Consideration

Introduction

Consideration is one of the essential elements of a valid contract.
Under Section 25 of the Indian Contract Act, 1872, an agreement without consideration (something given in return) is generally void (not legally enforceable), subject to certain exceptions.

In simple terms, consideration means something given in exchange for a promise. It is the value or price for which a promise is made.

Meaning / Definition

Section 2(d) of the Indian Contract Act, 1872 defines consideration as:

When at the desire of the promisor, the promisee or any other person has done or abstained from doing (refrained 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 consideration for the promise.

In simple words, consideration means something given in return for a promise.

It may involve:

• A benefit received by one party
• A loss or sacrifice suffered by another party

Thus, consideration is often described as the “price of the promise.”

Definitions by Jurists (Legal Scholars)

• Blackstone: Consideration is the recompense (reward or return) given by one contracting party to the other.
• Cheshire and Fifoot: Consideration is the price for the promise.
• Sir Frederick Pollock: Consideration is the price for which the promise of another is bought.
• Patterson: Consideration means something of value in the eyes of law.

Modes or Types

Consideration at the Desire of the Promisor

For valid consideration, the act must be done at the desire or request of the promisor.

If a person performs an act voluntarily (on their own) or at the request of someone else, it cannot be treated as valid consideration.

Example:

If A saves B’s goods from fire without B asking him, A cannot demand payment for that service.

Consideration by Promisee or Any Other Person

Under Indian law, consideration may be provided by:

• The promisee (person to whom the promise is made), or
• Any other person (third person).

This means the person giving consideration need not necessarily be the promisee.

However, under English law, consideration must move only from the promisee.

This is an important difference between Indian and English contract law.

Types of Consideration Based on Time

Consideration may occur at different stages of a transaction.

Past Consideration

This refers to an act done before the promise is made.

Example:
A helps B earlier, and later B promises to pay A for that help.

Present (Executed) Consideration

This occurs when the promise and the act happen at the same time.

Example:
A buys a book from B and pays the price immediately.

Future (Executory) Consideration

This refers to a promise to do something in the future.

Example:
A promises to deliver goods next week and B promises to pay after delivery.

Important Case Law

Durga Prasad v. Baldeo

Facts

The plaintiff constructed shops in a market on the order of the Collector (government officer).
The defendants later promised to pay the plaintiff commission on goods sold in the market.

The defendants later refused to pay the commission.

Judgment

The court held that the defendants were not liable to pay.

Reason

The construction of the market was not done at the desire of the defendants, but at the request of the Collector.
Therefore, the requirement of consideration at the desire of the promisor was not satisfied.

Kedarnath v. Gorie Mohammed

Facts

A Town Hall was proposed to be constructed in Howrah through public subscriptions (voluntary financial contributions).
The defendant promised to contribute Rs. 100.

Based on such promises, the plaintiff hired a contractor and started construction.
The defendant later refused to pay.

Judgment

The court held that the defendant was legally bound to pay.

Reason

The plaintiff had taken definite steps and incurred expenses relying on the promise, which constituted valid consideration.

Chinnaya v. Ramaya

Facts

An old lady transferred property to her daughter with a condition that she must pay Rs. 653 annually to the lady’s brother.

The daughter agreed but later refused to pay.

Judgment

The Madras High Court held that the daughter was liable to pay the annuity.

Reason

The consideration moved from the mother, and under Indian law consideration may move from any person, not necessarily the promisee.

Distinction / Comparison

Indian Law vs English Law on Consideration

Practical Example

A promises to sell his laptop to B for ₹20,000.

• A promises to deliver the laptop.
• B promises to pay ₹20,000.

Here:

• Laptop = consideration for B’s promise to pay
• ₹20,000 = consideration for A’s promise to deliver

Thus, each promise is supported by consideration.

Summary

• Consideration means something given in return for a promise.
• Under Section 25, agreements without consideration are generally void (not legally enforceable).
• Consideration must move at the desire of the promisor.
• It may be given by the promisee or any other person under Indian law.
• Consideration may be past, present, or future.
• Acts done voluntarily without the promisor’s request are not valid consideration.
• Courts recognise consideration when a party acts based on a promise and incurs obligations or expenses.