(Consideration and Object)

Chapter NO:3
Consideration & exception of
consideration & essentials / Exception
• Consideration is an essential element for the formation of a contract. It
may consist of a promise to perform a desired act.
or
• Its a promise to refrain from doing an act that one is legally
entitled to do.
• In a bilateral(two sided) contract: An agreement by which both
parties exchange mutual each promise is regarded as sufficient consid
eration for the other. Bilateral contracts involve a more balanced
negotiation process. promises—E.g: Real estate agreement
• In a unilateral(01 sided) contract: Unilateral contracts are often found in
situations where one party is in a position of power or
authority.An agreement by which one party makes a promise in
exchange for the other's performance, the performance is
consideration for the promise, while the promise is consideration for th
e performance. Unilateral contracts are just as binding as bilateral
contracts, but only one party is making a promise
• Unilateral contracts are just as binding as bilateral contracts, but only
one party is making a promise. Eg:Insurance contract
• Consideration must have a value that can
be objectively determined.
• For example :
A promise, , to make a gift or a promise of
love or affection is not enforceable becaus
e of
the subjective nature of the promise.
Definitions of Consideration…
• Justice Patterson: "The consideration means
something which is of some value in the eye
of law. it may be some benefit to the
plaintiff(applicant) or some detriment(loss) to
the defendant.
Lush J: :A valuable consideration may consist
of some rights, interest, profit, or benefit
accruing to one party, and some
forbearance(restraints) , loss or
responsibility given ,suffered or undertaken
by other.
Contd…
• Pollock: :The consideration is the price for
which the promise of the other is bought
and the promise thus given for value is
enforceable.
E.g: A promise to repair B's car and B
promise to pay Rs 1Lac. The promise of
one party is the consideration for the
other party.
Essentials of a Valid consideration

Move at the desire of promisor(one making the

promise ):
◦It means that any act performed at the
desire of third party or without the desire
of promisor can not be a consideration. It
must be done at the desire of the
promisor.
◦e.g:Mr Adil agrees to sell his house for Rs
20 Lac to Mr Ashraf ,Mr Ashraf pays this
amount to Mr.Ashraf.The consideration
was done at per desire of promisor.
May move from the Promisee(to whom with
a promise is made) or any other person

• A consideration may move from the

promisee or any other person.It means a
person can sue on a contract; even if the
consideration for the promisee moved to
third party.
• E.g: A gifted property to her Daughter on
the condition that she would pay certain
amount annually to her brother. She
promised to pay the amount but later she
refused. Her brother can sue for the
recovery of decided amount,as the
May be an Act ,Abstinence or
Promise
The consideration may be positive or negative
act. Sometimes a return promise also forms
consideration.
ACT: Means doing something, A consideration
may be an act.(e.g: A agrees construct the
house of P for Rs 10 .A’s promise to pay Rs 10
Lac is the consideration for P’s promise of
constructing the house.)
Abstinence
• Means refraining from doing something, In this
sense consideration is in negative form:
• E.g: A promise not to sue B if B pays him
amount of Rs,1 lac .The abstinence of A is the
consideration for B’s Payment.
Promise
• For a Valid consideration there must be a
promise from both sides. It means that
there must be one party against(in leiu)
the promise of other party
• E.g: A agrees to sell his property to B for
Rs 5 Lac B’s promise to pay 5 lac is the
consideration for A’s promise. A’s promise
to sell the property is the consideration to
Bs promise.
Consideration may be Past, Present ,&
Future
•
Consideration : The consideration may be Past,Present and
Future, means its an act which ahs already been done at the
desire of the promisor or in progress or a promise for future.
1)Past Consideration: When the Consideration was given before
the formation of agreement .It is called past consideration. Past
consideration refers to an act or benefit that has already been
performed or provided before a promise or agreement is made
• But if a promise is made to compensate a person who has already
rendered some services then past consideration will be valid.
• e.g: Mr Naseem lost his car & MR Faheem is a finder who
delivered car to him. Mr Faheem can not demand payment of his
services due to the past consideration.
2)Present : Consideration given immediately by one party to
another.
• e.g: Mr Ali sells a house to Mr Umar . He pays it price
immediately it is called present consideration.
Contd…
• 3)Future Consideration: The
consideration from both sides move to a
future date ,consisting of promises
considered by other as well.
• e.g: Mr Rauf promises to deliver a shop
to Mr Anwar after 01 Month for Rs 20
Lac. upon the promise of Mr Khan to pay
the agreed price at the time of delivery , it
is called future consideration.
Past Consideration example

• A is a doctor. B is a patient. B was brought to A’s

dispensary. A rendered his services for ten days. After
ten days B promises to compensate A for the services
rendered to him. It is past consideration. A can recover
the promised amount.
• A looks after the children of B at B’s request. A year
later B agreed to pay A. a sum of Rs. 2000 for his
services. For the promise of B, the services of A will be
taken as past consideration.
• A rendered some services to B in the month of June. In
July, B promised to pay A Rs. 500. The consideration of
A is past consideration.
Contd…
• Consideration must be restricted competent .if
consideration is physically illegal & uncertain it
will be void.
It Need not be adequate(sufficient): It is not
necessary that consideration should be equal in
value to the promise.. The law only insists on the
presence of consideration. The parties are free to
decide the value of consideration.
• E.g: If someone agrees to sell his valueable house
for Rupees 20 lac and his consent is free .The
contract is valid
Contd…
• It must be real: Consideration must be
real and competent, where consideration
is physically impossible, illegal, uncertain
or unreal it is not a valid consideration.
• e.g: Physically impossible means A
promise to alive a dead man its
impossible.
• Or
• To climb the hill without any help of
necessary equipments.
Exceptions to Consideration
• No doubt in law without consideration agreement is
void but it has also exceptions which are followings:
• 1-Natural love & affection ( love): consideration is
not compulsory in an agreement which is made b/w
the parties for natural love and affection and
registered as per legal formalities.(in
writing,registered,close relation,due to affection n
love)
• 2-Voluntary Compensation: In a case where promise
is made for compensation for voluntary services is
enforceable even though without consideration. In
other words a promise to pay for a past voluntary
service is binding. This is an exception to the principle
that past consideration is no consideration.
Contd….
• 3- Case of donation: Agreement made for donation is not
enforceable for want of consideration .A promised amount
can not be legally recovered where the promisery has
done nothing on the base of promise.
e.g: If Mr Shah promise to donate 1 Lac for the renovation
of a college .College principal did nothing for repair .Mr
Shah refused to pay,the principal of a college cannot sue
on Mr Shah because Mr shah cannot be liable for any loss
of promise.
4)In case of present /gift:In case of gift there is no need
of any consideration . Any gift which is actual delivered
will be valid, it cannot be demanded back an there is no
need of consideration.
Contd..
• 5)Time Barred Debt: There is no need of
any consideration , if agreement is made
to extend time for the enforceable of the
contract .
Doctrine (Principle) of privity of contract(the
relation between the parties in a contract )

The Doctrine (Principle) of Privity of Contract is a fundamental

rule in contract law that states that only the parties involved in a
contract have the rights and obligations under it. In other words,
a third party who is not a part of the contract cannot:
The relationship existing between the parties who have entered
into an agreement.
• Consequences :
• i)-A person who is not a party to a contract can not sue upon it
even though the contract is for his benefit and he provided
consideration.
• E.g: X owes(lend) Rs 1 lac to Y…X sells his house to B for Rs 10
Million and asks B to to pay to Y. Y can not sue B because he is
not a party.
• ii)-A contract can not confer rights or impose obligations arising
under it on any person other than the parties.
• E.g: A.C manufacturing company sold it’s a.c to D with a
Stranger to a contract cannot
sue
• A person who is not a party to the contract is called
stranger to the contract. That person has no right to sue
because he has no privity of contract.

• Except following exceptions:

1)Trust: The beneficiary can sue to enforce his rights under
the trust, though he is not party.
• E.g: An addressee of an insured article can sue the Post
office in case of loss because due to the receipt given by the
post office post office became trustee.
•
2)Charge: A person in whose favour , a charge on some
specific immovable property has been created may enforce
it although he is a stranger to the contract.
• E.g: A buys a house through HBFC and the house is under
charge of HBSC.A sells without returning the loan to HBFC
then HBFC can sue.
• 3)Family settlement: Where provision is made for the
marriage ,partition or other family arrangements for the
benefit of the any family member although this member is
not part of the contract can enforce the agreements.
• E.g: On a partition of joint property two brothers agreed
to pay Rs 300 to their mother for maintenance as a legal
right of their other.
•
4)Agent: A person acts as agent for his principal , the
principal can sue although he is not party in contract.(e.g:
A appoints B as his agent to sell the goods.B sells goods
to X ..X can sue A for defective goods though there is no
direct contract b/w A and X).
5)Assignment: under a contract in favour of third party
voluntarily or by operation of law, the assignee can
enforce the contract.
• E.g: A assigned insurance policy in favor of his wife the
wife can enforce it although she is not a party to the
contract.
Unlawful consideration and Objects
For the valid agreement the object and consideration
of an agreement must be lawful. If the consideration
or object of contract is unlawful the agreement is
illegal and therefore void.
The words object and consideration are different from
each other.Object means purpose and consideration
means the price for which the promise of other
party is bought. Sometimes the object of a contract
may be illegal but consideration is lawful.
E.g: A takes a house from B on rent.It is law ful. If A
wants A wants to store illegal arms in house the
agreement is un lawful due to unlaw ful object.
Causes of unlawful consideration
• 1)Prohibited by law: If any action which is
forbidden(prohibited) by law it will be unlawful
consideration .
e.g:If Mr Adil wants to use the car of Mr Ali for the
purpose of murder. For the consideration b/w these
two person is illegal according to islam & it is
unlawful as well.
2) Fraudulent Case: If the object of an agreement is
unlawful & confused then consideration is also
unlawful.
e.g:MR Zaid & MR Akram enters in to a agreement
that they will divide the money acquired by fraud
equal. so again the agreement is void.
• E.g: Sale of same piece of land to many people.
• 3) Immoral: In case of immoral act ,agreement is
void & can not be enforced by law.(Against the
moral values/prohibited by law)..
e.g: A married women was given money to obtain
divorce from her husband and then to marry the
lender .Held ,the agreement was immoral and the
lender could not recover the money.
4) Injury(criminal/wrongful harm) to other
person/property:
• If an agreement involved & cause injury to any
other person for any property is void.
e.g: If Mr A & B jointly made an agreement to kill
Mr c for the purpose of property for any financial
profit so the consideration is this agreement is
unlawful.
• 5) Against the public policy: In the case also
the object or consideration of an agreement is
said to be unlawful . There are certain clauses
of act which are said to be against the public
policy.
e.g: The agreement to influence judges.
/ The agreement with an alien enemy.
•
6)Nature of agreement : The consideration or
object of an agreement is unlawful if it is of
such nature that if it is permitted . it would
defeat the provision of law.
• E.g: agreement that can defeat the provision
of law.like hidden purchaser ,that can be
defaulter
Assignment:

1-What is consideration and its essentials?

2-Types of considerations

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