CONTRAT-I

Topic: -

Considerations ---- Exceptions together with

adequacy & legality

Doctor
Mrs. Ishita Chatterjee

NAME: BONNY BASAK

ROLL NO.: 61
COURSE: LL.B. 3 YEARS (1ST SEMESTER)

INDIAN INSTITUTE OF LEGAL

STUDIES
2016

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ACKNOWLEDGEMENT
With profound gratitude and sense of indebtedness I place on record my sincerest thanks to Mrs.
Ishita Chaterjee, Research Assistant in Law, Indian Institute of Legal Studies, for his guidance,
sound advice and affectionate attitude during the course of the study work.

There is no hesitation in saying that she molded raw clay into whatever we are through his
incessant efforts and keen interest shown throughout the academic pursuit. It is due to his patient
guidance that I have been able to complete the task.

I would also thank the Indian Institute of Legal Studies Library for the wealth of information
therein. I express my regards to the Library staff for cooperating and making available the books
for this project research paper.
Finally, I thank my beloved parents for supporting me morally and guiding me throughout the
project work.

Date:
_____________________
BONNY BASAK
LL.B (1st Semester) Roll No: 61

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TABLE OF CONTENTS
___________________________________________________________
Research

Methodology.

...3 - 4
A. Aims

and

Objectives..
3
B. Statement

of

Problem.
..3
C. Research

Hypothesis.

.3
D. Research
Questions..
..3
E. Methodology
of

Research.

.4
F. Scope

and

Limitations..
4
G. Review of

Literature..

.4
H. Mode

of

Citation.
4
Table
of
Cases
..5
Chapter

1:
Introduction
6-7
Chapter2: CONSIDERATION ONLY AT THE DESIRE OF THE PROMISOR...
8

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CONSIDERATION BY PROMISEE OR ANY OTHER

PERSON8
Exception to the rule that a stranger to contract cannot
sue..9

Chapter 3: CONSIDERATION MAY BE PAST, EXECUTED & EXECUTORY..10-11

Consideration need not be
adequate..11
Consideration must be
real.11
Chapter 4: Exceptions when agreement without consideration is valid ..
.12-13
Promise due to natural love and affection :.
.....................12
Compensation
for
past
voluntary
services
...13
CASE: In Rajlucky Dabee Vs. Bhootnath Mookerjee (1900)..13
Chapter 5: Debt due by whom?...
.14
In Pestonji Vs. Bai Meherbai (1928).
..14
Chapter
6:
Conclusion
.15

BIBLIOGRAPHY
16

RESEARCH METHODOLOGY
___________________________________________________________

A. AIMS AND OBJECTIVES

The aims and objectives of this project are to understand the concept and the principle of Good
faith in Consideration. One of the aims of the project is to have a comparative study on the
provisions relating to Contract Law and the necessity of abiding by the duty of disclosure in
entering a Contract with Consideration in India.

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B. STATEMENT OF PROBLEM
Despite the laws and Acts, the current rules do not give an equal chance to access and
flourish. Consideration having various provisions which can be interpreted in the light of
judiciary for benefit to the society is being used in a different way and the language of the
provision if not understood properly leads to a whole different perception which leads us the
other way.

C. RESEARCH HYPOTHESIS
Research in common parlance refers to a search for knowledge. It is an original contribution to
the existing stock of knowledge making for its advancement. It is the pursuit of truth with the
help of study, observation, comparison and experiment. In short, the search for knowledge
through objective and systematic method of finding solution to a problem is research. This
research work is an attempt to distill lessons from the Consideration and the experience,
particularly the provisions relating to the principle of good faith and duty of disclosure in
Consideration.

D. RESEARCH QUESTIONS
Based on the statement of problem and research hypothesis aforementioned, the following
research questions have been formulated:
1. Without Consideration Contract is valid or not?
2. For create a Contract what are the main essentials of Consideration is needed
3. Elucidate some exceptions when agreement without Consideration is valid?
4. Debt due by whom in Consideration?

E. METHODOLOGY OF RESEARCH
Methodology implies more than simply the methods the researcher used to collect data.
It is often necessary to include a consideration of the concepts and theories which
underlie the methods. The methodology opted for the study on the topic is Analytical and
Doctrinal. Doctrinal research in law field indicates arranging, ordering and analysis of the

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legal structure, legal frame work and case laws by extensive surveying of legal literature
but without any field work.

F. SCOPE AND LIMITATIONS

The scope of the study refers to the parameters under which the study is operating. An extensive
attempt has been made in order to search for the quest with regard to the topic under this paper.
Though there is ample scope to highlight on the principle of good faith and duty of disclosure
according to different Statutes, but the scope of research work is limited to a particular area in
search of answer. Therefore, the researcher confines to the materials which are available and
widely accepted.

G. REVIEW OF LITERATURE
The researcher while writing this project has taken recourse to various primary and secondary
sources. Primary sources would include various laws. Secondary sources would include books
and articles, reports and websites.

H. MODE OF CITATION
A Blue Book system of citation has been adopted throughout the project.

TABLE OF CASES

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Curie Vs. Misa (1875)

In Durga Prasad Vs. Baldeo (1880)
Khwaja Muhammad Khan Vs. Husaini Begum (1910)
In Rajlucky Dabee Vs. Bhootnath Mookerjee (1900)
Appa Rao Vs. Suryaprakasa Rao (1900)
Chinnaya Vs. Ramaya (1882)

Chapter 1

Introduction

The mere fact of agreement alone does not make a contract. Both parties to the contract
must provide consideration if they wish to sue on the contract. This means that each side must
promise to give or do something for the other. (Note: if a contract is made by deed, then
consideration is not needed.)
For example, if one party, A (the promisor) promises to mow the lawn of another, B (the
promisee), A's promise will only be enforceable by B as a contract if B has provided
consideration. The consideration from B might normally take the form of a payment of money
but could consist of some other service to which A might agree. Further, the promise of a money
payment or service in the future is just as sufficient a consideration as payment itself or the actual
rendering of the service. Thus the promisee has to give something in return for the promise of the
promisor in order to convert a bare promise made in his favour into a binding contract.
Presence of consideration is one of the essentials of a valid contract. Subject to
certain exceptions, the general rule in India is that an agreement without consideration is void.

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Consideration means something in return for the promise. It may be either some benefit
conferred on one party or some detriment suffered by the other.
In the words of Lush J. In Curie Vs. Misa (1875) A valuable consideration in the
sense of the law may consist either in some right, interest, profit or benefit accruing to one party,
or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.
Consideration:
It is quid pro quo i.e. something in return
It is the price of promise
X aggress to sell his Watch set to y for Rs. 20000. Watch set is the Consideration of y and Rs.
20000 is the Consideration of X.

Definition under Section 2(d)

Section 2(d), Indian Contract Act, defines consideration as under:
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 a consideration for that promise.
The definition mentions the following requirements to be satisfied in order that
there is valid consideration:
1. Consideration must be given at the desire of the promisor.
2. Consideration must be given by the promisee or any other person.
3. Consideration may be past, present or future in so far as the definition says that the
promisee :
(i) has done or abstained from doing, or
(ii) does or abstains from doing, or
(iii) promises to do or abstain from doing, something.
4. There should be some act, abstinence or promise by the promisee, which constitutes
consideration for the promise.

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Chapter-2
CONSIDERATION ONLY AT THE DESIRE OF THE PROMISOR1
It is essential that the consideration must have been given at the desire of the promisor, rather

than voluntarily or at the instance of some third party.

In Durga Prasad Vs. Baldeo (1880) the consideration for the promise had not moved at the
desire of the promisor but some other person, and that was held not to be sufficient consideration
to support the promise. The facts of the case are - The Plaintiff constructed certain shops in a
market at the instance of the collector of that place. Subsequently the defendants occupied one of
the shops in the market. The money for the construction of the market having been spent by the
plaintiff, the defendants, in consideration thereof, made a promise to pay to the plaintiff
commission on the articles sold through their agency in that market. The defendants failed to pay
the promised commission. In an action by the plaintiff to recover the commission it was observed
that the consideration for the promise to pay the commission was the construction of the market
by the Plaintiff. Such construction had not been done at the desire of the defendants, but on the
order of the collector. It was, therefore, held that since the consideration did not move at the
desire of the defendants (promisors) in this case, this did not constitute valid consideration and
therefore the defendants were not liable in respect of the promise made by them.
CONSIDERATION BY PROMISEE OR ANY OTHER PERSON

According to Indian law consideration may be given by the promisee or any other person. In
India there is a possibility that the consideration for the promise may move not from the
promisee but a third person, who is not a party to the contract. The position can be explained by
referring to the case of Chinnaya Vs. Ramaya (1882) In this case A, an old lady, granted an
estate to her daughter (defendant) with a direction that the daughter should pay an annuity of Rs.
653/- to As brother (plaintiff). On the same day the defendant made a promise to the plaintiff
that she would pay the annuity as directed by A. The defendant failed to pay the stipulated sum.
In an action against her by the plaintiff she contended that since the plaintiff himself had

furnished no consideration, he had no right of action.

The Madras High Court held that in this agreement between the (defendant) and (the
plaintiff), the consideration has been furnished by the defendants mother and that is enough
consideration to enforce the promise between the plaintiff and the defendant.

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Exception to the rule that a stranger to contract cannot sue1

(1) Trust of contractual rights:
One of the exceptions to the doctrine of privity of contract was recognised by the Privy Council
in the case of Khwaja Muhammad Khan Vs. Husaini Begum (1910) has recognised this
exception. In this case there was an agreement between the fathers of a boy and a girl that if the
girl (plaintiff in this case) married a particular boy, the boys father (defendant in this case)
would pay certain personal allowance known as Kharch-i-pandan (betel-box expense) to the
plaintiff. It was also mentioned that a certain property had been set aside by the defendant and
plaintiffs claim being a specific charge on the immovable property in her favour she is entitled
to claim the same as a beneficiary.
2.Conduct, Acknowledgement, or Admission
Sometimes there may be no privity of contract between the two parties, but if one of them by his
conduct, acknowledgement, or admission recognises the right of the other to sue him, he may be
liable on the basis of the law of estoppel against him. In the case of Narayani Devi Vs. Tagore
Commercial Corporation Ltd. (1973) where there was no contract between the plaintiff and the
defendants but the defendants in their agreement with the plaintiffs husband had agreed to pay
certain amounts to the plaintiffs husband during his life time and thereafter to the plaintiff, the
question of the right of the plaintiff to sue to defendants had arisen. It was established that the
defendants had made certain payments to the plaintiff, in pursuance of the agreement, after her
the said contract was entered into.
3. Provision for marriage expenses or partition, maintenance under a family arrangement:
Where, under a family arrangement, the contract is intended to secure a benefit to a third party he
may sue in his own right as a beneficiary. Such an action has been allowed in many cases where,
on the partition of joint family property between the male members, a provision is made for the
maintenance of the female members of the family. The basis of the recognition of such an action
is the application of the rule laid down in Khwaja Muhammad Khan Vs. Husaini Begam to such
situations.
1.

.Dr.

R.k Bangia, Contract-I, Allahabad Law Agency, Sixth Edition, 2009 p. 74

CHAPTER-3
CONSIDERATION MAY BE PAST, EXECUTED OR EXECUTORY2
Indian Contract Act recognises three kinds of consideration, viz., Past, Executed and Executory.
When, in return for the promise, the promisee or other person :
1. Has done or abstained from doing, then consideration is past.

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2. Does or abstain from doing, the consideration is Executed, or present.

3. Promises to do or abstains 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, I request you to find out my lost dog. When you have done
the same, I promise to pay you Rs. 100/- for that, it is a case of past consideration. For my
promise to pay you Rs.100/- the consideration is your efforts in finding my lost dog and the
same, had been done before I promised to pay the amount. This constitutes valid (past)
consideration under Section 2(d), and therefore the promise is enforceable.
Executed Or Present Consideration
Executed consideration is there when one of the parties to the contract has
performed his part of the promise, which constitutes the consideration for the promise by
the other side. Performance of the promise by the other side is the only thing now to be
done. For example, a advertises an offer of reward of Rs. 100/- to any one who finds out
his lost dog and brings the same to him. B finds out the lost dog and brings the same to
him. When B did his part of the job that amounted to both the acceptance of the offer,
which results in a binding contract under which A is bound to pay Rs. 100/- to B, and also
simultaneously giving consideration for the contract. The contract is case is said to be
executed

2.

Dr. R.k Bangia, Contract-I, Allahabad Law Agency, Sixth Edition, 2009 p. 77

Executed consideration may be distinguished from past consideration. In case of

executed consideration, the consideration is provided simultaneously along with the
making of the contract. For example, in the above illustration when B finds the lost dog
that constitutes not only the acceptance of the offer but also providing of the
consideration in respect of the contract between A and B.
Executory or future consideration

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When one person makes a promise in exchange for the promise by the other side,
the performance of the obligation by each side to be made subsequent to the making of
the contract, the consideration is known as Executory.
For example, A agrees to supply certain goods to B after a week, and B agrees to
pay for them at a future date, this is a case of Executory consideration.
Consideration need not be adequate
A contract which is supported by consideration is valid irrespective of the fact that
the consideration is inadequate. According to Explanation 2 section 25:

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 Court in determining the question whether the consent of the promisor
was freely given.
Consideration must be real
Although it is not necessary that consideration should be adequate, it is, however,
necessary that it should be real and should not be unsubstantial. Promise not to bore the
promisor is not enough to constitute consideration. In White Vs. Bluett (1853) a son
used to complain to his father that his brothers had been given more property than him.
The father promised that he would release the son from a debt if the latter promised
stopped complaining. After the fathers death an action was brought by the executors to
recover the debt. It was held that the promise by the son not to bore his father with
complaints in future did not constitute good consideration for the fathers promise to
release him, and, therefore, the son continued to be liable for the debt.
CHAPTER-4
Exceptions when agreement without consideration is valid.3
Section 25, as a general rule declares, that an agreement without consideration is void.
The section, however, mentions three exceptions, when there is no need of any consideration for
the validity of the contract. The provision is as under :
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
registration of documents and is made on account of natural love and affection between parties
standing in a near relation to each other : or unless

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(2) It is a promise to compensate , wholly or in part, a person who has voluntarily done
something for the promisor, or something which the promisor was legally compellable to do ; or
unless
Promise due to natural love and affection :When the promise is made in favour of a near relation on account of natural love and affection,
the same is valid even though there was no consideration for such a promise. The following
requirements have got to be satisfied in order that the case is covered under this exception.
1.The parties to the agreement must be standing in a near relationship to each other.
2.The promise should be made by one party out of natural love and affection for the
other.
3.The promise should be in writing, and
4.The agreement is registered.
The parties should be nearly related to one another in such an agreement. What is near
relationship has neither been defined in the Act, nor in any judicial pronouncement. But from the
various decided cases it appears that it will cover blood relations or those related through
marriage, but would not include those relations which are not near, but only remotely entitled
to inherit.

3.

.Dr.

R.k Bangia, Contract-I, Allahabad Law Agency, Sixth Edition, 2009 p. 92

In Rajlucky Dabee Vs. Bhootnath Mookerjee (1900) it has been held that relations
between the two parties does not necessarily imply natural love and affection between them. In
this case after lot of disagreements and quarrels between a Hindu husband and his wife they
decided to live apart. At this stage the husband executed a registered document in favour of the
wife whereby he agreed to pay for her separate residence and maintenance. In that agreement
mention was also made about quarrels and disagreements between the two. It was held that from
the recitals in the document it was apparent that the document had been executed not because of
natural love and affection between the parties but because of the absence of it, and therefore the
wife was not entitled to recover the sums mentioned in the document.
It is further necessary that the agreement should be in writing and registered under the law
relating to registration of documents

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Compensation for past voluntary services: When something has been done at the
desire of the promisor, that constitutes a good consideration in respect of a subsequent promise to
compensate for what has already been done. The second exception to Section 25 covers cases
where a person without the knowledge of the promisor, or otherwise than at his request does the
latter some service, and the promisor undertakes to recompense him for it. The promise to
compensate, though without consideration, is binding because of this exception. The exception
also covers a situation where the promise is for doing something voluntarily which the
promisor was legally compellable to do. Thus, when A finds Bs purse and gives it to him and
then B promises to pay A Rs. 50, or, A supports Bs infant son and B promises to pay As
expenses in so doing, there is valid contract in each case although the promisors act was a
voluntary one.
Promise to pay a time barred debt: Another situation when an agreement is a valid
contract even without any consideration is a promise to pay a time-barred debt. Section 25 (3)
requires the following essentials to be satisfied in such a case.
1. The promise must be to pay wholly or in part a time-barred debt, i.e. a debt of which the
creditor might have enforced payment but for the law for the limitation of suits.
2. The promise must be in writing and signed by the person to be charged therewith, or his duly
authorised agent.
CHAPTER-5
Debt due by whom? 4
In Pestonji Vs. Bai Meherbai (1928) the Bombay High Court has expressed the view that under
this exception that the promise should be to pay time-barred debt due from the promisor, and not
a promise to pay time-barred debts due from other persons.
Section 25 (3), it may be further noted, permits a promise to pay wholly or in part a time barred
debt. If a person promises to pay a portion of a barred debt, he can only be sued for that portion
alone and not for the whole debt. If, however, the promise to pay the whole debt is there then the
whole of the amount can be claimed. A owes B Rs. 1,000, but the debt is barred by limitation

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Act. A signs a written promise to pay B Rs. 500 on account of the debt. Under this contract A is
bound to pay Rs. 500.
There should be express promise:
The promise to pay the time-barred debt must be an express one and cannot be held to be
sufficient if the intention to pay is unexpressed and has to be gathered from a number of
circumstances.
In Appa Rao Vs. Suryaprakasa Rao (1900) the defendant wrote a letter duly signed by him to
the plaintiff after the debt had become time-barred mentioning the periods for which the rents
were due and also stating I shall send by the end of Vyaskha month. It was held that the
document contained the ingredients mentioned in Section 25 (3) and the defendant was entitled
to enforce his claim.

. Dr. R.k Bangia, Contract-I, Allahabad Law Agency, Sixth Edition, 2009 p. 96

CHAPTER-6
CONCLUSION
Contracts between school districts and its personnel must not only satisfy there
quirements of general contract law, but also must meet the requirements specified in state law
and administrative regulations. A contract may be defined as an agreement between two or
or more competent parties for legal consideration on a legal subject matter in the form required
by law. This definition includes five legal principles governing every valid contract: offer and
acceptance, competent parties, consideration, legal subject matter, and proper form.

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BIBLIOGRAPHY
A. PRIMARY SOURCES
I.

STATUTES:
i.

INDIAN STATUTES
-

Contract-I

B. SECONDARY SOURCES

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I. BOOKS
-

Dr. R.k Bangia, Contract-I, Allahabad Law Agency, Sixth Edition, 2009.