Consideration: Meaning, Definition and Essential Elements- Contract Act

Consideration: Meaning, Definition and Essential Elements- Contract Act 1872

Consideration: Meaning, Definition and Essential Elements

Meaning of Consideration

Consideration means “something return” or “something which is given and taken.” It refers to something of value given to someone in return for goods, services or some other promise. It is the price paid for contract. Section 25 of the Indian Contract Act, 1872 says that “an agreement made without consideration is void.” So, Consideration is necessary for the formation of contract i.e., a valid contract must include consideration for every party involved[1].

Definition of Consideration

  • Blackstone: According to Blackstone “Consideration is the recompense given by the party contracting to the other”[2]
  • Pollock: In the words of Pollock, “Consideration is the price for which the promise of the other is bought, and the promise thus given for value is enforceable”[3]
  • Justice Patterson: “Consideration means something which is of some value in the eyes of the law. It may be some benefit to the plaintiff or some detriment to the defendant”[4]

In Fazalaldin Mnadal v. Panchanan Das[5], the Calcutta High Court held that “Consideration is the price of the promise, a return or quid pro quo, something of value received by the promise as inducement of the promise.”

According to Section 2(d) of the Indian Contract Act, 1872 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" [6].

Essentials of Valid Consideration

  • At the desire of the promisor:

In order to constitute valid consideration it must be move at the desire of the promisor. An act done at the desire of the third party does not constitute a valid consideration. In Durga Prasad v. Baldeo[7], on the order of the town collector, a person built certain shops in bazaar at his own expense. The shops came to be occupied by the defendants who, in consideration of the plaintiff having expended money in the construction, promised to pay him a commission on articles sold through their agency in the bazaar. The plaintiff’s action to recover the commission was rejected. “The only ground for making of the promise is the expense incurred by the plaintiff in establishing the market but it is clear that anything done in  the way was not at the desire of the defendants so as to constitute consideration.” The act was the result not of the promise but of the collector’s order.

  • Promisee or any other person:

The second most important feature according to the consideration definition given in the Section 2(d) is that it may pass on to Promisor from Promisee or any other third person. In the case of Dutton v. Poole[8], a person had a daughter to marry and his son promised him that, in return he would pay 1000 pounds to his sister if his father not selling a wood. The father accordingly forbore but the son(defendant) did not pay. It was held that due to tie of blood between them the sister could sue, on the ground that the consideration and promise to the father may well have extended to her.

In Chinnaya v. Ramayya[9], a promise by a daughter to her mother’sister to pay maintenance in consideration of the mother(an old lady) making a gift of certain landed property to her, was sought to be enforced by the sister of the mother. The decision was in favour as this was a perfectly valid consideration.

VOID AGREEMENT UNDER SECTION 24 to 30 OF INDIAN CONTRACT ACT, 1872

  • Consideration may be past, present, future:

In consideration definition the words, “has done or abstained from doing; or does or abstains from doing; or promises to do or to abstain from doing; indicates that the consideration may be either something done or not done in the past, or done or not done in the present or promised to be done or not done in the future. So, consideration may be past, present and future act.

  • Past- When present promise consideration is given before the date of the promise then, it is called past consideration. A past act done at request will be good consideration for a subsequent promise[10].
  • Present- When consideration moves simultaneously with the promise the, it is known as ‘present’ or ‘executed’ consideration. Example- Tina buys an article from a shop and immediately pays for the same. In this the consideration moving from Tina is ‘present’ or ‘executed’ consideration.
  • Future- When consideration for a promise moves after the contract is formed, it is called as ‘future’ or ‘executory’ consideration. Example- A has promised to sell and B has promised to pay. Until the goods are actually delivered to B under the contract, the consideration is executor[11].
  • Consideration must be lawful:

A consideration which is against the law or public policy is not valid i.e., it will become void and unenforceable. Therefore, it is necessary that consideration should be lawful one. A husband offered reward to anyone who would rescue his wife dead or alive from a burning building and a fireman was allowed to receive it as he accomplished the rescue of her dead body and it was like a great peril to his health and life, the court held that as a fireman of the city he was not legally bound to risk his life in that rescue[12].

  • Consideration must be real:

Consideration must not be illusionary, it should be factual one i.e., it must be real and possible. It must have some value in the eyes of the law. It need not be adequate to the promise for the validity of an agreement.

Conclusion

Consideration legally binds a contract and it also protect both the parties from lawsuits and misunderstanding. It is not necessary that consideration nature should always be tangible, even an intangible consideration is equally valid consideration. Contract considered many essential elements and lawful consideration is integral part or element of valid contract.

References

  • [1] https://legaldictionary.net/consideration/
  • [2] COMMENTARIES
  • [3] Sir Frederick Pollock, POLLOCK ON CONTRACTS (13th Edn) 133
  • [4] In Thomas v. Thomas, (1842) 2 QB 851, 859
  • [5] AIR 1957 Cal 92
  • [6] Avtar Singh, Contract & Specific Relief, Page- 104, 12th Edition, EBC Publishing (P) Ltd.
  • [7] ILR (1883) 3 All 221, OLDFIELD J at p. 228
  • [8] Court of King’s Bench, (1991) 2 WLR 540
  • [9] ILR (1876-82) 4 Mad 137
  • [10] Lampleigh v. Brathwait Hob 106: 80 ER 255
  • [11] Avtar Singh, Contract & Specific Relief, Page- 128, 12th Edition, EBC Publishing (P) Ltd.
  • [12] Costigan, CASES ON CONTRACT (3rd Edn) 309