Introduction

Consideration is an essential element of a valid contract. It represents the value or benefit that one party gives in exchange for the promise of another.

In consumer law, the concept of consideration helps determine whether a person qualifies as a consumer when buying goods or hiring services.

Meaning / Definition

The term consideration is defined under Section 2(d) of the Indian Contract Act, 1872.

According to the section:

When, at the desire of the promisor, the promisee or any other person has done, abstained from doing, or promises to do or abstain from doing something, such act, abstinence (not doing something), or promise is called consideration for the promise.

In simple terms, consideration means something of value given in return for a promise.

Under consumer law, consideration usually refers to payment made or promised for goods or services.

Modes or Types

Consideration Paid

Consideration may be fully paid at the time of the transaction.

For example, a person who pays the full price for goods at the time of purchase has given consideration.

Consideration Promised

Consideration may also be promised to be paid later.

For example, a person may hire a lawyer and promise to pay the fee after the case is settled.

Consideration Partly Paid and Partly Promised

Consideration may sometimes be partly paid immediately and partly promised for future payment.

This situation commonly occurs in instalment payments.

Deferred Payment

Consideration may also be given under a deferred payment system, where payment is made in instalments over time.

This type of arrangement is common in consumer purchases such as vehicles, appliances, or electronic products.

Services Provided Free of Charge

If a service is provided free of charge, there is no consideration.

In such cases, the person receiving the service is not treated as a consumer under the Consumer Protection Act.

Important Case Law

Byford v. S. S. Srivastava

A company advertised that a person could enter a contest by booking a particular car. The complainant bought the car and entered the contest but did not receive the promised prize.

The National Commission held that the person was not a consumer with respect to the lottery prize, because the payment was made only for the car and not for participation in the contest.

Mayor, Calcutta Municipal Corporation v. Tarapada Chatterjee

A person complained about inadequate water supply by the municipal corporation while paying property taxes.

The National Commission held that tax payments do not constitute consideration for services, because the water supply was provided as part of a statutory duty of the corporation.

Practical Example

A hires a lawyer to file a case and promises to pay the lawyer's fee after the case is settled.

Even though the payment is not made immediately, the promise to pay is considered valid consideration, and A may be treated as a consumer.

However, if a doctor treats a patient completely free of charge, the patient will not be considered a consumer, because there is no consideration involved.

Summary

• Consideration is defined under Section 2(d) of the Indian Contract Act, 1872.
• It means something of value given in exchange for a promise.
• Consideration may be paid, promised, partly paid and partly promised, or payable later under a deferred payment system.
• Payment is necessary for hiring goods or services under consumer law.
• Services provided completely free of charge do not create consumer rights under the Act.
• Taxes paid to government bodies are not treated as consideration for services.