CONSIDERATION
Presence of consideration is one of the essentials of a valid contract. [10.] Subject to certain exceptions,the general rule in India is that "an agreement without consideration is void."[Sec.25.]
Consideration means something in return for the promise. It may be either some benefit conferred onone party, or some detriment suffered by the other.
DEFINITION OF CONSIDERATION
S. 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 to abstain from doing something, such act or abstinence or promise is called a consideration for the promise."
The definition requires the following essentials to be satisfied in order that there is valid consideration:—
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 promise.
4. There should be some act, abstinence or promise by the promisee, which constitutes consideration forthe promise.
1. CONSIDERATION ONLY AT THE DESIRE OF THE PROMISOR
It is essential that the consideration must have been given at the desire of the promisor, rather thanmerely voluntarily or at the instance of some third party.
Durga Prasad v. Baldeo, [(1880) 3 All. 221.]
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. Since the plaintiff had spent money for the construction of the market, the defendants, in consideration thereof, made a promise to pay to the plaintiff commission on the articles sold through their (defendant's) agency in that market.
The defendants failed to pay the promised commission. The plaintiff sued the defendants to recoverthe 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.
In above case the consideration for the promise had not moved at the desire of the promisor but some other person, and it was held that the same was not a sufficient consideration to support the promise.
2. CONSIDERATION BY PROMISEE OR ANY OTHER PERSON(PRIVITY OF CONSIDERATION)
According to Sec. 2(d) consideration may be given by the promisee or any other person.In India, there is a possibility that consideration for the promise may move not from the promisee but a third person, who is not a party to the contract.
In England, the position is different. There the rule is that consideration must move from the promisee andnobody else. [Thomas v. Thomas, (1842) 2 Q.B. 851; Tweddle v. Atkinson, (1816) 1 B. & S. 393.]
For example, A promises to give his watch to B and a consideration of Rs. 2,000 for the same is given to Aby X and not by B. This will not constitute a valid contract in England as consideration for A's promise in favour of B was not provided by the promisee B himself but by somebody else.
Such a contract will be valid in India as sec. 2(d) clearly provides that "...at the desire of the promisor, thepromisee or any other person" may provide consideration.
CHINNAYA V. RAMAYA, [(1882) 4 Mad. 137;
The position in India may be explained by referring to the above case.
1. In that case A, an old lady, granted an 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).
2. On the same day, the defendants made a promise with the plaintiffs that she would pay theannuity as directed by A.
3. The defendant failed to pay the stipulated sum.
In an action against her by the plaintiffs she contended thatsince the plaintiffs themselves had furnished no consideration, they had no right of action.
The Madras High Court held thatin this agreement (between the defendant and the plaintiffs), the consideration has beenfurnished by the defendant's mother and that is enough consideration to enforce the promise between the plaintiffs and the defendant.
It may be noted that in England the rule is different. There the consideration must move from the promisee (and nobody else), and a stranger to consideration cannot maintain an action.Also see Samuel v. Ananlhanatha, (1883) 6 Mad. 356.]
CONSIDERATION MAY BE PAST, PRESENT (EXECUTED) OR FUTURE (EXECUTORY)
Indian Contract Act recognises three kinds of consideration, viz., Past, Executed and Executory.
When, in return for the promise, the promisee or any other person:a. has done or abstained from doing, the consideration is Past.b.does or abstains from doing, the consideration is Executed or Present.
c. promises to do or to abstain from doing, the consideration is Executory or Future.
(a) PAST CONSIDERATION
Past consideration means that the consideration for any promise was given earlier and the promise is made thereafter.It is necessary that at the time the consideration was given that must have been done at the desireof the promisor.
EXAMPLE
I request you to find my lost dog. After you have done the same, if I promise to pay you Rs. 100 forthat, 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 thesame had been done before I promised to pay the amount.
In this case the consideration has been given at my request, because it is only when I requestedyou that you found the dog.
This constitutes valid (Past) consideration under sec. 2(d), and therefore the promise is enforceable.
EXECUTED OR PRESENT CONSIDERATION
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, it is known as executed consideration.
Performance of the promise by the other side is the only thing now to be done.
EXAMPLE
A makes an offer of reward of Rs. 100 to anyone who finds his lost dog and brings the same to him. Bfinds the lost dog and delivers the same to A. When B does so, that amounts 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 consideration in this case is "executed".(Carlill v. Carbolic Smoke Ball Co., (1893) 1 Q.B. 256.)
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 that also provides the consideration in respect of the contract between A and B.
In the case of past consideration, on the other hand, consideration is provided prior to the making of the contract. In such a case at the time of providing of the consideration, the promise is non-existent.
Thus, if after B has found A’s dog, A promises to pay Its. 100 to B, the consideration here is past.
EXECUTORY OR FUTURE CONSIDERATION
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.
EXAMPLE
A agrees to supply certain goods to B and B agrees to pay for them on a future date, this is a case of executory consideration.
