Consideration is one of the essential elements to

support a contract. Subject to certain exceptions,

an agreement without consideration is void.
Consideration is a technical term used in the sense
of quid pro quo (ie something in return). When a
party to an agreement promises to do something,
he must get “something” in return. This
‘something’ is defined as ‘consideration’
Definition :in section 2(d) is a simple and practical
definition: it is something of value which the
promisee has given, gives or promises to give in
return for the promise.
Justice Patterson defines “ consideration means
something which is of some value in the eyes of
law.
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Two leading cases
 Case law: Abdul Aziz Vs Mazum Ali
The secretary of a Mosque Committee filed a
suit to enforce a promise which the promisor
had made to subscribe Rs 500 to the re-
building of a mosque. Held, “the promise was
not enforcable because there was no
consideration in the sense of benefit” as the
person who made the promise gained nothing
in return for the promise made”.
Case law: Kedar Nath Vs Gauri Mohamed
The facts of this case were almost similar to those
of the previous case, but the secretary in this
case incurred a liability on the strength of the
promise. Held, the amount could be recovered.
Essentials of valid
consideration
1.Consideration must move at the desire of the
promisor: consideration must proceed or move at the
desire or request of the promisor. In other words,
consideration must have been given at the desire of
the promisor. The desire of the promisor may be
express or implied. Acts done voluntarily or request of
the third parties would not be valid consideration. Ex:
A sees B’s house on fire and helps to extinguish fire. A
can not demand payment for his services because B
did not ask him any help.
Case Law: Durga Prasad Vs Baldeo
B spent some money on the improvement of a market at
the desire of the Collector of the district. In
consideration of this D who was using the market
promised to pay some money to B. Held, the
agreement was void being without consideration as it
had not moved at the desire of D
2. Consideration may move from the
promisee or any other person: under the
Indian law, consideration may move from the
promisee or any other person ie even a stranger
.
Case law : Chinnaya Vs Ramaiah : an old lady
made a gift of her property to her daughter with
a direction to pay a certain sum of money to
the maternal uncle by way of annuity. On the
same day, the daughter executed a writing in
favour of the maternal uncle agreeing to pay the
annuity. The daughter did not, however, pay the
annuity and the uncle sued to recover the

. It was held that there was sufficient

consideration for the uncle to recover the
money from the daughter.
3.Consideration may be past, present
or future:
4. Consideration need not be
adequate: Something in return need
not necessarily be equal in value .
Even smallest consideration is
sufficient provided it has some
value. Eg: A agrees to sell his house
worth Rs 10,00,000 for Rs 1,00,000
to B. the agreement is a contract.
5. Consideration must be real: it
must be real not illusory. Some
value in the eyes of law.
6. Consideration must be lawful:
eg: A promises to B an
employment in a Govt.office if he
pays Rs 50,000 as bribe. It is
unlawful
7. It must be something which the
promisor is not already bound to do.
A promise to pay a sum of money to
a police officer for investigation into
a crime will be without consideration
because he is already bound to do so
by law.
8. It must not be illegal, immoral or
opposed to public policy
“Stranger to a contract can’t sue”
are there any exceptions?
 It is a general rule of law that only parties
to a contract may sue and be sued on that
contract.
 Case law: Dunlop Pneumatic Tyre
Company Vs Selfridge & Co
A sold a large quantity of tyres to B at a
certain price on entering into an
agreement not to sell the tyres below the
price mentioned in price list supplied by A.
B sold the tyres to C a retail dealer under
the a contract stipulating the same
agreement between A and B. C sold the
tyres at less than the list price. A sued C
for the breach. It was held that A could not
sue C as A was not a party to the contract
between A and C.
 Exceptions :
 1. A trust or charge : a person (called
beneficiary) in whose favour a trust or other
interest in some specific immovable property has
been created can enforce it even though he is
not a party to the contract. For eg: A, creates a
trust in favour of B and appoints C, D and E as a
trustees of the trust. B can enforce the provisions
of the trust although he is not a party to the
agreement.
 Case law: Mr.Gandy Vs MrsGandy
A husband who was separated from his wife,
executed a separation deed by which he
promised to pay the trustees all expenses for the
maintenance of his wife. But he failed to do so.
The wife filed a suit against her husband. It was
held that the agreement created a trust in favour
of the wife and could be enforced by her.
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 . Marriage settlement, partition or
other family arrangement: when
an arrangement is made in
connection with marriage,
partition or other family
arrangements and a provision is
made for the benefit of a person ,
he may sue although he is not a
party to the agreement.
 Case law:Shuppu Ammal Vs Subramanyam :
Two brothers, on a partition of joint properties,
agreed to invest in equal shares a certain sum of
money for the maintenance of their mother.
Held, she was entitled to require her sons to
make the investment.
 3. Acknowledgement or estoppel: where the
promisor by his conduct, acknowledges or
otherwise constitutes himself as an agent of a
third party, a biding obligation is thereby
incurred by him towards the third party. Eg: A
receives some money from T to be paid over to
P.A admits of this receipt to P. P can recover the
amount from A who shall be regarded as he
agent of P.
 4. contracts entered into through an agent
A contract without consideration is void –
exception
“NO consideration, no
 An agreement made without consideration is
contract”
void. Sections 25 and 185 deals with the
exceptions to this rule. In such cases the
agreements are enforceable even though they
are made without consideration. The exceptions
are:
 Promise made on account of love and affection:
An agreement made without consideration is
valid if it is in writing and registered and is
made on account of love and affection
 Case law: Venkataswamy Vs Rangaswamy
V on account of natural love and affection for his
brother R, promised to discharge his debt to B.
the promise was put in writing and registered,
the agreement was held valid and binding.
 2.compensation for voluntary
services: A promise to compensate,
a person who has already voluntarily
done something for the promisor, is
enforceable, even though without
consideration. In simple words, a
promise to pay for a past voluntary
service is binding.
 Ex : A says to B, “At the risk of your
life you save me from an accident. I
promise to pay you Rs 5000, there is
a contract between A and B.
 3. Promise to pay a time-barred debt:
a promise by a debtor to pay a time
barred debt is enforceable provided it
is made in writing and is signed by
the debtor.
 4. contract of agency: no
consideration is necessary to create
an agency.
 5. completed gift: The rule “No
consideration, no contract” does not
apply to completed gifts. Gift does not
require any consideration. Gifts once
made cannot be recovered on the
ground of absence of consideration