In any contract the consideration is said to be the foundation stone. As per section 25 of The Indian Contract Act 1872 (herein after referred as ‘Act’), an agreement is a void if it has been constituted without the support of the expressed consideration.
The term consideration is defined in Section 2(d) of the Indian Contract Act as follows: “When the promisor, the promisee, or any other person has done, or abstained from doing something; or does or abstains from doing something; or promises to do, or abstain from doing something; then such act, abstinence, or promise is called a consideration for the promise.”
Consideration is ‘QUID PRO QUO’ which means ‘something in return’.
Lush J. defines consideration in Currie v. Misa as follows: “A valuable consideration, in the meaning of the law, may include either in any right, interest, profit, or advantage flowing to the party, or some restraint, harm, loss, or responsibility provided, endured, or undertaken by other.”
Elements of Consideration
– At the request of the offeror, consideration shall be passed: – The offeree should submit only the consideration requested by the offeror. In the event that the offeree sends undesired considerations, he has no right to counter-claim. (Baldeo v. Durga Prasad)
– Consideration may be given to a promisee or to anybody else:
In Indian law, consideration may be transferred from the promisee or, if the promisor has no objection, from any other person, according to section 2(d) of the Indian Contract Act.
In English law, In the case of Dutton v. Poole it was stated that consideration should only ever be transferred from the promisee. Despite this, English law has made an exemption, requiring that there be a blood tie between the promisee and the other person giving the consideration.
– Consideration does not have to be adequate: Consideration of the contract does not have to be of equal magnitude. The insufficiency of consideration has no bearing on the contract’s legality. (Thomas vs Thomas)
– There must be a legal consideration: The presence of illicit consideration renders the contract invalid and hence void. As an example, A offers to care for B’s child and B pledges to pay A Rs. 1,000 per year to do so. In this case, each party’s promise is the consideration for the commitment of the other party. They are all legal considerations.
– Consideration must be genuine: Consideration should not be in the form of an unlawful contract. It has to be a plausible idea.
Exceptions to Consideration:
Section 25 of the Contract Act specifies a few circumstances in which an agreement formed without consideration is not invalid.
1.Natural Love and Affection is an exception: A written and recorded agreement between close relatives based on natural love and affection is binding without consideration. The term “close relative” refers to parties who are connected by blood or marriage.
2.Previous Voluntary Service: A commitment to reward someone who has previously willingly done everything for the promisor, or who was legally compelled to do anything for the promisor, is enforceable. However, such activity should have been performed willingly, even without promisor’s knowledge, and only for the promisor.
3.Time-barred Debt: A commitment to pay a debt that has passed the statute of limitations is enforceable. Example: A owes B Rs. 1,000, but the Limitation Act prevents him from collecting the loan. A makes a formal agreement to repay B Rs. 500 for the loan. This is a legal document.
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