INTRODUCTION
·
Consideration is
necessary for the formation of contract. Section 10 of the Indian Contract Act
1872 provides, “All agreements are contracts if they are made by the free consent
of the parties and competent to contract, for lawful consideration and with a
lawful object and are not hereby expressly declared to be void.
·
Section 25 of
the said Act lays down the general rule that "an agreement without
consideration is void.
MEANING
OF CONSIDERATION:
·
Consideration is
necessary for the one formation of a contract. It means "something returns".
·
It is the price
paid for contract. It must be Lawful. A contract without consideration is void.
DEFINITION
OF CONSIDERATION
(a) Pollock:
According to Pollock Consideration are the price for which the promise of the
offer is brought, and the promise thus given for value is enforceable.
(b) Blackstone: According to Blackstone consideration is the
recompense given by the party contracting to the other. It is the price of the
promise.
ESSENTIAL ELEMENTS OF CONSIDERATION
·
Consideration
must move at the desire of the promisor:
It is the essential that consideration must move at the Desire of the promisor,
but not at the instance of a third party. An act done at the Desire of a third
person will not constitute a good consideration within the meaning of section 2
(d) of the Indian Contract Act 1872.
·
Consideration
may move from the promisee or any other person: A party who wishes to enforce a contract must be
able to show that he himself has furnished consideration for the promise of the
other party. In English law, consideration must move from promise only. But in
Indian law it may move from promise to any other person.
·
Consideration
must be real not illusory: Consideration
must be real and possible. It must not be illusory or unsubstantial.
·
Consideration may
be paste, present or future:
The words used in the definition under section 2(d) of the Indian contract Act,
clearly state state that, consideration may be past, present or future.
·
It must be Lawful: Consideration must not be illegal it must be
Lawful.
·
It must not be immoral or opposed to public
policy: Consideration must not
be immoral for opposed to public policy
·
Past, Present,
and Future Consideration:
Examples
Past consideration involves something that was already given before the
contract was signed. It's sometimes called executed consideration.
For example,
a person finds a lost wallet and returns it to its owner who promises to pay
$100 in one week. The return of the wallet thus constitutes past consideration.
Present consideration, most commonly cash in
exchange for goods, is given at the time the promise is made. If you buy
groceries for cash, the cash is your consideration, and the groceries are the
consideration given by the store. This is a contract even though it is not
spoken or written.
Future consideration will be given after the
contract is formed.
For example, you order a product online that will be
delivered in one week. The product is payable when it is delivered.
AGREEMENT
WITHOUT CONSIDERATION EXCEPTION
Consideration
being one of the essential elements of a valid contract, the general rule is
that “an agreement made without consideration is void.” But there are a few
exceptions to the rule, where an agreement without consideration will be
perfectly valid and binding.
These exceptions are as follows:
1.
Agreement made
on account of natural love and affection [Sec. 25(1)]:
An agreement made
without consideration is enforceable if, it is
(i) Expressed
in writing, and
(ii) Registered under the law for the time being in
force for the registration of documents, and is
(iii) Made on account of natural love and affection,
(iv) Between parties standing in a near relation to
each other. Thus there are four essential requirements which must be complied
with to enforce an agreement made without consideration, as per Section 25(1).
2. Agreement to compensate for past voluntary
service:
A promise made without consideration is also valid,
if it is a promise to compensate, wholly or in part, a person who has already
voluntarily done something for the promisor, or done something which the
promisor was legally compellable to do.
(a) A finds B’s purse and gives it to him. B
promises to give A Rs 50. This is a contract.
(b) A
supports B’s infant son. B promises to pay A’s expenses in so doing. This is a
contract14 (Note that B was legally bound to support his infant son.)
(c) A rescued B from drowning in the river, and B, appreciating
the service that has been rendered, promises to pay Rs 1,000 to A. There is a
contract between A and B.
3. Agreement to pay a time-barred debt: Where there is an agreement, made in writing and
signed by the debtor or by his authorized agent, to pay wholly or in part a
debt barred by the law of limitation, the agreement is valid even though it is
not supported by any consideration. A time barred debt cannot be recovered and
therefore a promise to repay such a debt is without consideration, hence the
importance of the present exception.
4. Completed gift:
A gift (which is not an agreement) does not require consideration in order to
be valid. “As between the donor and the done, any gift actually made will be
valid and binding even though without consideration” [Explanation 1, to Section
25]. In order to attract this exception there need not be natural love and
affection or nearness of relationship between the donor and done. The gift
must, however, be complete.
5. Contract of agency: Section 185 of the Contract Act lies down that no
consideration is necessary to create an agency.
6. Remission by the promisee, of performance of the
promise: For compromising a due
debt, i.e., agreeing to accept less than what is due, no consideration is
necessary. In other words, a creditor can agree to give up a part of his claim
and there need be no consideration for such an agreement. Similarly, an
agreement to extend time for performance of a contract need not be supported by
consideration.
7. Contribution to charity: A promise to contribute to charity, though
gratuitous, would be enforceable, if on the faith of the promised subscription,
the promisee takes definite steps in furtherance of the object and undertakes a
liability, to the extent of liability incurred, not exceeding the promised
amount of subscription. Stranger To Contract The expression “Privity of Contract”
is a doctrine, which means stranger to a contra.
STRANGER TO CONTRACT
The expression “Privacy of Contract” is a doctrine,
which means stranger to a contract. It means that a person, who is not a party
to the contract, is deemed to be a stranger to the contract, means the
relationship subsisting between the parties who have entered into contractual
obligations, and implies a mutuality of will and creates a legal bond between
the parties.
STRANGER
TO CONSIDERATION
Stranger to consideration or contract cannot bring a
legal action, Indian law is quite different. Section 2(a) of the Contract Act
while defining ‘Consideration’ includes the words ‘the Promisee or any other
person’ and that clearly shows that a stranger to consideration can sue.
Therefore it is clear that a person other than a party to the contract can
provide the consideration.
UNLAWFUL
CONSIDERATION AND OBJECT
Where the object or the
consideration of an agreement is that the performance of an act which is
forbidden by law, the agreement is void.
Acts or undertakings
forbidden by law are those punishable under any statute also as those
prohibited (expressly or implicitly) by special legislation of Parliament and
state legislatures.
For example, the
assembly or sale of excisable articles is prohibited under the Excise Act
except upon a Government license. Sale of liquor without a license is
prohibited for this reason under the Excise Act and is, therefore, illegal.
To summarize, all agreements involving breach of laws enacted for the protection or promotion of public interest are void.
2 Defeat the purpose:
Of Provisions of any Law Though the thing or consideration for the agreement, sometimes indirectly forbidden by law, they’re still forbidden if nature defeats the aim of the provision of law. Agreement with such an object or consideration is void. Where a legislative enactment provides penalty for an act or promise, the performance of such an act or promise would amount to the defeat of that enactment, because it is implicit that the statute intends to forbid that act
3. Fraudulent: An agreement, the object of which is to defraud others is void. Where the parties comply with practice a fraud on a 3rd person, not a celebration to the contract, their agreement is unlawful and void. To render an agreement unlawful and void on the idea of fraudulent object or consideration, the fraud, must, however, be established beyond reasonable doubt.
4. Injurious
to Person or Property: Any agreement
that suggests or involves injury to person or others property, it’s deemed
unlawful and thus void. it had been held that the contract was void since the
promise contained within the bond was tantamount to slavery on a part of the
defendant, which is both injurious to an individual also as illegal.
5. Immoral:
If the object or consideration of an agreement is against morality, its void. The
subsequent examples would help understand the purpose better.
6. Agreements
against Public Policy: The term public
policy during a wider sense means restriction of freedom of persons from doing
something within the larger interest or for the great of the community. Within
the context of the Indian Contract Act, it restricts the liberty of persons to
accept certain areas that are detrimental to public policy.
An agreement
is void if the law regards it as against public policy.
a) Trading with an alien enemy
b) Interference with administration of justice
c) Marriage brokerage agreements
d) Trafficking publicly offices
e) Unfair or unreasonable dealings
Post a Comment
If you have any doubts, please let me know.