Whenever we talk about consideration the first thing we think is of contract. Now, since we know that an agreement becomes a contract only when it is enforceable by law and it goes through a number of steps like proposal, acceptance, binding promise and the most important of all which is consideration. Consideration is the among the most important step to be performed for an agreement to be formed in a contract. If there is no consideration among the parties who are establishing a contract then the complete contract will be termed as void which is it will hold zero value in the court of law.
“Nudum Pactum Orbiter Non- Actio.” This means out of naked pact no cause of action arises. In simple terms of says without consideration an agreement will not turn into an contact. Paulak says Consideration is the price for which the promise of other is bought and the promise is given for the value is enforceable. Which says Promise without consideration is not enforceable. Consideration, according to Contract Law, is the return for the act that one has done. Something in exchange not necessarily should be in monetary terms is called consideration. People think if its contract then consideration should always be in a monetary term but no it can also be in a way of kind act for instance someone promise to do something in return of the price other party paid. For sale of a good, you may get another good. This is called exchange of goods. One good is consideration for another good. Consideration is the price for the promises. Without this no contract except provided by law under section 25 of the Indian Contract act is accepted. Consideration shows seriousness in an agreement. It doesn’t mean only one party is required to give consideration but there must be consideration from both the sides. There must be something in return. For example- if I sell my car to my friend in one lakh then the car is consideration from my side to my friend whereas, the one lakh paid by him is his consideration from his side to me. In this way consideration done from both the side only can make a valid contract.
Some important Requisants of consideration are:-
1. Consideration must be given at the desire of the promisor.
2. Consideration may be given by third person or party.
3. Consideration need not to be in a monetary form but can be an act, abstinance or forbearance.
4. Consideration must be real, impossibility can make the consideration unreal.
5. Consideration must not be illusionary. Real consideration means that the consideration should not be physically or legally impossible. Consideration is not real in the case of physical and legal impossibility or uncertainty.
6. Consideration need not to be adequate. It may or may not be adequate. Consideration should be of some value in the eyes of the law.
7. Consideration must hold some value in the eyes of law.
8. Consideration must be lawful.
9. Consideration may be past, present or future. Where Past consideration is a promise for a voluntary act done in the past to help the party who is making promise to pay or to do something subsequently. When the promisor receives consideration simultaneously with his promise, the consideration is termed as Present Consideration.When a promise is to be executed on a future date it is called executory consideration or future consideration. In this the promisor makes an offer for a future date and the promisee promises to accept and execute the contract after that date this is future consideration.
An agreement without consideration is void but if it comes under section 25 of the Indian Contract Act 1872 its not. Exceptions to consideration is provided under section 25.
1. The first exception talks about the love and affection like if a father gave his property to his son that is the act of love and affection for his son and in return he won’t ask for something in exchange. Such contract arising out of love and affection is not void according to the Indian Contract Act 1872. But also it limits the love and affection only to near relation that is the blood relation or the relation that arises out of marriage.
2. Past Voluntary Services- if someone have done something for other person as a voluntary act but the person against whom the act was done promises to give something in return then the act becomes a contract and then the parties are bound to fulfill it. Voluntary service is not consideration if the person against whom the act is done doesn’t want to make a contract.
3. Time barred debt- this exception can be understood with an example as A took a loan of 10,000 from B for a period of six months and 2 months is the period under which B can approach the court. If A can’t pay the loan he took within 6 months then B can sue him in that given time period of 2 months. But now if B thinks of filling the case in the 9th month, then there will be no remedy left for him. The loan cannot be repaid. B will lost the right to take back his loan because of the time barred dept.
Doctrine of privity- this means parties to a contract my sue and may be sued on the contract. This rule is based on the doctrine of the privity of contract. Any person who is not a party to a contract cannot sue upon it even though the contract is for his benefit and he supplied consideration. Also it cannot give any right or impose any kind of obligations to other party who is not under a contract even though the contract is for his own benefit.
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