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Session- 2014-15
LAW OF CONTRACTS
PROJECT
SUBMITTED TO:
Dr. Visalakshi Vegesna
SUBMITTED BY:
Anjali Rajput
Associate Professor
Roll no. - 27
Department of Law
Section - A
Semester- II
ACKNOWLWDGEMENT:
I would like to express my gratitude to all those who helped me in this topic. I extend my
sincere acknowledgements to Dr. Visalakshi Vegesna Maam who gave me the opportunity to
make a project on the topic Consideration may be Sufficient- Analyse with Case Laws. I
am deeply indebted to her whose help and stimulating suggestion helped me in choosing this
topic.
I would also like to thank my friends for their constant help and valuable suggestions.
I further extend my thanks to library staff of DR. RAM MANOHAR LOHIYA NATIONAL
LAW UNIVERSITY who helped me in getting all the materials necessary for the project.
-Anjali Rajput
Roll No. 27
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TABLE OF CONTENTS:
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CONTENTS
Objective
Introduction
Consideration by promise or any other person (privity of
contract)
Consideration may be past, present(executed) or
future(executory)
Past consideration
Executed or present consideration
Executory or future consideration
Consideration may be sufficient it need not to be adequate
Consideration may be of some value
Value need not be adequate(adequacy of consideration)
Conclusion
Bibliography
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Objective:
The objective of this project is to give a detailed analysis on the sufficiency of a consideration
in a contract. Here, I have analysed whether a consideration is sufficient to conclude a
contract irrespective of the fact it is adequate or inadequate.
Introduction:
There are a number of essentials which are required for a valid contract such as there must be
an agreement between the two parties, the parties entering into the contract must be
competent to do so, etc. One of the essentials needed for a valid contract is that there should
be a lawful consideration.
Consideration has been variously defined. The simplest definition is by Blackstone:
Consideration is the recompense given by the party contracting to the other. In other words,
it is a price of the promise. In the words of Pollock, Consideration is the price for which the
promise of the other is bought and the promise thus given for value is enforceable. But the
most commonly accepted definition is that which was attempted by Lush J in Currie v.
Misa1: A valuable consideration in the sense of the law may consist either in some right,
interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss, or
responsibility given, suffered or undertaken by the other.
In Section 2(d) of the Indian Contract Act, consideration is defined as follows: 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 to abstain from doing, something, such act
or abstinence or promise is called a consideration of the promise.
The definition requires the following essentials to be satisfied in order that there is valid
consideration:
1.
2.
3.
4.
1 (1875) 10 Ex 153,162
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When, in return for the promise, the promise or any other person:
1. Has done or abstained from doing, the consideration is Past.
2. Does or abstains from doing, the consideration is Executed or Present.
3. Promise to do or to abstain from doing, the consideration is Executory or Future.
Whether the consideration is Past, Executed or Executory, it is essential that it must have
been given at the desire of the promisor.
Past Consideration
As noted above, Indian Contract Act recognises Past consideration. It means that the
consideration for any promise was given earlier and the promise is made thereafter. It is, of
course, necessary that at the time the consideration was given, that must have been done at
the desire of the promisor. For example, A requests to B to find his lost dog and after he
has done the same, if A promise to pay Rs 100 for that, it is a case of past consideration. For
As promise to pay B Rs 100, the consideration is Bs efforts in finding As lost dog and the
same had been done before A promised to pay the amount. In this case, the consideration has
been given at As request, because it is only when A requested B that he found the dog. This
constitutes valid (Past) consideration under section 2(d), and therefore the promise is
enforceable. The word has done or abstained from doing, according to Pollock and Mulla
declare the law to be that an act done by A at Bs request, without any contemporaneous
promise form B, may be consideration for a subsequent promise from B to A.
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But the courts have been very liberal in this respect and have always tried to find value in
something to which parties attach value. Thus, a transfer of property in consideration that
the transferee shall accept the responsibility and discharge those recurrent services and
ceremonies (Ramacharya v Shiv Nivascharya6), and a promise by a wife to pay off her
husbands debts and to maintain his mother made in consideration of enjoying certain
properties, were held to be for valuable consideration.
that the requirement to send in the worthless wrappers would encourage more people to buy
the company chocolate.
The adequacy of the consideration is for the parties to consider at the time of making the
agreement, not for the court when it is sought to be enforced. This is the English rule and is
applicable in India also, for Explanation 2 attached to Section 25 lays it down so clearly that
an agreement to which the consent of the promisor is freely given is not void merely because
the consideration is inadequate. This is further fortified by illustration (f) which is as
follows:
A agrees to sell a horse worth Rs 1000 for Rs 10. As consent to the agreement was freely
given. The agreement is a contract notwithstanding the inadequacy of the consideration.
It can be summarized the points of law and arguments in the above for the statement
consideration must be sufficient but need not be adequate. When considering value, the
Courts is not interested in adequacy of consideration, i.e. whether the price is fair, it
is only concerned with whether or not the consideration can be expressed in terms of
economic worth. Hence, intangibles such as emotions (respect for a husbands wishes, love
and affection), lack of boredom Thomas v. Thomas and White v. Bluett are not valuable
consideration. Provided, however that the consideration has some economic value to you, as
long as it has some economic purpose Chappell v. Nestle.
This explains White v Bluett (1853) where a sons promise to stop complaining to his father
about the distribution of the fathers property was held to be incapable of amounting to
consideration.
Although inadequacy of consideration by itself is not a ground for treating the contract as
invalid but it may be a factor which the court may take into consideration to know whether
the consent of a party was free or not. If a party does not take undue advantage in a
transaction and there is no undue influence, the agreement is not affected by the mere fact of
inadequacy of consideration. In Vijaya Minerals Pvt. Ltd. V Bikash Deb, 7 the position in this
regard was explained in the following words, It may be noted that short of undue influence
and duress, an agreement between the parties cannot be rendered nugatory on the ground that
the consideration is not adequate.... In fact, the courts do not go into the question of adequacy
of consideration when considering whether an agreement is binding or not.
7 AIR 1996 Cal. 67
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Conclusion
Adequacy of consideration refers to the fairness of the bargain. In general, a court will not
question the adequacy of consideration if the consideration is legally sufficient. Under the
doctrine of freedom of contract, parties are normally free to bargain as they wish. If people
could sue merely because they had entered into an unwise contract, the courts would be
overloaded with frivolous suits. In extreme cases, a court of law may consider the adequacy
of consideration in terms of its amount or worth because inadequate consideration may
indicate fraud, duress, undue influence, or a lack of bargained-for exchange. It may also
reflect a partys incompetence (for example, an individual might have been too intoxicated or
simply too young to make a contract). Suppose Dylan has a house worth $100,000 and he
sells it for $50,000. A $50,000 sale could indicate that the buyer unduly pressured Dylan into
selling or that Dylan was defrauded into selling the house at far below market value.
Whether consideration is valid can be summarised by the phrase: consideration need not be
adequate, but must be sufficient. Consideration does not have to reflect the value of the
promise (need not be adequate). For example, a promise to buy an item for less than its actual
value may be acceptable. However, the promise must be legally sufficient, which means it
must be something that the law regards as being capable of amounting to valid consideration.
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BIBLIOGRAPHY
Primary source
Secondary source
www.e-lawresource.com
www.lawteacher.net
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