LEGAL REQUIREMETS REGARDING CONSIDERATION

Consideration is essential for a valid contract. It is the price for a promise – a quid pro quo. It is the value received as incentive for the promise. A contract without consideration is not binding on the parties.

Blackstone defined consideration as “the recompense given by the party contracting to the other”.

Pollock took consideration to be “the price for which the promise of the other is bought, and the promise thus given for value is enforceable”.

Section2 (d) of the Indian Contract Act,1872 defines consideration in the following words:

“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 a consideration for the promise.”

Illustration:-

 X promises to deliver 10 kgs of basmati rice to Y and Y promises to pay Rs. 500 upon delivery. In this contract, Y’s promise to Rs. 500 upon delivery is the consideration for X’s promise. Similarly, X’s promise to deliver 10 kgs of basmati rice is the consideration for the promise Y made.

Consideration is the foundation of ever contract. The law insists on the existence of consideration if a promise is to be enforced as creating legal obligations. A promise without consideration is null and void.

i)     Consideration must move at the desire of the promisor :- Consideration must be offered by the promisee or the third party at the desire or request of the promisor. An act done at the desire 'of a third party is not a consideration.

ii)    Consideration from promisee or any other person :- In India, consideration may process from the promisee or any other person who is not a party to the contract. The definition of consideration as given is Section 2(d) makes that proposition clear. According to the definition, when at the desire of the promisor, the promisee or any other person does something such an act is consideration. In other words, there can be a stranger to a consideration but not stranger to a contract.

iii)Executed and executory consideration:- A consideration which consists in the performance of an'" act is said to be executed: When it consist in a promise, it is said to be executory. The promise by one party may be the consideration for an act by some other party, and vice versa. For example, A pays Rs. 5,000 to Band B promises to deliver to him a certain quantity of wheat within a month. In this case A pays the amount, whereas B merely makes a promise. Therefore, the consideration paid by A is executed, whereas the consideration promised by B is executory.

iv)  Past Consideration:- The words has done or abstained from doing" [as contained in Section 2(d)] are a recognition of the doctrine of past consideration. In order to support a prorruse, a past consideration must be moved by a previous request. It is the general principal that consideration is given and accepted in exchange for the promise. The consideration, If past, may be the motive but cannot be the real consideration of as subsequent promise. But in the event of the services being rendered in the past at the request or the desire of the promisor the subsequent promise is regarded as an admission that the past consideration was not gratuitous.

v)     Adequacy- of consideration:- Consideration need not be any particular value. It need not be approximately equal value with the promise for which it is exchanged but it must be something which the law would regard as having some value.

It may be noted in this context that Explanation 2 to Section 25 states that an agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate.      

vi)   Performance of what one is legally bound to perform:- The performance of an act by a person f' who is legally bound to perform the same cannot be consideration for a contract. Hence, a promise to pay money to a witness is void, for it is without consideration. Hence such a contract is void for want of consideration. Similarly, an agreement by a client to pay to his counsel after the latter has been engaged, a certain sum over and above the fee, in. the event of success of the case would be void, since it is without consideration.       

But where a person promises to do more that he is legally bound to do such a promise provided it is not opposed to public policy, is a good consideration.

vii) Consideration must not be unlawful, immoral, or opposed to public policy.

Courtesy:- Legal Point Foundation