide the plaintiff with
a sum of money as consideration. G failed to pay such amount and the plaintiff
sued his executors.
WHITMAN J considered it to be an established principle ‘that no stranger to the
contract can take advantage of a contract, although made for his benefit’.
Thus, although the sole purpose of the contract was to secure a benefit to the
plaintiff, he was not allowed to sue due to the very reason that the contract
was made with his father and not him.
This particular case laid the foundation of what subsequently came to be known
as the doctrine Privity of Contract, which means that a contract is a contract
between parties only and no third person is allowed to sue upon it even if it is
avowedly made for his benefit.
Position in India: Decisions following English Law
In India, there has been a divergence of opinions in the courts as to how far a
stranger to a contract can enforce it. There are multiple decided cases which
declare that a contract cannot be enforced by a person who is not a party to a
contract. Although, there is no such provision in the Indian Contract Act either
for or against such rule.
The Privy Council extended the rule to India in its decision in Jamna Das v
Pandit Ram Autar Pande
A borrowed an amount of Rs. 40,000 by executing a mortgage against her zamindari
in favour of B. Subsequently, A sold the land to C at a sum of Rs. 44,000 and
allowed C, the purchaser, to retain Rs. 40,000 in order to redeem the mortgage
if C deemed appropriate. B sued C for the recovery of the mortgage money but he
could not succeed since C was no party to the agreement between A and B.
Thus, where a party transfers property to another and stipulates for the payment
to a third part, such stipulation cannot contend in a court of law. Although,
the party making the contract can and may sue for specific performance to secure
the benefit of the third party.
Consequently, based on the same principle, a Hindu assured’s wife’s claim was
denied for the recovery of insurance money due under her deceased husband’s
policy. Though a nominee under the policy, it was concluded that she was not a
party to the contract between the deceased husband and the insurance company and
could not therefore enjoy benefits under the policy merely because she was named
in the policy.
The Supreme Court upholds Privity
The Supreme Court of India presented itself in favour of the principle laid down
by Tweddle v Atkinson.
In Jamna Das v Ram Autar Pande
The Judicial Committee pointed out that the purchaser’s contract to pay off the
mortgage could not be enforced by the mortgagee who was not a party to the
Therefore, it was well-established that other than in cases of a beneficiary
under a fund/trust or family arrangements, no right may be enforced by a person
who is not a party to the contract.
Exceptions to Privity Rule
Eventually, over a period of time the courts have certainly introduced certain
exceptions to the rule of privity of contract from preventing a person from
enforcing a contract made in his benefit but of which he is not a party to.
These exceptions are connected with the special branches of the law of contract,
such as agency, negotiable instruments, transfer of property, railway receipts,
bill of lading etc.
Beneficiaries under trust or charge or other arrangements
If a charge or other interest in some specific property has been created in
favour of a person who is not a party to the contract, such person may have the
power to enforce such a contract.
In Nawab Khwaja Muhammad Khan v Nawab Hussaini Begum 
The appellant executed an agreement with the respondent’s father that as
consideration for the respondent’s marriage with the appellant’s son (both
minors at the time), he would pay a sum of Rs. 500 a month to the respondent for
petty expenses and charged certain properties with the payment, with power to
the respondent to enforce it. The husband and wife separated due to a quarrel
and the suit was brought to court by the plaintiff-respondent for the recovery
of the arrears of this annuity.
It was concluded that although the respondent was no party to the agreement, she
was clearly entitled to proceed in equity to enforce her claim.
Here the agreement executed by the defendant (appellant) specifically charges
immovable property for the allowance which he binds himself to pay to the
plaintiff (respondent); she is the only person beneficially entitles under it.
Marriage settlement, partition or other family arrangements
Where an agreement branches out from marriage settlement, partition or other
family arrangements, carrying a provision to secure the benefit of a person, he
or she may enjoy such benefits and advantages of such agreement although not
being a party to the agreement.
In Rose Fernandez v Joseph Gonsalves 
The father of the girl entered into an agreement with the defendant for the
purpose of the girl’s marriage, it was realised that the girl, after attaining
majority age could file a suit for damages for breach of the promise to marry
and the defendant could not make a plea, although she was no party to the
In Daropti v Jaspat Rai 
The wife of the defendant left him owing to the claim of cruelty. The defendant
later entered into an agreement with the wife’s father, promising to treat her
properly and if, upon failing to do so, promised to pay her monthly maintenance
and provide her with a dwelling. Subsequently, the defendant continued the
maltreatment and finally the wife was driven out. It was later concluded that
she was held eligible to enforce the promise made by the defendant to her
Acknowledgement or estoppel
Where a person is required to make a payment to a third party owing to the terms
of a contract and he acknowledges such obligation, thereby a binding liability
is incurred towards him. Acknowledgement may be express or implied.
In N. Devraja Urs v Ramakrishniah 
A sold a house to B under a registered sales deed and left a part of the sales
amount in his hands to pay this amount to his creditor, C. subsequently, B made
part payments to C and informed him that they were out of the sale price and the
balance would be remitted immediately. However, B failed to remit the balance
and as a consequence C sued him for the same.
The suit was held to be maintainable.
Though originally there was no privity of contract between B and C, B having
subsequently acknowledged his liability, C was entitled to sue him for recovery
of the amount.
Covenants running with land
The rule of privity of contract may also be modified to make exceptions for
principles relating to transfer of immovable property.
In Tulk v Moxhay 
The principle of this famous case is that any person who purchases a land with
notice that the owner of the land is bound by certain duties created by an
agreement or covenant affecting the land, shall be bound by them although he was
not a party to the agreement.
Past, Present and Future Consideration:
…Has done or abstained from doing…
This means that consideration is an act or abstinence which has been executed at
the desire of the promisor or is in the process of execution or is promised to
be done in the future.
An act or abstinence which has already been done against a promise, at the
desire of the promisor is known as an executed consideration.
It is known to be an old age principle of the English Law that consideration to
any promise should be simultaneous to or contemporaneous with the promise.
Consideration is supposed to be a price for the promise and it should be in
response to or as an inducement for the promise. If the act or abstinence is
done before there is any promise, it is referred to as past consideration and
past consideration is no consideration.
In Roscorla v Thomas 
Where an agreement being completed between parties for the sale of a horse had a
subsequent warranty for the horse’s soundness. It was later discovered that the
horse was vicious is behaviour. The buyer consequently sued and it was concluded
that the promise for the soundness of the horse was unsupported by consideration
and subsequent to the completion of the contract and hence, it was based on past
Position in India
Past and Executed Consideration
- Past voluntary service
A voluntary service is one which is rendered without any promise and there is a
subsequent promise to pay.
For example: If A saves B from drowning and B later promises A a reward.
According to English Law, A cannot rely on his action as consideration for B’s
promise for it is past in point of time.
Although, in India, such a promise to reward would uphold owing to Section 25(2)
of the Indian Contract Act, which provides that a promise to compensate, wholly
or in part, a person who has already voluntarily done something for the
- Past service at request
This is the only area where uncertainty is acceptable as this domain has not
been expressly articulated in either Section 2(d) or Section 25(b).
Section 2(d) requires that the act should be done at the desire of the promisor.
This presupposes the existence of a promise to pay for the act and even if
construed literally the provision cannot apply to an act done at request but
without a promise to pay.
For example: J and T, the joint owners of a patent, wrote a letter to their
manager saying: We now have pleasure in stating that in consideration of your
services as the practical manager in working both our patents, we herby agree to
give you one-third share of the patents. The court held that here for past
services there is ample justification for the promise to give the third share.
The Bombay High Court in Sindha Shri Ganpatsinghji v Abrahman  laid down
that any services rendered to a minor at request and were continued after
majority at the same request, were good consideration for his promise to pay.
A past consideration is different from an executed consideration. Past
consideration is an act executed or abstained without a promise. Whereas, an
executed consideration is an act or abstinence done in response to a positive
In Union of India v Chaman Lal Loona & Co. 
S.K. Das J of the Supreme Court said: An executed consideration consists of an
act for a promise. It is the act which forms the consideration. No contract is
formed unless and until the act is performed, e.g., the payment for a railway
ticket, but the act stipulated for exhausts the consideration, is merely
a nundum pactum . In an executed consideration the liability is outstanding
on one side only; it is a present as opposed to a future consideration.
Consideration can also consist of an act which is only promised to be executed
at some time in future.
There may only be a single exchange of promises where each promise acts as a
consideration for the other.
For example: A agrees to sell to a B a commodity at a stipulated price, in
other words, A promises to sell and B promises to pay.
So, until the time the goods are actually delivered to B, the consideration
Under Section 2(d), consideration may consist of a past, present or future act.
Such act, abstinence or promise is called consideration
Consideration must be of some value
Consideration as defined by the act is any act, abstinence or promise executed
on the part of the promisee or any other third person at the desire of the
promisor. Thought, by no means does the act imply that any worthless act will
suffice as a good consideration, provided it is done at the desire of the
promisor. In order for a consideration to be regarded as good consideration, the
act must hold some value not just for the parties but also in the eyes of the
For example: The defendant owed a sum of money under a promissory note to his
father. The defendant perpetually complained to his father for being unfair
towards him amongst all the siblings. The father promised to discharge all
liability of the son in respect of the loan if the son stopped complaining as
consideration against the father’s promise to discharge such liability.
In Chidambara Iyer v P.S. Renga Iyer 
It was laid down by the Supreme Court that consideration shall be ‘something’
which not only the parties regard but the law can also regard as having some
Though the Indian Contract Act does no imply that consideration must be good or
valuable to sustain a contract, but it had always been understood that
consideration should be of some value in the eyes of law. Consideration must not
be unreal, or illusionary, whether adequate or not.
Value need not be adequate (adequacy of consideration)
However, it is not necessary that the consideration be adequate to the promise.
It is hard for the courts to assume whether or not something makes up for an
‘adequate consideration’ for a promise. It is dependent upon the parties to
determine the adequacy of consideration at the time of the making an agreement
and not for the courts to interpret at the time of its enforcement.
A agrees to sell a horse worth Rs. 1000 for Rs. 10. A’s consent to
the agreement was freely given. The agreement is a contract notwithstanding the
inadequacy of the consideration.
In Devji Shivji v Karsandas Ramji 
The transfer of the goodwill and the whole of the assets if a business for a
bare Rs. 1000 has been upheld.
Forbearance to Sue
Forbearance to sue has always been regarded as a valuable consideration, since
it is a kind of abstinence, which has been expressly elucidated and recognised
as good consideration in the definition provided by the Indian Contract Act
Forbearance to sue means that the plaintiff has a certain right to action
against the defendant or a third party and as consideration against a promise by
the defendant, he refrains from bringing that action.
In Debi Radha Rani v Ram Dass 
The Patna High Court held that: Where a wife who is ready to sue her husband
for maintenance allowance has forborne to sue on husband’s agreeing to pay her
monthly allowance by way of maintenance, the contract is supported by
consideration as wife’s forbearance to sue amounts to consideration for
husband’s agreement for payment of maintenance allowance.
Compromise good irrespective of merits
A compromise of a pending suit is also considered to be a good consideration for
the agreement of compromise. But it is essential that the dispute be bona fide.
Although, in Rameshar Mistri v Babulal Pandit
, the Patna High Court held
that a compromise is binding even if the suit was based on false claim.
In CWT v Her Highness Vijayaba 
Two brothers were in dispute over the division of their deceased father’s
property. Consequently, their mother persuaded the younger brother to give up
the struggle with a promise that the elder brother would provide him a sum of
money, failing which the mother would subside him. The promise was held to be
enforceable as it was given to be a good and valuable consideration since it was
an attempt to purchase family peace and happiness.
Exceptions to Considerations
In Pestonji Manekji Mody v Bai Meherbai
- Natural love and affection
A written and registered agreement made out of or based on natural love and
affection between near relatives is enforceable without consideration. Although,
the act does not expressly mention or define the term ‘near relative’ and nor
has such expression been judicially construed. So, it is concluded, the term
‘near relative’ will compromise of blood relations and marriage.
In Bhiwa v Shivaram 
A sued B, his brother, for a share in a certain piece of land. The suit was held
not to be maintainable as B confirmed that the property in question was
ancestral, although B then agreed and registered to give A one-half of the
property in dispute. The present suit was brought to obtain the share.
It was concluded by the Bombay High Court that this is just the case to which
Section 25(1) should be held to apply. The defendant had such natural love and
affection for his brother that in order to be reconciled to him, he was willing
to give him his property.
Although, in certain situations and owing to certain external circumstances, the
degree of instinctive love and affection between partier near related may
sometimes be overruled.
In Rajlukhy Dabee v Bhootnath Mookerjee 
The defendant in this case promised to pay his wife a fixed amount of
monthly payment for separate residence and maintenance. The court in this
situation could not find any trace of love and affection as the quarrels
between the couple had forced them to separate.
- Past voluntary service
A promise to compensate wholly or in part, to a person who voluntarily rendered
any service to the promisor in the past, is legally binding. It is necessary to
note that the service so rendered should have been voluntary in nature. Hence, a
subsequent promise to pay for an act done in the past is enforceable.
- Time-barred debt
A promise to pay a time-barred debt, wholly or in part, is enforceable, given
that it should be in writing. It should also be signed by the promisor or by
his agent generally or specially authorised in that behalf. Moreover, the debt
must be such of which the creditor might have enforced payment but for the law
for the limitation of suits.
Although, it is not explicitly mentioned or interpreted whether or not it is
necessary that the promise should be given by the person who was liable for the
original time-barred debt.
The Bombay High Court has held that a promise made by a person who is under no
obligation to pay the debts of another… does not fall within the clause.
Whereas in Puliyath Givinda Nair v Parekalathil Achutan Nair
In the opinion of the Madras High Court the words ‘by the person to be charged
therewith in Section25(3) are wide enough to include the case of a person who
agrees to become liable for the payment of a debt due by another and need not be
limited to the person who was indebted from the beginning.
Also, in SBI v Dilip Chandra Singh Deo
An admission by the legal heir of a deceased debtor in his deposition in the
court to the effect that he was willing to pay the principal time-barred amount
was held to be a promise to pay making him liable.
The promise referred to in Section 25(3) must be an express one and cannot be
held to be sufficient if the intention to pay is unexpressed and gas to be
gathered from a number of circumstances. There must be a distinct promise to pay
before the document can be said to fall within the provisions of the section.
- Fazalaldin Mandal v Panchanan Das (1957) AIR Cal 92
- Currie v Misa (1874) ILR 10 Ex 153
- Durga Prasad v. Baldeo and Ors,  ILR 3 ALLAHABAD 221.
- Kedarnath Bhattacharji v Gorie Mahomed, (1886) ILR 14 Cal 64
- Aloka Bose v Parmatma Devi, (2009) 2 SCC 582: AIR 2009 SC 1527
- Abdul Aziz v Masum Ali, (1934) AIR All 22: ILR (1914) 36 All 268.
- Duttan v Poole, (1678) 2 Lev 210
- Tweddle v Atkinson (1861) 1 B&S 393.
- Jamna Das v Pandit Ram Autar Pande, (1916) ILR 38 All 209
- Nawab Khwaja Muhammad Khan v Nawab Hussaini Begum, (1910) 12 BOMLR 638
- Rose Fernandez v Joseph Gonsalves, (1924) ILR 48 Bom 673
- Daropti v Jaspat Rai, (1904) PR 171. 2
- N. Devraja Urs v Ramakrishniah, (1952) AIR Mys 109
- Tulk v Moxhay, (1848) 41 ER 1143
- Roscorla v Thomas, (1842) 3 QB 234; 11 LJ QB 214
- Sindha Shri Ganpatsinghji v Abrahman, (1896) ILR 20 BOM 755
- Union of India v Chaman Lal Loona & Co., (1957) AIR 652, (1957) SCR 1039
- Nandum Pactum (Latin): naked promise or bare promise
- Chidambara Iyer v P.S. Renga Iyer, (1966) AIR 193, (1966) (1) 168
- Devji Shivji v Karsandas Ramji, (1954) AIR Pat 280
- Debi Radha Rani v Ram Dass, (1941) AIR Pat 282
- Rameshar Mistri v Babulal Pandit, (1946) AIR Pat 97
- CWT v Her Highness Vijayaba, (1979) 2 SCC 213: AIR (1979) SC 982 Bhiwa v Shivaram, (1899) 1 Bom LR 495
- Rajlukhy Dabee v Bhootnath Mookerjee, (1899-00) 4 CWN 488
- Pestonji Manekji Mody v Bai Meherbai, (1928) AIR Bom 539
- Puliyath Givinda Nair v Parekalathil Achutan Nair, (1940) AIR Mad 678
- SBI v Dilip Chandra Singh Deo, (1998) AIR Ori 129