Define and explain the term Consideration and state its rules.
What are the contracts without consideration? Section 2 (d) of the Contract Act 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 consideration for the promise. ‘In the words of Pollock, “an act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.” In every contract, every party must stand to gain something in return of what it agrees to do or not to do. This something given or received is the consideration. Consideration is the essential element of contract. An agreement without consideration cannot be contract and hence is not enforceable by law. If the person who makes the promise gains nothing in return of the promise made, such promise cannot be enforced against him. Hence the principle – ‘No consideration – No contract’.
Essential elements of Consideration: The analysis of the definition of consideration would show that following are the essential elements of valid consideration.1.Consideration must move at the desire of the promisor: The definition of consideration starts with the assertion that consideration must move at the desire of the promisor. Hence, an act done at the desire of any third party is not consideration. Similarly, acts done voluntarily or services rendered without any request cannot form consideration. Thus, where A sees B’s house on fire and helps him to put off the fire, A cannot ask for payment for his services since B never asked for his assistance.2.Consideration may be furnished by anyone: Consideration need not be from the promisee alone, but may proceed from third person also. Thus as long as there is consideration, it does not matter from whom it is given. It may move from the promisee or any other person.3.Consideration may be past, present or future: The words used in the definition clearly indicate that the consideration (either in the form of some act or abstinence) may have been given in the past, or being given in the present, or promised now but to be given at some future time. Therefore, it is not only the act or abstinence of the past or present (something done or not done in the past and something being done or not done in the present), but also a promise to do or not to do certain act in the future which constitutes consideration.4.Consideration must be ‘something of value’ in the eyes of law: The fourth essential element of consideration is that it must be something of value in the eyes of law. It should be noted that what is adequate consideration is to be decided by the parties and not by the law. The law insists on the presence of consideration and not on its adequacy. When no consideration is necessary Although as a general rule there cannot be any contract without consideration, there are some exceptions where an agreement is a valid contract even without consideration. These are the exceptions to the rule- No Consideration -No Contract.
1. Agreement made on account of natural love and affection: An agreement made without consideration is enforceable as valid contract, if it is, a) expressed in writing, b) registered under the law for the time being in force for the registration of documents, c) made on account of natural love and affection and is d) between the parties standing in a near relation to each other.2. Agreement to compensate for past voluntary services: If a promise is made to a person who has already voluntarily done something for the promisor in the past, such promise is a valid contract even though at the time of promise there is no consideration moving from that person to the promisor.However, this exception is not to be confused with past consideration. The contracts falling in the category of the exception are the contracts where the promisor is under no obligation to make any promise. But when he does promise, it becomes a contract. If the services are not rendered voluntarily, it would be covered under past consideration.3. Agreement to pay a time-barred debt: The law of limitation lays down the period during which a suit can be filed to recover a debt. If that time expires, no recovery can be made through law. A time-barred debt is the debt which cannot be legally recovered, as the remedy to recover the same is lost under the law of limitation. Section 25 (3) of the Contract Act provides that where there is an agreement, made in writing and signed by the debtor or by his authorized agent, to pay wholly or in part, a debt barred by law of limitation, the agreement is a valid contract even though it is not supported by any consideration. What is necessary for the contract to fall under this exception is that 1) the contract must be in writing, 2) it must be signed by the debtor or by his authorized agent and 3) there has to be an express promise to pay.4.Completed gift: An agreement whereby one person promises to give a gift to another is obviously not a contract, because there is no consideration. However, where the transaction of actually giving the gift is complete, it is a contract in the eyes of law. The gift so given cannot be demanded back on the ground that there was no contractual obligation to give the gift.5.Contract of agency: Section 185 of the Contract Act provides that in the contract of agency, there is no need of consideration for creating agency.6.Remission of promise: (waiver of rights) Remission of contractual rights takes place where the creditor agrees to accept less than what is outstanding. Thus, a banker, who fears that the total loan given to a borrower may turn out to be bad debt, may accept part of the loan amount in full settlement of the loan dues. No consideration is necessary for this contract. Similarly, under section 63, a contract whereby the time for performance of contract is extended, needs no consideration.Contribution to charity: A promise to contribute to the charity, though gratuitous, would be enforceable, if on the faith of the promised contribution, the promisee materially alters his position and incurs a liability. For example, where A promises to pay a certain sum by way of contribution for the purpose of extension of a hospital building and if the hospital authorities, on the faith of the promised contribution, undertake the construction activity, the promise can be enforced against A, though it is without consideration.
What are the contracts without consideration? Section 2 (d) of the Contract Act 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 consideration for the promise. ‘In the words of Pollock, “an act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.” In every contract, every party must stand to gain something in return of what it agrees to do or not to do. This something given or received is the consideration. Consideration is the essential element of contract. An agreement without consideration cannot be contract and hence is not enforceable by law. If the person who makes the promise gains nothing in return of the promise made, such promise cannot be enforced against him. Hence the principle – ‘No consideration – No contract’.
Essential elements of Consideration: The analysis of the definition of consideration would show that following are the essential elements of valid consideration.1.Consideration must move at the desire of the promisor: The definition of consideration starts with the assertion that consideration must move at the desire of the promisor. Hence, an act done at the desire of any third party is not consideration. Similarly, acts done voluntarily or services rendered without any request cannot form consideration. Thus, where A sees B’s house on fire and helps him to put off the fire, A cannot ask for payment for his services since B never asked for his assistance.2.Consideration may be furnished by anyone: Consideration need not be from the promisee alone, but may proceed from third person also. Thus as long as there is consideration, it does not matter from whom it is given. It may move from the promisee or any other person.3.Consideration may be past, present or future: The words used in the definition clearly indicate that the consideration (either in the form of some act or abstinence) may have been given in the past, or being given in the present, or promised now but to be given at some future time. Therefore, it is not only the act or abstinence of the past or present (something done or not done in the past and something being done or not done in the present), but also a promise to do or not to do certain act in the future which constitutes consideration.4.Consideration must be ‘something of value’ in the eyes of law: The fourth essential element of consideration is that it must be something of value in the eyes of law. It should be noted that what is adequate consideration is to be decided by the parties and not by the law. The law insists on the presence of consideration and not on its adequacy. When no consideration is necessary Although as a general rule there cannot be any contract without consideration, there are some exceptions where an agreement is a valid contract even without consideration. These are the exceptions to the rule- No Consideration -No Contract.
1. Agreement made on account of natural love and affection: An agreement made without consideration is enforceable as valid contract, if it is, a) expressed in writing, b) registered under the law for the time being in force for the registration of documents, c) made on account of natural love and affection and is d) between the parties standing in a near relation to each other.2. Agreement to compensate for past voluntary services: If a promise is made to a person who has already voluntarily done something for the promisor in the past, such promise is a valid contract even though at the time of promise there is no consideration moving from that person to the promisor.However, this exception is not to be confused with past consideration. The contracts falling in the category of the exception are the contracts where the promisor is under no obligation to make any promise. But when he does promise, it becomes a contract. If the services are not rendered voluntarily, it would be covered under past consideration.3. Agreement to pay a time-barred debt: The law of limitation lays down the period during which a suit can be filed to recover a debt. If that time expires, no recovery can be made through law. A time-barred debt is the debt which cannot be legally recovered, as the remedy to recover the same is lost under the law of limitation. Section 25 (3) of the Contract Act provides that where there is an agreement, made in writing and signed by the debtor or by his authorized agent, to pay wholly or in part, a debt barred by law of limitation, the agreement is a valid contract even though it is not supported by any consideration. What is necessary for the contract to fall under this exception is that 1) the contract must be in writing, 2) it must be signed by the debtor or by his authorized agent and 3) there has to be an express promise to pay.4.Completed gift: An agreement whereby one person promises to give a gift to another is obviously not a contract, because there is no consideration. However, where the transaction of actually giving the gift is complete, it is a contract in the eyes of law. The gift so given cannot be demanded back on the ground that there was no contractual obligation to give the gift.5.Contract of agency: Section 185 of the Contract Act provides that in the contract of agency, there is no need of consideration for creating agency.6.Remission of promise: (waiver of rights) Remission of contractual rights takes place where the creditor agrees to accept less than what is outstanding. Thus, a banker, who fears that the total loan given to a borrower may turn out to be bad debt, may accept part of the loan amount in full settlement of the loan dues. No consideration is necessary for this contract. Similarly, under section 63, a contract whereby the time for performance of contract is extended, needs no consideration.Contribution to charity: A promise to contribute to the charity, though gratuitous, would be enforceable, if on the faith of the promised contribution, the promisee materially alters his position and incurs a liability. For example, where A promises to pay a certain sum by way of contribution for the purpose of extension of a hospital building and if the hospital authorities, on the faith of the promised contribution, undertake the construction activity, the promise can be enforced against A, though it is without consideration.
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