Introduction – Consideration
Consideration is one of the fundamental elements of a valid contract under Indian Contract Law. It is the price paid for a promise and forms the basis on which a contract is enforceable. Simply put, consideration is what each party gives or promises to give to the other in exchange for their promise. Without consideration, a contract is generally void under Section 25 of the Indian Contract Act, 1872, except in cases of contracts made on account of natural love and affection or voluntary gratuitous contracts under seal (if any applicable in other jurisdictions).
Consideration ensures that a contract is not gratuitous, i.e., not a mere promise without any benefit or detriment to the parties. It embodies the idea of quid pro quo — something in return for something.
Definition – Consideration
The Indian Contract Act, 1872, Section 2(d), defines consideration as:
“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.”
Key Elements of Consideration:
- There must be something in return for the promise.
- The act, abstinence, or promise must be at the desire of the promisor.
- It can be past, present, or future.
Types of Consideration
1. Executed Consideration
Consideration that has already been performed at the time of making the promise.
- Example: A promises to pay B ₹10,000 because B has already painted A’s house.
- Case: Chinnaya vs Ramayya (1882) ILR 5 Mad 36 – Consideration can be executed, even if the act was performed before the promise, provided it was done at the desire of the promisor.
2. Executory Consideration
Consideration that has yet to be performed in the future.
- Example: A promises to deliver goods to B next week in exchange for B’s promise to pay on delivery.
3. Past Consideration
Consideration for an act done before the promise was made.
- Generally valid in India if the act was done at the desire of the promisor.
- Case: Pinnel’s Case (1602) – Early English precedent; past consideration is good if done at the promisor’s request.
Also Read: Offer and Acceptance
Essentials of a Valid Consideration
1. Must Move at the Desire of the Promisor
The act constituting consideration should be done at the request of the promisor.
- Case: Chinnaya vs Ramayya (1882) – Act done voluntarily without the promisor’s request does not qualify as consideration.
2. Must be Lawful
Consideration must not be forbidden by law or unlawful.
- Acts involving crime, fraud, or immorality cannot form valid consideration.
- Section 23, Indian Contract Act prohibits contracts with unlawful consideration.
3. Must Be Real
Consideration must have some value, though it need not be adequate.
- Courts do not examine the fairness or adequacy of consideration.
- Case: Thomas vs Thomas (1842) – A nominal sum of £1 was sufficient consideration.
4. Can Be for the Promisee or Any Other Person
Consideration can move from the promisee or a third person.
- Example: A promises to pay B for services rendered by C — valid if done at the promisor’s desire.
5. Must Not Be Illusory
Consideration must be real and tangible. A mere statement without intent to perform is invalid.
Exceptions to the Rule of Consideration
Even though consideration is generally essential, the Indian Contract Act, 1872, provides exceptions:
- Natural Love and Affection (Sec 25(1))
- Contracts between relatives made out of love and affection do not require consideration, provided they are written and registered.
- Compensation for Past Voluntary Services (Sec 25(2))
- Consideration is not necessary for a promise to compensate someone who has voluntarily done something for the promisor in the past.
- Agency and Other Statutory Exceptions
- Certain contracts enforceable without consideration, such as contracts under Section 31 of the Indian Contract Act (contracts in the form of a contract of agency).
Consideration vs. Quid Pro Quo
While both mean something in return, consideration is the legal mechanism, whereas quid pro quo is more a philosophical idea of exchange. Indian courts rely on consideration as a technical requirement for contract enforcement.
Key Case Laws on Consideration
- Chinnaya vs Ramayya (1882 ILR 5 Mad 36) – Past consideration is valid if done at the promisor’s desire.
- Thomas vs Thomas (1842) – Adequacy of consideration is not examined; even nominal consideration is sufficient.
- Pinnel’s Case (1602) – Part payment of a debt is valid consideration only if something extra is given.
- Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge & Co. Ltd. (1915 AC 847) – Demonstrates that consideration is the essential foundation for enforceability.
Conclusion
Consideration ensures that a contract is mutually binding and not a gratuitous promise. Indian law is flexible, recognizing executed, executory, and past consideration, provided it is lawful, real, and at the promisor’s desire. Exceptions like love and affection or voluntary services make the law pragmatic and socially relevant. Ultimately, consideration embodies the quid pro quo principle, safeguarding fairness and enforceability in contractual relationships.