CONSIDERATION AND OBJECT

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CONSIDERATION AND OBJECT

Meaning and Definition

Consideration is one of the essentials of a valid contract. An agreement without

consideration is void. A consideration is what a Promisor demands for his

promise. An agreement is enforceable only when both the parties get something

and give something. That something given or obtained is consideration.

Pollock: “ The consideration is the price for which the promise of the other is bought and

the promise thus given for value is enforceable”.

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CONSIDERATION AND OBJECT

Robert Lush J: “ A valuable consideration may consist of some right, interest, profit
or benefit accruing to one party and some forbearance, detriment, loss or responsibility
given, suffered or undertaken be other”.

Justice William Paterson: “The consideration means something which is of some

value in the eye of law. It may be some benefit to the plaintiff or some detriment to the
defendant.”

Section 2(d) of the Contract Act, 1872 “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.”
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CONSIDERATION AND OBJECT
EXAMPLES

a) A agrees to sell his house for £100,000 to B. For A the consideration is

£100,000. For B the consideration is house.

b) A promises to repair B’s car and B promises to pay £200. The promise of
one party is the consideration for the other party.

c) A promises not to sue his debtor B and B promises to pay him £500 more.
The abstinence of A is the consideration for B’s promise to pay.

d) A promises to paint a picture for B and B promises to teach him for a month
. The promise of one party is the consideration for the other party.

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CONSIDERATION AND OBJECT
ESSENTIALS OF A VALID CONSIDERATION

The essentials or legal rules of a valid consideration are as under:-

1. IT MUST MOVE AT THE DESIRE OF THE PROMISOR

For a valid consideration, the act or abstinence which forms the consideration
must be done at the desire of the promisor, It means that any act performed at
the desire of third party or without the desire of the promisor cannot be a
consideration.

Similarly, the act done voluntarily will not create a valid consideration. The
promisor need not necessarily get any benefit; the third party may also get
benefit from the contract.

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 CONSIDERATION AND OBJECT
Examples

a) A saved B’s house from fire. B did not ask for help. A cannot demand
payment for his services. Because he acted voluntarily.

b) B promised to pay a commission on goods sold in his market if D

constructed a market in that area. Later on, the Collector requested D to
construct the market which he constructed. Subsequently, D demanded
commission from B.
Held, the promise was not enforceable because the market was not
constructed at the desire of B. (Durga Prasad vs Baldeo).

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CONSIDERATION AND OBJECT

2. IT MUST MOVE FROM THE PROMISEE OR ANY OTHER PERSON

A consideration may move from the Promisee or any other person. It means
that a person can sue on a contract; even if the consideration for the promise
moved from a third party.

Examples

A gifted property to her daughter R on the condition that she would pay
certain amount annually to A’s brother C. R promised her uncle C to pay
amount but later refused to pay.

Held, C could recover the amount as the consideration on his behalf had
moved from her sister A. (Chinnaya vs Ramayya).

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CONSIDERATION AND OBJECT

3. IT MAY BE AS ACT, ABSTINENCE OR PROMISE

The consideration may be a positive or a negative act. Sometimes a return
promise also forms consideration.
a) Act
b) Absentia
c) Promise

a) Act:

A consideration may be an act, i.e. doing of something. In this sense consideration

is in positive form.
P agrees to construct A’s house for £10,000. Here, the promise to pay £10,000 is
the consideration for P’s promise of constructing the house.
.
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 CONSIDERATION AND OBJECT
b) Abstinence
Abstinence means refraining from doing something. In this sense
consideration is in negative form.
A promises B not to sue him if he pays him extra £500. The abstinence
of A is the consideration for B’s payment

(c) Promise
For a valid consideration, there mist be a promise from both sides. It
means that must be a promise be one party against the promise of other
party.
A agree to sell his horse to B for £700. B’s promise to pay £700 is the
consideration for A’s promise. A’s promise to sell the horse is the
consideration for B’s promise.

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 CONSIDERATION AND OBJECT
4. IT MAY BE PAST, PRESENT OR FUTURE
The consideration may be past, present or future. It means that the consideration is
an act, which has already been done at the desire of the promisor or in progress or a
promise to be done in future.

(a) Past Consideration

When the consideration was given before the formation of
agreement, it is called a past consideration. It is not a valid
consideration. When an act has been done voluntarily without any
promise for compensation the consideration is past, and the person doing
the act will get no compensation. But if a promise is made to compensate a person
who has already rendered some services, then the past consideration is a valid
consideration.
EXAMPLES
a) A teaches B at his request in January, and in February B promises to pay A Rs.
2.000 for his services. The service of A is past consideration.
b) A lawyer gave up his practice and served as manager at the request of landlord.
The landlord promised to pay pension. It was held that there was valid past
consideration. (Shiv Saran vs. Kesho Prasad)
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(b) Present Consideration
When consideration is given immediately be one party to another at the time of
contract, it is called present consideration. The act creating the consideration is
completely performed.
A sells a book to B and B pays price immediately, it is a case of present
consideration.

(c) Future Consideration

When the consideration on both sides is to move at a future date, it is called future
consideration. It consists of promises and each promise is a consideration for the
other. In future consideration, the liability is outstanding on both sides.

X Promises to deliver a car to Y after a week, and Y promises to pay the price at
the time of delivery. The consideration is future.

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5. IT NEED NOT BE ADEQUATE

It is not necessary that the consideration should be equal in value to
the promise. The law only insists on the presence of consideration and
not on its adequacy. The parties are free to decide the value of
consideration. However, inadequate consideration may create a doubt
about the free consent of the parties.
But if the consent is proved to be free, inadequate consideration is valid.

EXAMPLE
A agrees to sell his car worth £5000 for £1000 and his consent is free.
The contract is valid.

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6. IT MUST BE REAL
It is necessary that consideration must be real and competent. Where
consideration is physically impossible, uncertain or unreal; it is not a valid
consideration.

(a) Physically impossible

A promise to do something which is physically impossible.

For example A promises to put life in B’s dead brother on B’s promise to
pay him £1000.

(b) Legally Impossible

A promise to do something which is illegal.
For example A promises to pay £500 to B if he promises to beat up C.

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(c) Uncertain Consideration

A promise to do something which is uncertain.
For example A employs B for a certain work and promises to pay a
reasonable amount.

(d) Unreal Consideration

Consideration is unreal if it consists of a promise to perform a duty
which a person is already responsible to perform under a law.

G promised to pay C if he gave evidence in court for G. C gave

evidence on court order. Afterwards, C sued for payment.
Held: that consideration was unreal as C was under duty to give
evidence
(Collins vs. Godefroy)
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EXCEPTIONS TO CONSIDERATION
According to Section 25, an agreement without consideration is void.
Though law has made certain exceptions to it.
1. Gift
The agreement which is expressed in writing and registered under the law
and is made on account of natural love and affection between the parties
standing in a near relation to each other is enforceable even if there is no
consideration. The contract without consideration shall only be considered
valid if following conditions are satisfied:
a) The contract is in writing and registered.
b) The contract is made on account of natural love and affection.
c) There must be near relation between the parties to the contract.

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EXAMPLES
a) A promises, for no consideration, to give to B £100. It is a void
agreement.

b) F on account of natural love affection promises to give his son S,

£100,000. F puts it in writing and gets it registered. S can enforce it.

c) B, a husband due to dispute with his wife R through a registered

document promised to pay some amount. Later B refused to pay. R
sued for recovery.
It was held that agreement was void because it was not based on
natural love and affection.
(Rajlakhi Devi vs Bhootnath)
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CONSIDERATION AND OBJECT
2. Voluntary Compensation
According to Sec. 25 (2), if a promise is made to compensate, wholly or
in part, a person who has voluntarily done something for the
promisor, is enforceable even though without consideration.
In other words, a promise to pay for a past voluntarily service is
binding. This is an exception to the principle that past consideration is
no consideration.
Conditions:
1. The Promisor must in existence at the time the services were
rendered.
2. The intention of the promisor should be to compensate the
Promisee.
3. The services rendered must be legal.
Examples
a) A finds B’s purse and gives it to him. B Promises to give A £50.
This is a valid contract. 17 17
CONSIDERATION AND OBJECT
3. Time –Barred Debt
Usually, a debt becomes time-barred (lapse of defined length of time) if it
is not claimed for a period of three years from the date it becomes due
(S.64 Limitation Act).
But where there is an agreement, made in writing and signed by the
debtor to pay wholly or in part a time-barred debt, the agreement is valid
even though it is not supported by any consideration. Such an agreement
is valid if the following conditions are fulfilled. (Sec 25(3)).

a) The debt must be time-barred.

b) The promisor himself must be liable for the debt.
c) There must be an express promise to pay a time-barred debt.
d) The promise must be in writing and signed by the debtor or his agent.

EXAMPLES
A owes B £1000. but the debt becomes barred. A signs a written promise to
pay B £500 on account of the debt. It is a contract. 1818
 CONSIDERATION AND OBJECT

STRANGER TO CONTRACT?
A stranger to a contract isn’t a party to the contract.

The promisor may pay consideration to the promisee or any other

person upon promisee’s request. It means that a person may be
stranger to contract but not stranger to the consideration. A person
who isn’t party to the contract i.e. stranger cannot confer rights or
obligations arising out of a contract.

This is called the Doctrine of Privity of Contract.

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CONSIDERATION AND OBJECT
Doctrine of Privity of Contract

Privity of Contract essentially means the relationship existing between the

parties who have entered into agreement. This doctrine has two
consequences:

1. A person who is not a party to a contract sue upon it even though the
contract is for his benefit and he provided consideration.
X owes £50,000 to Y. X sells his house to B for £50,000 and asks B to pay
Y, B fails to pay. Y cannot sue B because he is not a party to the
contract.

2. A person who is not a party to a contract sue upon it even though the
contract is for his benefit and he provided consideration
Dunlop sold tyres to D, on the condition that he will not sell the tyres
to the public below Dunlop’s list price. D sold tyres to S upon this
condition, but S sold them below the list price. It was held that the
Dunlops could not sue S, as he was a stranger to the contract.
(Dunlop Tyre Co. vs. Selfridges Ltd.)
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CONSIDERATION AND OBJECT
EXEPTIONS TO THE DOCTRINE OF PRIVITY OF CONTRACT
1. Trust
In case of trust, the beneficiary can sue to enforce his rights under the trust,
though he is not a party to the contract.
a) A, transfers some property to B under trust for the benefit of M. M can
enforce the agreement.
(M.K Ropai vs John)
b) An addressee of an insured article can sue the Post Office in case of loss
as on receipt of article, the Post Office becomes trustee for the
addressee.
(Amir Ullha vs Central Governments).
2. Charge
A person in whose favor a charge on some specific immovable property
has been created may enforce it, though he is a stranger to the contract.
A buys a house through a bank, B. The house is under charge with B. A
sells the house to X without returning loan to B. B can sue X.
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3. Family Settlements
Where provisions made for the marriage, partition or other family
arrangements for the benefit of any member of a family, such member,
though not party to the agreements, can enforce the agreements.
Two brothers, on a partition of joint property, agreed to pay Rs.300 for the
maintenance of their mother. Held, she was entitled to recover.
(Shuppu vs. Ammal)
4. Agent
Where a person acts as agent for his principal, the principal can sue on a
contract though he is not a party to a contract.
A appoints B as his agent to sell goods. B sells goods to X. X can sue A for
defective goods though there is no direct is no direct contract between A
and X.

5. Assignment
In assignment of rights under a contract in favour of a third party
voluntarily or by operation of law, the assignee can enforce the contract.
A assigned his insurance policy in favour of his wife. The wife can enforce
it although she is not a party to the contract. 22
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CONSIDERATION AND OBJECT
UNLAWFUL CONSIDERATIONS AND OBJECTS
For the valid agreement the object and consideration of an agreement
must be lawful. If the consideration or object of a contract is unlawful
the agreement is illegal and therefore void.

The words object and consideration are different from each other. The
word object means purpose. While the consideration means the price for
the object of a contract is illegal though its consideration is lawful.

EXAMPLES
A takes a house from B on rent. It is lawful. If A wants to store illegal
arms in the house. The agreement is unlawful due to unlawful object.

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CONSIDERATION AND OBJECT
According to Section 23, the consideration or object of an agreement is
unlawful in the following cases.

1. If it is Forbidden by Law
If the consideration or object of a agreement is forbidden by law, the
agreement is void. An act is forbidden law:
a) When it is punishable by the Criminal Law of the country, or.
b) When it is prohibited by special act of legislature.

EXAMPLES
a) B and C agree to divide the goods obtained by theft. The agreement is
unlawful.
b) The sale of liquor without licence is illegal and so void.
c) Agreement to sell above the price fixed by the law is illegal and void.
(Sita Ram vs. Kunj Lal)
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2. If it Defeats the Provisions of any Law
If the object or consideration of an agreement is of such a nature that if
permitted, it would defeat the provisions of any law. Such object or
consideration may not be directly forbidden by law. It will indirectly
violate law and so illegal.
A fails to pay his loan to HBFC. His house is sold for recovery of debt. By
law, A is prohibited from purchasing his house. A aske B to purchase the
house and transfer to him. The agreement is void.

3. If it is Fraudulent
It the object or consideration of agreement is to defraud others is unlawful
and so void. Where the parties agree to commit a fraud on third person,
the agreement is illegal.
a) A promises to pay Rs. 20,000 to Bs’ promise to commit fraud on C. The
agreement is illegal and void.
b) A is the agent of X. A agrees for money with B to get the land of his
principal without his knowledge. The agreement between A and 25B25is
CONSIDERATION AND OBJECT
4. If it Involves injury to Property of Another
If the object or consideration of agreement is to cause an injury to the
person or property of another is illegal and also void. Injury means
criminal or wrongful harm.
a) An agreement to put certain property on fire is unlawful and void.
b) An agreement to commit an assault or to beat a man has held unlawful
and void. (Allen vs Rescous).

5. If the Court regards it as Immoral

If the consideration or object of an agreement is such that the court regards
it as immoral, the consideration is void. Immoral means acts, which are
against the moral values and also prohibited by law.
A married woman was given money to obtain divorce form her husband
and then to marry the lender. Held, the agreement was immoral and the
lender could not recover the money.
(Bai Vijli vs Hamda Nagar) 2626
CONSIDERATION AND OBJECT
6. It the Court regards it as Opposed to Public Policy
An agreement which is harmful for the welfare of the society or the state is
said to be against the public policy. It the court regards the object or
consideration of an agreement as opposed to public policy, the agreement
is unlawful.
Broadly speaking, an agreement, which leads to corruption, injustice or
immorality, is considered to be against the public policy. The following
agreements have been held to be against public policy.
EXAMPLES
a) The agreements to give money to induce a person to give false
evidence are void.
b) The agreements to influence judges.
c) The agreements with an alien enemy.
d) The agreements which disturb the friendly relations of the state.
e) The agreements the purpose of which is to influence over the officers
of justice. 2727