RESEARCH QUESTION

What is consideration with reference to Indian Law?

What is the position of past & present consideration in Indian Contract laws?

INTRODUCTION
The section 25 of the Indian Contract Act, 1872 openly declares that an agreement made
without consideration is void. In other w ords the pres ence of cons idera tion is
an essential for a contract to be valid.
Consideration in simple words means something in return of a promise which may either be
benefit gained by one party or something lost by the other. So generally there
can be no doubt that for a valid contract, there must be consideration, and also free consent.
It has been variously defined:
The simplest definition is by Blackstone1: Consideration is the recompense given by the
party contracting to 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.2
Another simple definition is by Justice Patterson3: Consideration means something which is
of some value in the eyes of the law It may be some benefit to the plaintiff or some
detriment to the defendant.
But the most commonly accepted definition is that which was attempted by Lush J in
Currie v Misa:4 A valuable consideration in the sense of the law, may consist either in some
right, interest, profit or benefit accuring to the one part, or some forbearance, detriment, loss,
or responsibility given, suffered or undertaken by the other.
1 Commentaries.
2 Sir Fredrick Pollock, Pollock on Contracts, ed. 13, p.133.
3 In Thomas v Thomas, (1842) 2 QB 851, 859.
4 (1875) 10 Ex 153,162.
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The definition of consideration as a price of the promise has been commended by

Cheshire and Fifoot. According to the learned writers, it is easier to understand, it
corresponds more happily to the normal exchange of promises and it emphasises the
commercial character the English contract. It reveals the essential simplicity of the concept.
The Calcutta High Court has observed in a case that consideration is the price of a promise,
a return or quid pro quo, something of value received by the promise as inducement of the
promise.5
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, something, such act or abstinence or
promise is called a consideration for the promise.

ESSENTIALS OF CONSIDERATION
The definition of consideration highlights the following essentials to be fulfilled for
the presence of a valid consideration:
1. Consideration to be given at the desire of the promisor.
2. Consideration to be given by the promise or any other person.
3. Consideration may be past, present or future, in so far as definition says that
the promisee:
a) has done or abstained from doing, or
b) does or abstains from doing, or
c) promises to do or to abstain from doing, something.
4. There should be some act, abstinence or promise by the promisee, which constitutes
consideration for the promise.
CONSIDERATION AT THE DESIRE OF THE PROMISOR
The definition of consideration under section 2(d) clearly emphasizes that the
consideration must be given at the desire of the promisor, rather than merely voluntary or at
the instance of some third party. In the case Durga Parsad v Baldeo:6 The plaintiff, on
the order of the Collector of the town, built at his own expense, certain shops in a bazaar. The
5 Fazalaldin Mandal v Panchanan Das, AIR 1957 Cal 92.
6 (1880) 3 All. 221, Oilfield J at p. 228.
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shops
came
to
be
occupied
by
the
defendants
who,
in consideration of the plaintiff having expended money in the construction, promised to pay
him a commission on his articles sold through their agency in the bazaar. The plaintiffs
action to recover the commission was rejected. It was held because as the construction had
not been done as per the desire of the defendants, but the order of the collector. Hence, the
consideration was not valid and the defendants not liable for the same.
According to the Indian Law7, consideration may be given by the promisee or any
other person. It means that as long as there is a consideration for a promise, it is immaterial
who has furnished it. It may move from the promisee, or, if the promisor has no objection,
from any other person.

PRIVITY TO CONTRACT
The Doctrine of Privity of Contract in simple words means that only those persons
who are parties to the contract can enforce the same. A stranger to the contract cannot enforce
a contract even though the contract may have been for his benefit. To explain it with an
example, if there is a contract between A and B whose benefit has been conferred upon C, C
cannot file a suit to enforce the contract because only A and B are the parties to the contract
and C is a stranger to the same. This rule has to be differentiated from the rule stated earlier
according to which in India a person who is a stranger to the consideration can sue. This does
not affect the rule of Privity of Contract.
The rule of Privity of Contract is applicable in India as it is applicable in England. Even
though under the Indian Contract Act, 1872 the definition of consideration is wider than the
English law, yet the common law principle of Privity of contract is generally applicable
in India, with the effect that only a party to the contract is entitled to enforce the same.8
In the case of Jamna Das v Ram Avtar9, A borrowed Rs.40,000 by executing a mortgage of
her zamindari in favour of B. subsequently she sold the property to C for Rs.44,000 and
allowed C, the purchaser, to retain Rs.40,000 of the price in order to redeem the mortgage if
he thought fit. B sued C for the recovery of the mortgage money, but could not succeed
because he was not a party to the agreement between A and B.

TRUST OF CONTRACTUAL RIGHTS OR BENEFICIARY UNDER A CONTRACT

7 Section 2(d); Indian Contract Act, 1872.

8 Narayani Devi v. Tagore Commercial Corporation Ltd., A.I.R. 1973 Cal. 401 at 405.
9 (1911) 30 I.A. 7.
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In the case of Narayani Devi v. Tagore Commercial Corporation Ltd.10 A held various
shares of value of Rs. 40,500. It was agreed that A would sell his shared to B and in return B
will pay A Rs.500/month and after his death Rs.250/month to his As widow during her life. C
stood a surety for B. some payments were made by C to A and after his death to As widow.
Thereafter the payments were stopped. As widow brought action against B and C to recover
the amount. One of the defendants pleaded that the plaintiff was not a party to the contract
and it was entered into by his husband and the defendants, she was not legally entitled to sue
in
respect
of
this
agreement
being
a
stranger
to
thecontract. The Calcutta High Court rejected this and held that from the facts and
circumstances of the case the obligation the obligation in the nature of trust was in favour of
the plaintiff, and equity was created in her favour and she was entitled to it even if she was
not the party to the contract. A decree was passed in her favour for the arrears of the amount
due.

CONDUCT, ACKNOWLEDGMENT, OR ADMISSION

Sometimes there may be no privity of contract between the two parties, but if one
of them by his conduct, acknowledgment, or admission recognizes the right of the other to
sue him, he may be liable on the basis of the law of estoppel. In the case Narayani Devi v
Tagore Commercial Corporation Ltd.11 discussed earlier had no contract between the plaintiff
and the defendants but the defendants in their agreement had agreed to pay some money to
them even after her husbands death. Here the question to sue the defendants arose. After the
death of the husband same payments were received. Apart from this the defendants had also
called the plaintiff to administer some documents in the same respect recognizing her rights.
It was, therefore, held that had created privity with the plaintiff by their conduct and by
acknowledgment and admission of her rights hence the plaintiff was entitled to the action
even though at the time of the contract there was no privity.
PROVISION FOR MARRIAGE EXPENSES OR MAINTENANCE UNDER FAMILY
AGREEMENT
Where, under a family agreement, the contract is intended to secure a benefit to a
third party, he may sue in his own right as a beneficiary.12 In the case of Sundara Aiyangar
v. Lakshmiammal,13 under a family agreement, the male members of the family made
a provision for the expenses of her marriage to be contributed by the defendants, i.e.,
10 A.I.R. 1973 Cal. 401
11 Ibid.
12 Mst. Dan Kuer v. Sarla Devi, A.I.R. 1947 P.C. 8: I.L.R. (1946) All.756: (1947) 49 Bom. L.R. 123
13 A.I.R. 1957 A.P. 965
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her father and brothers. She brought an action to enforce the agreement between the
defendants. It was held that even though the plaintiff was not a party to the contract, yet the
contract constituted a situation like trust in her favour and therefore, she was entitled to the
amount.

CONSIDERATION MAY BE PAST, PRESENT OR FUTURE (EXECUTORY)

Section 2(d) of the Indian Contract Act, 1872, recognizes three types of consideration,
namely, Past, Executed and Executory. It says that when at the desire of the promisor,
the promisee 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. Promises to do or abstain from doing, (the consideration is Executory or future).

PAST CONSIDERATION
Past consideration means that the consideration for the promise had been given
earlier and the promise has been made afterwards. It is, of course, necessary that at the time
of
the
act constituting consideration was
done, must have
been done at the desire
14
of the promisor . For example in lost or found cases if A looses his watch and puts out a
notice that whoever finds it will get Rs.500 as reward. The person who finds it has already
done the consideration. This amounts to valid (past) consideration under Section 2(d), and
the promise is enforceable. The words has done and abstained from doing, in Section 2(d)
of the Indian Contract Act, 1872, according to Pollock and Mulla15 declare the law to bethat
an act done by A at Bs request, without any contemporaneous promise from B, may be
consideration for a subsequent promise from B to A.

Past services voluntarily rendered [Section 25(2)]

A voluntary service means a service rendered without any request and there is no subsequent
promise for the same. For example if a person A has lost his watch and another person B
finds it and returns it to A and now asks A to give him a reward for the same, A is not liable
for the same as A has not made any prior promise for the reward and this is not a contract.
The following illustrations also show the difference:

14 See Section 2(d)

15 Indian Contract and Specific Relief Acts, 9th ed. (1972) p.41

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1. A finds Bs purse and gives it to him. B promises to give A Rs.50. This is a contract.16
2. A supports Bs infant son. B promises to pay As expenses in so doing. This is a
contract.17

English Law Regarding to Past Consideration

According to English law if the act has been done before any promise is made, it is
called past consideration and a past consideration is no consideration.18 The past act may
explain why the promise was given and may, thus, be a motive for the promise, but it
furnishes no legal consideration.19 The consideration and the promise ought to go
together.20 An example is McArdle, In re:21
A effect certain improvements to certain property. The ultimate beneficiaries of the
property signed a document declaring that: In consideration of your carryingout
certain alterations and improvements, we the beneficiaries shall repay to youthe sum of
488 in settlement of the amount spent on such improvements. Anaction to enforce
this promise was rejected.

Past consideration at the Promisors Request

Past consideration in lieu of a prior request by the promisor is deemed to be a good
consideration. It was established as early as 1616 as in the case of Lampleigh v Barthwat22
that a past act done at request will be good consideration for a subsequent promise. The facts
were as given on the next page:
The defendant, having committed a murder, requested the plaintiff to labour andto do
obtain pardon from the King. The plaintiff did his best to obtain the Kings pardon,
16 Illustration (c) to Section 25
17Illustration (d) to Section 25
18Anson, Principles of the English Law of Contract, 23rd ed., (1972), p. 85
19 Roscoral v. Thomas, (1842) 3 QB 234: 11 LJ QB 214: 114 ER 496
20 Street, Foundations of Legal Liability, 281
21 (1591) 1 Ch 669: (1951) 1 All ER 905
22 (1616) Hob 105: 80ER 255
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riding and journeying at his own expense. Afterwards the defendant promised the
plaintiff to give him 100 and then refused to pay. He was, however, held liable.
On this context there is not much difference between the Indian and English laws.
Indian law recognizes past consideration, when the same is given at the desire of the
promisor. Past act done voluntarily is no consideration either in India or England. In India,
however, a voluntarily done consideration can render an agreement valid if it is declared valid
under exception mentioned in Section 25(2). There is no such provision under English law.

EXECUTED OR PRESENT CONSIDERATION

When one of the parties to the contract performs his part of the promise which
constitutes the consideration for the promise by the other side is called executed
consideration and the performance of the promise by the other side is the only thing now to
be done. For example, A makes an offer to reward Rs. 100 to anyone who his lost phone and
brings the same back to him. B finds the lost item and delivers it to A. When B does so it
amounts to acceptance of the offer which results into a binding contract under which A will
have to pay Rs.100 to B, and also simultaneously giving consideration for the contract (i.e.
the lost object).23 The consideration in this case is executed.
Executed consideration is different from past consideration as executed consideration
is provided simultaneously along with the making of the contract while past consideration is
provided prior to the making of the contract.

SUBSCRIPTION FOR A CHARITABLE PURPOSE

Consideration is needed in exchange in every promise in order to make it enforceable.
A mere promise to make contribution to a charitable purpose may not make it enforceable. In
Abdul Aziz v Mausam Ali24 the defendant promised to pay a sum of Rs.500 as donation for the
purpose of repair and reconstruction of a mosque. Nothing was done and the defendant
refused to pay the amount. It was held that nothing could be done to enforce the same as
nothing was done in faith of the promise and no consideration was given. Therefore, the
defendant was not liable for breaking his promise. Although, a promise to contribute is not
enforceable only till then the promise has caused something done in faith of the promise. The
English decisions on this point are similar to the Indian ones. In Re Soames,25 one Soames
made a promise to the plaintiffs that he would leave a sum of 300 by his will for the
23 Carlill v Carbolic Smoke Ball Co., (1893) 1 Q.B. 256
24 A.I.R. 1914 All. 22
25 (1897) 15 T.L.R. 430
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maintenance of a school which was to be established by the plaintiffs. On the faith of this
promise the plaintiffs established a school. But there was no such provision in the will of
Soames. It was held that the executors of the promisors will be liable for the same.

CONSIDERATION NEED NOT TO BE ADEQUATE

It is not necessary for the consideration to be adequate to the promise. The courts can
hardly assume the task of setting what is the appropriate consideration for the promise.
According to Explanation 2 to Section 25 of the Contract Act, 1872:
An agreement to which the consent of the promisor is freely given is not void
merely because the consideration is inadequate; but the inadequacy of the consideration may
be taken into account by the Court in determining the question whether the consent of the
promisor was freely given.
The parties are free to make the consideration of their choice. 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. 26 For example, A agrees to sell his house
worthRs.1,00,00,000 for Rs.1,00,000. As consent to the agreement was freely given. The
agreement is a contract notwithstanding the inadequacy of the consideration.27

CONSIDERATION MUST BE REAL

It is necessary for consideration to be real and should not be unsubstantial. In White
v Bluett,28 a son used to complain to his father that his brothers had been given more property
then him. The father promised that he would release the son from his debt if he stopped
complaining. After the death of the father an action was brought by the executors to recover
the debt. It was held that the promise of not facing the father with thecomplaints in future was
not a good consideration for the fathers promise to release himfrom the debt. Therefore the
son continued to be liable for the debt.

PERFORMANCE OF AN EXISTING LEGAL DUTY IN NO

CONSIDERATION
Doing something what a person is already legally bound to do is not a consideration.
But for a proper consideration there should be a promise to do something more than what
26 Bolton v Madden, L.R. (1873) 9 Q.B. 55, at 57, per Blackburn J
27 Illustration (f) to Section 25
28 (1853) 23 L.J. Ex. 36
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a person is already bound to do. In Collins v Godefroy,29 A received a subpoena, i.e. presence
of a witness to testify, in a case. Thereafter B promised to pay A some money for the trouble
caused to him in appearing in that case. A sued to recover B for the amount promised. It was
held that A was already under a public duty to give evidence and that the consideration to pay
by B did not constitute a good consideration.

PROMISE TO PERFORM AN ALREADY EXISTING LEGAL DUTY

If a person is already contractually bound to perform a certain task for B then
Bs promise to pay something additional in return is no consideration. In other words
compliance to a legal obligation imposed by a contract is no consideration for promise. In the
case of Ramchandra Chintaman v Kalu Ram:30
The plaintiff accepted a vakalatnama from the defendant to act for him in a certain
suit on receiving his usual fee. Subsequently the defendant agreed to pay him a certain sum as
special reward (inam), if the suit is decided in his favour. The suit was decided in favour of
the defendant, who, however, did not pay the amount. The plaintiff, therefore, brought the
present suit action against him.
Rejecting the action, Westroppe CJ said: The plaintiff, having accepted aVakalatnam
a was already bound to render his best service as a pleader. There was no fresh consideration
proceeding from the plaintiff when he obtained the agreement.

INDIAN LAW
In India such confusion is not likely to arise, for the Contract Act in Section 63
clearly provides that every promise may dispense with or remit, wholly or in part, the perfor
mance of the promise made to him, or may extend the time for such performance, or may
accept instead of any satisfaction which he thinks fit. The section also provides the
following illustrations:31
1. A owes B 5,000 rupees. A pays to B, and B accepts, in satisfaction of the whole debt,
2,000 rupees paid at the time and place at which 5,000 rupees were payable. The
whole debt is discharged.
2. A owes B 5,000 rupees. C pays to B 1,000 rupees, and B accepts them in satisfaction
of claim on A. this payment is a discharge of the whole claim.
29 (1831) 1 B. & Ad. 950
30 (1877) 2 Bom. 362
31 Illustrations (b), (c), (d) & (e) respectively, to Section 63
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3. A owes B under a contract, a sum of money, the amount of which has not been
ascertained. A, without ascertaining the amount gives to B, and B, in satisfaction
thereof, accepts the sum of 2,000 rupees. This is a discharge of the whole debt,
whatever may be its amount.
4. A
owes
B 2,000
rupees,
and
is
also
indebted to
other
creditors. A makes anarrangement with his creditors, including B, to pay them a
compensation of eightannas in a rupee (i.e. 50%) upon their respective demands.
Payment to B of 1,000rupees is a discharge of Bs demand.

FORBEARENCE TO SUE IS CONSIDERATION

Forbearing i.e. abstaining from enforcing the claim is a good consideration for a
promise to pay or do some other act. 32Forbearance to sue only constitutes consideration
only so far as the delay in the proceedings is a benefit to the person intended to be sued.
Promise to forbear may be implied and it may be forbearance only for unspecified time.
EXCEPTIONS WHEN AGREEMENT IS VALID WITHOUT
CONSIDERATION
Section 25 of the Indian Contract Act, 1872, generally declares that an agreement
without consideration is void. The Section, however, provides exceptions to the rule stated
asunder:
25. An agreement made without consideration is void unless
1. It is expressed in writing and registered under the law for the time being in force for
the registration of documents and is made on account of natural love and affection
between parties standing near relation to each other, or unless
2. It
is promise to compensate, wholly or in part, a person who has alreadyvoluntarily
done something for the promisor, or something which the promisor who legally
compellable to do; or unless
3. It is a promise, made in writing and signed by the person to be charged therewith,or
by his agent generally or specially authorized in that behalf, to pay wholly or in part a
debt of which the creditor might have enforced but for the law for thelimitation of
suits.
In any case of these cases, such an agreement is a contract.

PROMISE DUE TO NATURAL LOVE AND AFFECTION [SECTION 25(1)]

32 Morton v Burn, (1837) 7 A.&E. 19; Coles v Pack (1869) L.R. 5 C.P. 65
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If a promise is made in favour of a person of a near relation on account of nearness,

love or affection, the same is valid even though there is no consideration. The following
conditions need to be satisfied in order to cover this exception:
1. The parties to the agreement must be standing in a near relationship to each other.
2. The promise should be made to one party out of natural love and affection for the
other.
3. The promise should be in writing and registered.
The near relationship has not been defined by act or any judicial pronouncement. But,
from the various decisions we can see that it covers blood relations 33 and relations made
through matrimony,34 but would not include such relations which are not near, but remotely
entitled to inherit.35 But in a relation where there is no love and affection the exception does
not apply. Like in Rajlucky Dabee v Boothnath Mookerjee,36 after a lot of quarrels and
disagreements between the parties who were Hindu husband and wife decided to live apart.
Later the husband executed a document giving the wife separate residence and maintenance.
The agreement also included mention of the quarrels and disagreements between the two. It
was held that the document was not executed because of love and affection but the absence of
the same, therefore, the wife could not recover the sums mentioned in the document. It is also
necessary for the document to be in writing and the writing be registered under the law
relating to registration of documents.

CONSIDERATION FOR PAST VOLUNTARY SERVICES [SECTION25 (2)]

When somethings done at the desire of the promisor it constitutes a valid
consideration in the same respect a subsequent promise to compensate for whatever has
already be end one is also good. In other words promise to pay for a past voluntary service is
binding. In Sindha v Abraham37 the Bombay High Court said that services rendered at the
desire of the minor expressed during majority and continued at the same request after his
majority form a good consideration for a subsequent express promise by him in favour of the
person who rendered the services.

33 Bhiva v Shivram, (1899) 1 Bom. L.R. 495

34 Gopal Saran v Sita Devi, (1932) 36 C.W.N. 392
35 Jafar Ali v Amhad Ali, (1868) 5 B.H.C. 37
36 (1900) 4 C.W.N. 488
37 (1895) 20 Bom. 755
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ADMISSION TO PAY IN COURT PROCEEDINGS

In State Bank of India v Dilip Chandra Singh Deo38 it has been held that if the legal
heir of deceased makes an admission
in court indicting his
willingness to pay
the sum borrowed by the deceased, he can be held liable on the basis of his admission, even
though the recovery for the same is barred by limitation. Promise to Pay must be
Unconditional Promise to pay time barred debt within the meaning of clause (3) of Section 25
must be expressed and unconditional. In K. Jeyaraman v M/s Sundaram Industries Ltd.39, the
appellant made a formal recognition of the fact that in a document he had agreed to pay the
amount only after receiving the amount from the State Electricity Board. It was held by the
Madras High Court that the document conveyed a conditional promise and was not covered
by Section 23(3) as the cause of action of filing suit would only arise after amount was
received from the State Electricity Board.

CRITICAL EVALUATION
Consideration in simple words means something in return of a promise which may either be
benefit gained by one party or something lost by the other. So generally there
can be no doubt that for a valid contract, there must be consideration, and also free consent.
Past consideration in lieu of a prior request by the promisor is deemed to be a good
consideration. On this context there is not much difference between the Indian and English
laws. Indian law recognizes past consideration, when the same is given at the desire of the
promisor. Past act done voluntarily is no consideration either in India or England. In India,
however, a voluntarily done consideration can render an agreement valid if it is declared valid
under exception mentioned in Section 25(2). There is no such provision under English law.
When one of the parties to the contract performs his part of the promise which constitutes the
consideration for the promise by the other side is called executed consideration and the
performance of the promise by the other side is the only thing now to be done.
Executed consideration is different from past consideration as executed consideration is
provided simultaneously along with the making of the contract while past consideration is
provided prior to the making of the contract.

BIBLIOGRAPHY

38 Govinda Niar v Achutan Niar, A.I.R. 1940 Mad. 678 at p. 679

39 A.I.R. 1981 Delhi 165
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1. Singh, Avtar, Contract & Specific Relief, 10th ed. Eastern Book Company (Lucknow),
2008.
2. Bangia, R.K.,Law of Contract Part I, 6th ed. Allahabad Law Agency (Faridabad),
2009.
3. Furmston, MichaelCheshire, Fifoot & Furmstons Law of Contract, 14th ed.Lexis Nexis
Butterwoths, 2006.

4. Kumar, P.N., Sanjiva Rows Commentary on The Indian Contract Act, 1872 and
Tenders, 10th ed. Delhi Law House, 2007.

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