Consideration

Contract Law

Contract Law

Consideration

Consideration

Guided by- Prof. Eqbal Husain

Guided by- Prof. Eqbal Husain

Submitted by – Heba

 It is my imperative duty to thank the following people for the successful 

completion of my Contract law project,

- Professor Eqbal Husain  for the clarity he brings into teaching 

thus enabling us to have a better understanding of his subject. I 

also feel obliged to thank him for providing us with such wonderful 

topics to choose from.

-

FEED UR FRIENDS NAME, My resourceful classmate, who I 

ran into in the library, thus un-expectedly starting and successfully

completing a rough handwritten draft of this project within the

next  days. !hough it is possible for our language to seem similar,

it has to be noted that given some of our group member"s

insistence on not depending on one single book led to all of us

 giving in e#ual contribution to the completion of this project.

- !he very cooperative and friendly staff members in the Central 

and $aw $ibrary who were instrumental in our finding the

necessary books without wasting much time. It has to be noted that 

their contribution is essential as our %niversity is yet to get a fully

 functional centrali&ed database for its libraries

_.

Contents

1. Free

Consent………

………4

2. Coercion………

……….5

3. Features

of

Coercion………

………..5

4. Act

forbidden

by

IPC………

……..6

5. Una!fu

detention

of  

Pro"erty……….6

6. #uress

and

#i$erence

bet!een

Coercion

%

#uress………&

'. Case

a!s………

………(

&. Undue

In)uence………

……….1*

(. +$ects

of

Undue

In)uence………

….11

1*.

+ssentias

of

Undue

In)uence………...1

1

11.

Fraud………

………..15

12.

Fase

,tate-ents

of  

Facts………

16

13.

Actie

Concea-ent………

……….16

14.

/ere

,ience

is

no

fraud………

..1'

15.

+0ce"tion………

……….1&

16.

+e-ents

of

fraud………

…………..24

1'.

/isre"resentation………

………25

1&.

#i$erence

bet!een

Fraud

and

/isre"resentation………26

1(.

+e-ents

of

/isre"resentation………

………..34

2*.

+0ce"tions………

………..34

21.

/istae………

……….34

Introduction to Contract La

!"at is La#

Law means a set of rules! which "o#erns our beha#iours and relatin" in

a ci#ili$ed society. So there is no need of Law in a unci#ili$ed society.

%hy Should &ne 'now Law(

&ne should )now the law to which he is sub*ect because i"norance of 

law is no e+cuse.

Meanin$,  contract is an a"reement made between two /or0 more

 1arties which the law will enforce.2

3efinition, ccordin" to section 4/h0 of the 5ndian contract act6 7894.

n a"reement enforceable by law is a contract.

ccordin" to SL:&;36 a contract is n a"reement creatin" and

definin" obli"ations between the 1arties2.

5ntroduction to Consideration

:eanin",

Consideration is a quid 1ro quo i6e somethin" in return it may be – 

• some benefit ri"ht6 interest6 loss or 1rofit that may accrue to one 1arty or6

• some forbearance6 detriment6 loss or res1onsibility suffered on underta)en by the other 

 1arty7

ccordin" to Sir Frederick Pollock 6 'consideration is the price for which the promise of the other is bought and the promise thus given for value is e nforceable.(

Consideration is a technical term used in the sense of quid-1ro-quo /i.e..6 somethin" in return0. %hen a 1arty to an a"reement 1romises to do somethin"6 he must "et somethin" in return. <his somethin"2 is defined as consideration.

3efinition =Sec 4/d0>,- when at the desire of the Promisor6 the 1romise or any other 1erson. a. has done or abstained from doin" 6 or =Past consideration>

 b. does or abstains from doin"6 or =Present consideration>

c. 1romises to do or abstain from doin" somethin" =?uture consideration > such act or  abstinence or 1romise is called a consideration for the 1romise.

E%a&'le

a( P! a""ress to sell his car to @! for Rs.AB6BBB Here @!s Promise to 1ay RsAB6BBB is the consideration for P!s 1romise and P!s 1romise to sell the car is the consideration for @!s  1romise to 1ay Rs.AB6BBB.

b( ! 1romises his debtor ! not to file a suit a"ainst him for one year on !s a"reein" to  1ay him Rs.7B6 BBB more. Here the abstinence of ! is the consideration for !s Promise

to 1ay.

Consideration is needed for the formation and #ariation of a contract. <here are three forms of  consideration,

1 Currie #. :ussa, Lush D -   #aluable consideration in the eyes of the law may consist either in some ri"ht6 interest6 1rofit or benefit to one 1arty6 or some forbearance6 detriment6 loss or res1onsibility "i#en6 suffered or underta)en by the other .2

E%ecutor) consideration, Consideration is called e+ecutor where there is an e+chan"e of   1romises to 1erform acts in the future. ?or e+am1le6 a bilateral contract for the sale of "oods

wherein  1romises to deli#er "oods to  at a future date and  1romises to 1ay on deli#ery.

E%ecuted consideration, <his arises in unilateral contracts where the act of acce1tance is also the consideration. 5f one 1arty ma)es a 1romise in e+chan"e for an act by the other 1arty6 when that act is com1leted6 it is e+ecuted consideration. Howe#er6 this label is also used to describe the situation where6 in a bilateral contract6 one 1arty has 1erformed as 1er his 1romise – in the abo#e e+am1le it would be when  deli#ers the "ood to .

Past consideration, Consideration that comes before the 1romise. 5f one 1arty #oluntarily  1erforms an act and the other 1arty then ma)es a 1romise6 the consideration for the 1romise is

said to be in the 1ast. Past consideration is not a #alid form of consideration.

It &ust &o*e at t"e desire of t"e 'ro&isor+

5n order to constitute a le"al consideration6 the act /or0 abstinence formin" the consideration for the 1romise must mo#e at the desire /or0 request of the 1romisor.

5f it is done at the instance of a third 1arty /or0 without the desire of the 1romisor6 it will not be a #alid contract.

It &ust not be ille$al, i&&oral or- not o''osed to 'ublic 'olic)+

• <he consideration "i#en for an a"reement must not be unlawful6 ille"al6 immoral and not

o11osed to 1ublic 1olicy.

• %here it is unlawful6 the court will not allow an action on the a"reement.

It need not be adequate+

• Consideration need not be any 1articular #alue.

• 5t need not be a11ro+imately equal #alue with the 1romise for which it is e+chan"ed. ut

it must be somethin" which the law would re"ard as ha#in" some #alue.

• 5n other words consideration6 as already e+1lained6 it means somethin" in return2. <his

means somethin" in return need not be necessarily be an equal in #alue to somethin" "i#en2.

Consideration must be sufficient /of economic #alue0 but need not be adequate.4

• Past consideration is not "ood consideration.

E+ce1tion, 3octrine of im1lied assum1sit.F

Consideration must mo#e /come0 from the 1romise.A

 ;ote there is no equi#alent requirement that consideration must mo#e to the 1romisor .

Consideration must not be somethin" the 1romisee is already bound to do,

• Le"al 3uty.9

E+ce1tion, Performance e+ceeds le"al duty.8

• Contractual 3uty.

E+ce1tion 7, Performance e+ceeds contractual duty.7B

2 Cha11ell # ;estle I %hite # luett

3 Re:crdle

4 Lam1ei"h # raitwait I Pau &n # Lau Lon"

5 <weedle # t)inson

6 olton # :adden

' Collins # Godefroy

& Glasbroo) Ltd # Glamor"an CC

( Stil) # :yric) 

1* Hartley # Ponsonby

E+ce1tion 4, Practical benefit.77

<he conce1t of 1ractical benefit! does not e+tend to contracts of debt.74

• ut consideration can be somethin" the 1romisee is bound to do for a third 1arty.7

Consideration must not be 1art 1ayment of a debt.7F

E+ce1tion, Pinnel!s Case

• Consideration must not be forbearance to sue for an in#alid claim.7A

• Consideration e+ists when the #ariation or dischar"e is ca1able of benefitin" either 

 1arty.7

Le$al Rules for *alid consideration

7. Consideration must mo#e at the desire of the 1romisor. 3 constructed a mar)et at the instance of 3istrict collector. &ccu1ants of sho1s 1romised to 1ay 3 a commission on articles sold throu"h their sho1s. Held6 there was no consideration because money was not s1ent by Plaintiff at the request of the 3efendants6 but at instance of a third 1erson #i$. the Collector  and6 thus the contract was #oid.79

11 %illiams # Roffey

12 Re, Selectmo#e

13 Scottson # Pe""

14 ?oa)es # eer 

15 %ade # Simeons I Coo) # %ri"ht

16 %D lan # El ;asr 

1' 3ur"a Prasad #. aldeo

4. Consideration may mo#e from the 1romisee or any other 1erson who is not a 1arty to the contract.78

 owed Rs.4B6BBB to .  1ersuaded C to si"n a Pro ;ote in fa#our of . C 1romised  that he would 1ay the amount. &n faith of 1romise by C6  credited the amount to !s account. Held6 the dischar"e of !s account was consideration for C!s 1romise.7

. Consideration may be 1ast6 1resent6 ?uture,

• Jnder En"lish law6 Past consideration is no consideration. • Present consideration ,- cash sale

• ?uture or e+ecutory consideration, -  Promises to  to deli#er him 7BB ba"s of 

su"ar at a future date.  1romise to 1ay first on deli#ery.

F. Consideration should be real and not illusory. 5llusory consideration renders the transaction #oid consideration is not #alid if it is.

5. Physically im1ossible 55. Le"ally not 1ermissible 555. Jncertain

5K. illusory /fulfillment of a 1re-e+istin" obli"ation0 A. :ust be

le"al,-Consideration must not be unlawful6 immoral or o11osed to 1ublic 1olicy.

. Consideration need not be adequate.  contract is not #oid merely became of the fact that the consideration is inadequate. <he law sim1ly requires that contract should be su11orted by consideration. So lon" as consideration e+ists and it is of some #alue6 courts are not required to consider its adequacy.

E+am1le,

 a"reed to sell a watch worth Rs.ABB for Rs.4B6 !s consent to the a"reement was freely "i#en. <he consideration6 thou"h inadequate. %ill not affect the #alidity of the contract. Howe#er6 the inadequacy of the consideration can be considered in order to )now whether the consent of the  1romisor was free or not. =Section 4A E+1lanation 55>

1& =Chinnaya!s Ks Ramayya>

1( ;ational an) of J11er 5ndia #. ansidhar 

9. <he 1erformance of an act what one is le"ally bound to 1erform is not consideration for the contract mean!s somethin" other than the 1romisor!s e+istin" obli"ation –

 A contract not supported by consideration is void.

E%( Nudo Pacto non oritur action, i,e, an a$ree&ent it"out consideration is *oid . E+ce1tions to the Rule ;o consideration. ;o contract2.

7. %ritten and re"istered a"reements arisin" out of lo#e and affection,- =4A /70>

• E+1ressed in writin" and re"istered under law for the time bein" in force for 

re"istration of document

•  ;atural lo#e and affection

• etween 1arties standin" in a near relation to each other

E+am1le, - n elder brother6 on account of natural lo#e and affection6 1romised to 1ay the debts of his youn"er brother. "reement was 1ut to writin" and re"istered. Held6 a "reement was #alid.

E+ce1tion, - Rajlukhy Dabee #. Bhootnath Mukharjee

E+am1le,  Hindu husband by a re"istered document6 after referrin" to quarrels and disa"reements between himself and his wife6 1romised to 1ay his wife a sum of money for her  maintenance and se1arate residence. Held that the 1romise was unenforceable since natural lo#e and affection was missin".

4. Promise to com1ensate =4A/40>

• Promise to com1ensate wholly or in 1art

• %ho has already #oluntarily done somethin" for the 1romisor  • Somethin" which the 1romisor was le"ally com1ellable to do.

E+am1le,-  finds !s 1urse and "i#e to him.  Promise to "i#e  Rs.ABB. <his is a #alid contract.

. Promise to 1ay a time – barred debt. =Sec 4A/0>

•  debt barred by limitation con not reco#ered. Hence6 a 1romise to 1ay such a debt is

without any consideration.

• Can be enforced only when – in writin" and si"hed by 3ebtor or his authori$ed a"ent.

E+am1le,  owes  Rs.7B6 BBB but the debt is barred by Limitation ct.  si"ns a written  1romise to 1ay  Rs.86 BBB on account of debt. <his is a #alid contract.

F. Com1leted "ift- "ift do not require any consideration.

A. "ency /78A0–ccordin" to the 5ndian contract ct. ;o consideration is necessary to create an a"ency.

. ailment /7F80 - consideration is not necessary to effect a #alid bailment of "oods. 5t is Called Gratuitous ailment.

9. Remission /0.

8. Charity- 5f a 1erson 1romises to contribute to charity and on this faith the 1romises underta)es a liability to the e+tent not e+ceedin" the 1romised subscri1tion6 the contract shall  be #alid.

Cases

•  Abdul Aziz  #. Masum Ali !

?acts, <he secretary of a mosque committee filed a suit to enforce a 1romise which the 1romisor  had made to subscribe Rs.ABB- for rebuildin" a mosque.

Dud"ment, <he 1romise was not enforceable because there was no consideration in the sense of   benefit!6 as the 1erson who 1romised "ained nothin" in return for the 1romise made!6 and the

secretary of the committee to whom the 1romise was made6 suffered no detriment /liability0 as nothin" had been done to carry out the re1airs. Hence the suit was dismissed.

2* 1(14

•  Dur"a Prasad  #. Baldeo#

?acts, ! s1ent some money on the im1ro#ement of a mar)et at the desire of the collector of the district. 5n consideration of this 3! who was usin" the mar)et 1romised to 1ay some money to !.

Dud"ment, <he a"reement was #oid bein" without consideration.

$hinnaya #. Ramayya

?acts, n old lady6 by a dead of "ift6 made o#er certain 1ro1erty to her dau"hter 3!6 under the directions that she should 1ay her aunt6 P! /sister of old lady06 a certain sum of money annually. <he same day 3! entered into an a"reement with P! to 1ay her the a"reed amount later 3! refused to 1ay the amount on the 1lea that no consideration had mo#ed from P! to 3!.

Dud"ment, P! was entitled to maintain suit as consideration had mo#ed from the old lady6 sister  of P!6 to the dau"hter6 3!.

• %enkats&amy# . Ran"as&amy'

?acts, y a re"istered a"reement6 K!6 on account of nature6 lo#es and affection for his brother6 R!6 1romises to dischar"e debt to !. 5f K! does not dischar"e the debt.

Dud"ment, R! may dischar"e it and then sue K! to reco#er the amount. <herefore it is a #alid a"reement.

•  (edernath #. )houri Mohammed *

21 1&&* 22 1&&2. 23 1(*3

?acts, G! had a"reed to subscribe Rs.7BB- towards the construction of a town hall at Howrah. <he secretary6 '!6 on the faith of the 1romise6 called fro 1lans and entrusted the wor) to contractors and undertoo) the liability to 1ay them.

Dud"ment, <he amount could be reco#ered6 as the 1romise resulted in a sufficient detriment to the secretary. Howe#er6 be enforceable only to the e+tent of the liability incurred by the secretary. 5n this case6 the 1romise6 e#en thou"h it was "ratuitous6 became6 enforceable because on the faith of 1romise the secretary had incurred a detriment

• <weddle #. t)inson.4A

<he 1laintiff was to be married to the dau"hter of one G and in consideration of this intended marria"e G and the 1laintiffs father entered in to a written a"reement by which it was a"reed that each would 1ay the Plaintiff a sum of money. G failed to do so and the 1laintiff sued his e+ecutors. %hitman D considered it to be an established 1rinci1le that a 1erson cannot ta)e ad#anta"e of a contract6 which is stran"er to the contract.

• Ramchandra Chintaman #. 'alu Ra*u.4

<here was a 1romise to 1ay to the Ka)il an additional sum if the suit was successful.

Held, <he 1romise was #oid for want of consideration. <he Ka)il was under a 1re- e+istin" contractual obli"ation to render the best of his ser#ices under the ori"inal contract.

•  Hindu husband6 after referrin" to quarrels and disa"reement between him and his wife

e+ecuted a re"istered document in fa#our of his wife a"reein" to 1ay her maintenance. ut no consideration mo#ed from the wife. Held6 the a"reement was #oid for want of  consideration.49 24 1&&6. 25 1&61 123 + '62 26 1&'' 2' auy s. 7ootnat Page | 14

• 3ebi Radha Rani #s. Ram 3ass.48

3 is ready to sue her husband for maintenance allowance. &n husband!s a"reein" to 1ay her a monthly allowance by way of maintenance6 she forbears to sue.

Held, <he wife!s forbearance to sue amount to consideration for the husband!s a"reement for   1ayment of maintenance allowance.

• 3unlo1 Pneumatic <yres Co. Ltd. Ks. Selfrid"e I Co. Ltd.64

S bou"ht tyres from the 3unlo1 Rubber Co. I sold them to 36 a sub-dealer6 who a"reed with S not to sell these tyres below 3unlo1!s list 1rice and to 1ay the 3unlo1 Co. MA as dama"es on e#ery tyre 3 undersold6 3 sold two tyres at less than the list 1rice and thereu1on the 3unlo1 Co. Sued him for the breach.

Held, <he 3unlo1 Co. Could not maintain the suit as it was stran"er to the contract.

• Roscorla # <homas /78F40 –

3 1romised claimant that horse bou"ht by claimant was sound and free from #ice. Held, 1romise made ?<ER sale had been com1leted there was no consideration

2& 1(41 2( 1(15