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Prof. A D Vasmatkar Assistant Professor SLS, Hyderabad
Prof. A D Vasmatkar Assistant Professor SLS, Hyderabad

Prof. A D Vasmatkar

Assistant Professor

SLS, Hyderabad

 The section 25 of the Indian Contract Act, 1872 openly declares that “an agreement

The section 25 of the Indian Contract Act, 1872 openly

declares that “an agreement made without

consideration is void…”. Unless_

it is in writing and registered and the promise has been made due to natural love and affection between the

parties standing in near relation to each other.

it is a promise to compensate, wholely or in part, a person who has voluntarily done something for the promisor or something that the promisor was legally

bound to do.

it is a promise to pay for a time barred debt.

the promisor or something that the promisor was legally bound to do.  it is a
the promisor or something that the promisor was legally bound to do.  it is a
the promisor or something that the promisor was legally bound to do.  it is a
the promisor or something that the promisor was legally bound to do.  it is a
 Section 2(e) - „Every promise and every set of promises, forming the consideration for

Section 2(e) - „Every promise and every set of

promises, forming the consideration for each other, is

an agreement

It is the price for a promise a quid pro quo. It is the value received as incentive for the promise.

Blackstone defined consideration as “the recompense given by the party contracting to the other”.

Pollock took consideration to be “the price for which

the promise of the other is bought, and the promise thus

given for value is enforceable”.

be “the price for which the promise of the other is bought, and the promise thus
be “the price for which the promise of the other is bought, and the promise thus
be “the price for which the promise of the other is bought, and the promise thus
be “the price for which the promise of the other is bought, and the promise thus

In England too “promises without consideration are not enforced,

because they are gratuitous”.

The definition given in Curre v Misa (1875) LR 10 Ex 153, 162 by Lush J is widely accepted - 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 forbe arance, determent, loss, or responsibility given, suffered or undertaken by the other…”

In Chidambara Iyer v. Renga Iyer, AIR 1966 SC 193SC acknowledged this definition being similar to sec. 2(d).

Illustration: X promises to deliver 10 kgs of basmati rice to Y and

Y promises to pay Rs. 500 upon delivery. In this contract, Y‟s

promise to Rs. 500 upon delivery is the consideration for X‟s promise. Similarly, X‟s promise to deliver 10 kgs of basmati rice is the consideration for the promise Y made.

X‟s promise. Similarly, X‟s promise to deliver 10 kgs of basmati rice is the consideration for
X‟s promise. Similarly, X‟s promise to deliver 10 kgs of basmati rice is the consideration for

The Indian Contract Act, 1872 under Section 2 (d) defines

consideration as given 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 the promise.1) Consideration to be given “at the desire of the promisor”

2) Consideration to be given “by the promisee 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.

 4) There should be some act, abstinence or promise by the promisee, which constitutes consideration
 4) There should be some act, abstinence or promise by the promisee, which constitutes consideration
 Consideration must be given at the desire of the promisor, rather than merely voluntary
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, (1880) 3 All 228

The plaintiff, on the order of the Collector of the town, built at his own expense, certain shops in a bazaar. The 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 plaintiff‟s 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.

Personal benefits are not necessary.

To Constitute a good consideration, act or abstinence must be at the desire of the promisorand voluntary contribution, not a good consideration.

Promise to make charitable contributionquestion is

whether the promise is supported by the consideration and is it binding?

Kedar Nath v. Gorie Mohamed, ILR (1886) 14 Cal 64Construction of a Town Hall at Howrahdefendant was

made liable to pay the agreed amount of Rs. 100A man

for some reason or other puts his name down for a

subscription to some charitable object, for instance, but the amount of his subscription cannot be recovered from him

because there is no considerationbut in this case yes it

can be as further to his promise liability was incurred.

Abdul Aziz v. Mausum Ali, AIR 1914 All 22No liability can be imposed on legal heirs.

liability was incurred.  Abdul Aziz v. Mausum Ali, AIR 1914 All 22 … No liability
liability was incurred.  Abdul Aziz v. Mausum Ali, AIR 1914 All 22 … No liability

Consideration is required to be given at the desire or request of the promisor, if it is given at the desire of some other person, then it is not a good consideration.

desire or request of the promisor, if it is given at the desire of some other
desire or request of the promisor, if it is given at the desire of some other
desire or request of the promisor, if it is given at the desire of some other
desire or request of the promisor, if it is given at the desire of some other
 According to the Indian Law, consideration may be given by „the promisee or any

According to the Indian Law, consideration may be

given by „the promisee or any other person‟… But in

English Law the position is different, there the consideration must move from the promisee himself.

For example, A promises to give his watch to B and a consideration of Rs.5000 for the same is given to A by C and not B himself. This will not be a valid contract in England but in India it will be valid as the section 2(d)

clearly states that “…at the desire of the promisor, the

promisee or any other person” may provide consideration.

In Dutton v. Poole, (1677) 2 Lev. 210a view contrary to the English law was takenson promised father not to cut family tree for the marriage of his sister for which he agreed to pay £1000on refusal

case was filed by both father and sisteralthough

sister was not a part of the contract still was entitled to recover the agreed amount.

The rule is not followed in subsequent cases in Twiddle v. Atkinson, (1861) 1 BS 393Arrangement during marriage to pay the plaintiff a particular sum which was made by father of both the parties getting

marriedwhen sued it was stated that he is a

beneficiarycan not recover the amount.

of both the parties getting married … when sued it was stated that he is a
of both the parties getting married … when sued it was stated that he is a
of both the parties getting married … when sued it was stated that he is a
of both the parties getting married … when sued it was stated that he is a

This principle enunciated in Twiddle v. Atkinson was affirmed by

the House of Lords in Dunlop Pneumatic Tyre Co. v. Selfiridge

and Co. Ltd. (1915) AC 847 entitled to recover.

It was held that plaintiff is not

In Chinnaya v Ramaya , (1882) 4 Mad 137

In this case A, an old lady granted her estate to her daughter (the defendant) with a direction that the daughter should pay an annuity of Rs.653, to A‟s brothers (the plaintiffs). On the same day, the defendants made a promise with the plaintiffs that she would pay the annuity as directed by A.

The defendant failedIn an action against her by the plaintiffs she contended that since the plaintiffs themselves had furnished no consideration, they had no right of action. The Madras High Court held that in this agreement the consideration had been furnished by the defendant‟s mother and

that it was enough consideration to enforce the promise between the plaintiff and the defendant.

defendant‟s mother and that it was enough consideration to enforce the promise between the plaintiff and
defendant‟s mother and that it was enough consideration to enforce the promise between the plaintiff and
defendant‟s mother and that it was enough consideration to enforce the promise between the plaintiff and
defendant‟s mother and that it was enough consideration to enforce the promise between the plaintiff and
 General rule of English law … Contract can not confer any right on one

General rule of English lawContract can not confer

any right on one who is not a party to the contract, even

though the very object of the contract may have been to benefit him.

A stranger to the contract can not sue. Doctrine of Privity of Contract‟ has been criticized and recommended by many committees to abolish this principlethe beneficiary shall be able to sue.

In Cases like Beswik v. Beswik, (1967) 2 All ER 1197business was transferred by uncle to nephew against a contract to pay £ 6 per week to him and after his death £5 to his wifewhen refusedwidow suedclaim was said to be maintainable.

In UK several exceptions to this doctrine are found under

the Contracts (Rights of Third Parties) Act, 1999 and made significant changes to this doctrineHowever the doctrine has not been abolished.

Under Indian law there is no provision for privity of

contract. However, Judicial decisions have established that stranger to the contract can not enforce the contract.

Jamuna Das v. Ram Avtar, (1911) 30 IA 7A person

mortgaged his property to another personthen after

sold his property to third person with an understanding

that he would pay-off mortgage debt to the mortgagemortgagee brought an action for recovery of money

court held that mortgagee was not a party to a contract

not entitled to enforce the contract.

recovery of money … court held that mortgagee was not a party to a contract …
recovery of money … court held that mortgagee was not a party to a contract …
recovery of money … court held that mortgagee was not a party to a contract …
recovery of money … court held that mortgagee was not a party to a contract …

In M. C. Chako v. State Bank of Travancore, AIR 1970 SC 540SC reaffirmed this principle in this case.

This doctrine of privity of Contract is subject to certain exceptions. 1. Trust:

If by the contract trust is created in favour of a third person in respect of certain property, he can enforce the

contract even if he is not a party to the contract.

Rana Umanath Bakshi Singh v. Jung Bahadur, AIR 1938 PC 245a son was appointed by his father as his successorproperty was given to him with a

consideration that some money and a village will be

given to illegitimate son of the fatherheld that the illegitimate son can enforce the contract because trust was created in his favour.

Clause v. East India Hotels Ltd., AIR 1997 Del 201one of

the exceptions to the doctrine of privity of contract is even beneficiary can sue even if he is not a party to a contract.

If a parcel is lost in the transitthe person who was to

receive it can file a case even if he is not a party to a contract.

Khwaja Mohammad Khan v. Hussaini Begam, (1910) 37 I A 152(Kharch-i-Pandan Case) Khwaja Mhd. Khan enter into an agreement with father of the Hussaini Begam to pay her

500 rupees per month in perpetuity if she marries with his son.

He also charged his immovable property for the payment

later on refual

even after separationbecause the property was charged

and being a beneficiary can sue.

Court held that she is entitled to get payment

… because the property was charged … and being a beneficiary can sue. Court held that
… because the property was charged … and being a beneficiary can sue. Court held that
… because the property was charged … and being a beneficiary can sue. Court held that
… because the property was charged … and being a beneficiary can sue. Court held that

2. Marriage Settlement, Partition or other family

settlement:

The person for whose benefit it has been made can enforce iteven though he is not a party to it.

On partition of joint family, male members have entered into a contract to contribute equally towards marriage expenses of unmarried daughters or to maintain elderly members of the family is also

enforceableeven though they are not party to the

contract.

Sundararaja Ayengar v. Lakshmiammal, (1915) 38 Mad 788Agreement for marriage.

Rose Fernandes v. Joseph Conslaves, AIR 1995 Bom

97.

v. Lakshmiammal, (1915) 38 Mad 788 … Agreement for marriage.  Rose Fernandes v. Joseph Conslaves,
v. Lakshmiammal, (1915) 38 Mad 788 … Agreement for marriage.  Rose Fernandes v. Joseph Conslaves,
v. Lakshmiammal, (1915) 38 Mad 788 … Agreement for marriage.  Rose Fernandes v. Joseph Conslaves,
v. Lakshmiammal, (1915) 38 Mad 788 … Agreement for marriage.  Rose Fernandes v. Joseph Conslaves,

3. Acknowledgement and Estoppel:

If a party to a contract has some liability towards a third person under a contract and he acknowledges this liability, the third person can enforce the contract,

although he is not a party.

4. Contract by Agents:

Where a contract is entered into by an agent in the name of his principle and acting within the scope of his authority, the principal can enforce a contract.

an agent in the name of his principle and acting within the scope of his authority,
an agent in the name of his principle and acting within the scope of his authority,
an agent in the name of his principle and acting within the scope of his authority,
an agent in the name of his principle and acting within the scope of his authority,
 Past consideration means consideration given before making of promise by the promisor.  Eg.

Past consideration means consideration given before making

of promise by the promisor.

Eg. A rendered certain services to B and after sometime B agrees to pay 500 rupees.

In India past consideration is valid considerations if it has

been provided at the desire of the promisoreven if services

are provided not at the desire of the promisor then also it is covered under Section 25(2) voluntary services rendered.

Whereas under English law past consideration is no consideration. However, past consideration made at the desire of the promisor is a good consideration even under English Law.

 Present consideration is a consideration which is given in response to the promise. 

Present consideration is a consideration which is given in

response to the promise.

One of the party does all that he is bound to do under the contract and only the performance of the promise by the other party remains to be done.

In this case promise of the promisor remains in existence at the time when the consideration is given.

Eg. X makes an offer of reward of 500 rupees to any one

who finds out his lost watch and brings it to him. Y finds

it and gives it to X. X giving watch to Y is acceptance of

offer and also consideration thereof and consequently.

 It is a promise for a promise and the performance of the promise remains

It is a promise for a promise and the performance of the promise remains outstanding on both parties.

as promises are

Contract

is

concluded

as

soon

exchanged.

of the promise remains outstanding on both parties. as promises are  Contract is concluded as
of the promise remains outstanding on both parties. as promises are  Contract is concluded as
of the promise remains outstanding on both parties. as promises are  Contract is concluded as
of the promise remains outstanding on both parties. as promises are  Contract is concluded as
 Consideration need not be adequate but it must be real
Consideration need not be adequate but it must be real

and not illusory.

Impossibility makes the consideration unreal.

Performance of the legal duty cannot be a good consideration for a promise. It is notable that doing

something more that which one has to do under law may

be a good consideration for a promise.

Forbearance to sue is a good considerationDevi Radha Rani v. Ramdas, AIR 1941 Pat 282husband agreed to

pay monthly maintenanceand asked wife not to sue

when refusedHeldforbearance is also a good consideration.

 Raju and Viju are two good friends. They are staying in Mamidipalli village of

Raju and Viju are two good friends. They are staying in Mamidipalli village of Mahaboobnagar district. Raju comes from a very rich family and has access to every amity of the world but was whimsical person. He used to take Viju along whenever he

goes to college on his own brand new scooter Chetak. After

examination Raju got admitted to Engineering colleger

in Vizag and Viju joined a degree collage in Shadnagar. Viju had to walk for 4 km one side to attend college. After completion of one

semester when Raju came to meet his friend, he was very upset by

passing 12

th

seeing Viju‟s condition. He was into tears and wanted to gift his

scooter to his friend. Viju refused to take the scooter and said that Dosti Ke Beechme Kabhi Gadi Nahi Aani Chahiye. Seeing Viju‟s self esteem Raju proposed that he can purchase Raju‟s

scooter by paying him Rs. 2000 to which viju agreed.

When Raju was about to leave for Vizag, viju came with Rs. 2000 and requested Raju to hand over scooter to him. Raju being a whimsical person refused. Viju filed a case against Raju for fulfillment of his part of the promise under the contract. Will he

Succeed?

 Mr. Sachin was murdered by some unknown person late night when he was returning

Mr. Sachin was murdered by some unknown person late night when he was returning alone from railway station to his home.

He was a deputy collector of Nanded District and started a war against „Sand Mafia‟. No one is coming forward to give evidence. Mr. Nitin, brother of Sachin, announced that whosoever drives the investigation by providing evidence would

entitled to a cash price of Rs. 5 Lac. Mr. Popatlal, a Police

Constable, heard this and after his duty hours started investigation. He got a clue and did further investigation. He submitted all collected evidences to Mr. Nitin and claimed the award money. Nitin refused to pay by taking a defence that it was

part of his official duty. Mr. Popatlal being a poor person and

wanted to collect money for dowry to be paid during daughters marriage sued Nitin. Will he succeed?

a poor person and wanted to collect money for dowry to be paid during daughters marriage
a poor person and wanted to collect money for dowry to be paid during daughters marriage
Thank you…

Thank you…

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