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Essentials Of Valid Consideration

The word 'consider' originated from Latin word. Consideration is one among the most important essential of a valid contract. it's the foundation of every contract. Verified consideration are often stated as a consideration whose value is an exchange with the promise.

Example:
  • A promises B to not file a suit against him if he pays him Rs.500. A's abstinence is taken into account as the consideration for B's payment.

Definition of consideration

Blackstone defines, "Consideration is that the recompense given by the party contracting to the other"

Essentials of valid consideration

According to Section 10 of the Contract Act, all agreements are contracts which are made by the:

  1. Free Consent Of Parties;
  2. Competent To Contract;
  3. For A Lawful Consideration; And
  4. With A Lawful Object.

Essentials of a legitimate consideration are mentioned below:

  1. Consideration Must Move At The Will Of The Promisor (Promissory Estoppel)

    Consideration must are given at the desire of the promisor. the will of the promisor may be expressed or implied. As per Section 2(d) the act, or abstinence to try to to or not to do something must be at the desire of the promisor and not at any other third party.

    Case laws:
    Durga Prasad v Baldeo ILR (1881) 3 AII 221
    In this case court observed that the agreement was void for want of consideration because the plaintiff had not constructed the market at the desire of the defendant, but at the will of the collector.
     
  2. Consideration May Move From The Promisee Or The Other Person

    "A stranger to consideration don't have the right to sue a contract" according to English law.
    Consideration must tend by the promisee.. But as per Indian Law, consideration may move from the promisee or the other person. When it involves Indian Law a stranger to consideration can sue on a contract, provided he's a party to the contract. this is often also known as "Doctrine of Constructive Consideration".
     
  3. Consideration Could Also Be Past, Present Or Future

    As per Indian Law, consideration could also be past, present and future. But under English Law, consideration could also be present or future but not past.
    • Present or executed consideration
      When the promise and consideration occur simultaneously it's termed as Present or Executed Consideration.
    • Future or executory consideration
      When the promisor has got to receive consideration in future for his promise, it's termed as Future or Executory Consideration.
    • Past consideration
      When the promisor had received the consideration before the date of the promise, the consideration is termed as Past Consideration.
      There also are Exceptions to the Rule that Past Consideration is no Consideration
    • Service must be delivered at the request made by the promisor
    • Promise to pay a time-barred debt
    • Negotiable Instrument.
    In India, Past consideration may be a good consideration. Consideration are often either past, present or future in nature.
    Example: A rendered some services to B within the month of January. In February, B promises to pay A Rs.300 The consideration of A is past consideration.
    So Past consideration is not any consideration at all in English Law. Hence an agreement supported past consideration is void.
     
  4. Consideration Needn't Be Adequate

    Consideration means 'something in return'. Courts stress upon the principle that "consideration needn't be adequate, but it must be real". consistent with Explanation 2 to Section 25 of the Contract Act ,1872 is extremely significant.

    Case law:
    Thomas v Thomas (1842) 2 QB 851
    In this case court held that Consideration must have some value in the eyes of law and it was further held that motive is not sufficient consideration.
     
  5. Consideration Must Be Real Not Illusionary

    In simple words, the consideration must have some value . The consideration shouldn't be impossible, illusory, unsubstantial.
    • Unreal considerations
      The following are not real considerations:
      • Physical Impossibility-If A promises B to run at a speed of 100 miles an hour if B pays him Rs.1000. A's promise is physically impossible
      • Legal Impossibility-When the performance of promise is legally impossible, consideration isn't real.
      • Uncertain consideration-Consideration isn't real and is not enforceable if it is uncertain.
      • Illusory Consideration-An illusory consideration isn't real and is unenforceable.
      • Pre-existing legal obligation-When there's a promise to perform a public duty by a public servant is not a consideration.
      • Real or good Considerations
      Case law:
      Debi Radha Rani v Ramdas (1935) Mad. 521
      In this case D sued her husband for maintenance allowance. She sued after her husband agreeing to pay the monthly allowance. it had been held that the forbearance to sue amounted to good consideration for the husband's promise to pay allowance.

     
  6. Compromise of a disputed claim-Compromise may be a kind of forbearance.
     
  7. Composition with Creditors-A one that is not ready to pay debts fully may call a meeting of his creditors and request them to accept lesser amount. If the creditor agrees thereto agreement will bind upon both the creditor and debtor.
     
  8. Consideration must be lawful-It must not be illegal or immoral. If consideration is against the law the agreement cannot be enforced.
     
  9. Promise to perform an already existing contractual duty is not any consideration-If A is obliged to perform a contractual duty owed to B, B's promise to pay something additional for the identical promise is no consideration.

Conclusion
Contract considered many essential elements and lawful consideration is integral part or element of a legitimate contract. A contract under seal is enforceable. No Consideration-No Contract may be a Rule.

Reference:
Books:
  • Dr.S.R.Myneni, 21st edition
  • Avtar Singh, 12th edition

Written By: Surya. A. Nair

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