According to Patterson,
Consideration is something which is of some value in the eyes of the law. It may be some benefit to the plaintiff or some determinant to the defendant.
According to Pollock,
Consideration is the price for which the promise of the other is bought.
Consideration means quid pro quo which means something in return.
Consideration plays a very significant role in the contract. Section 10 of the Indian Contract Act enumerates (mentions) it as one of the essentials to a valid contract. There can be no agreement without consideration. According to section 25 of the Indian Contract Act, an agreement without consideration is void.
According to section 2(d) of the Indian Contract Act, when at the desire of the promisor, if the promisee or any other person:
- has done or abstained from doing (past),
- does or abstains from doing (present),
- promises to do or abstains from doing (future),
such an act or abstinence is known as consideration.
Law Note: What Is Consideration and Its Kinds
Essentials of a Valid Consideration
The essentials of a valid consideration are derived from the definition of ‘consideration’ given under section 2(d) of the Indian Contract Act, 1872. They are:
The six essentials of a valid consideration are explained below in detail.
1. Given at the Desire of the Promisor
The consideration should be given at the desire of the promisor, not that of the third person. The act done at the plaintiff’s desire may be of no significance or personal benefit to the plaintiff – it will be considered a good consideration.
In Durga Prasad vs Baldeo (1880), the defendant spent some money on construction at the desire of the district’s collector. Plaintiff promised to pay commission to the defendant on articles sold by him in the market in which he occupied a shop.
In a suit by the defendant, it was held that there was no consideration for the promise made by the plaintiff and hence no contract as he had not constructed that market at the plaintiff’s instance.
2. Given by the Promisee or Any Other Person
The consideration doesn’t need to be given by the promisee. It may come from any other person also. It is immaterial as to who furnished it.
In Chinnaya vs Ramayya, an old lady gifted her entire property to her daughter under the condition that she would give annuity to her uncle. Annuity means paying someone a fixed sum of money each year, typically for the rest of their life. She agreed to pay annuity but stopped after some time and filed a plea that no consideration was moved by her uncle. The court rejected the plea and held that indirect consideration was already moved by her aunt.
3. Consideration May Be Past, Present or Future
The past, present, and future nature of the consideration can be inferred from the definition of ‘consideration’ as given under section 2(d) of the Indian Contract Act.
A consideration is called past consideration when the act is done before any promise is made. Example: X renders his service to Y, and Y promises to pay a sum of ₹500 for the service after a month. This is past consideration.
When consideration is given simultaneously with the promise is called present consideration. It is also known as executed consideration. Example: Sale of an article in cash.
When a promise is made to do or abstain from doing something in future, it is called future consideration. It is also known as executory consideration. It is a promise for a promise. Example: X agrees to sell Y 10 quintals of wheat at ₹10000 when they will be harvested.
4. It Must Be Real, Certain and Lawful
In a contract where consideration is unreal, uncertain or unlawful, such contract is void.
If X agrees to sell his car to Y at whatever price he wants to pay is an uncertain consideration.
If Y promises to pay ₹10000 to X to beat up Z, it is an illegal consideration.
5. Consideration May Be Positive or Negative
There should be some act or abstinence. Consideration may be positive when the promisee does something at the express wish of the promisor. Consideration may be negative when the promisee is abstained from doing something at the wish of the promisor.
6. It Need Not Be Adequate
Consideration need not necessarily be adequate. The law provides that there should be a consideration for a valid contract. It may or may not be adequate. The adequacy of consideration is for the parties to consider at the time of agreement. A contract cannot be held invalid on the grounds of the inadequacy of consideration. For instance, X decides to sell his wheat produce valued at ₹10000 for ₹2000 to Y. Such agreement will be deemed to be a contract if X has free consent.