Chapter 1.
3 Contracts Act 1872- Consideration 33
Chapter 1.3
Consideration
➢ Consideration is an important element of a contract. Without consideration no agreement is valid.
➢ Mr. A promises to give ₹ 1000 to Mr. B. Later on, A denies to pay B. No legal remedy is available
with Mr. B because in the agreement there was no consideration for Mr. A, hence, the agreement
was not valid.
➢ The principle of ‘quid pro quo’ i.e. something in return applies here.
➢ However, there are a few exceptions to this rule, where the agreement is valid even without
consideration (Sec. 25).
Definition
Consideration Section 2(d) “When, at the desire of the promisor, the promisee or any
other person
• has done or abstained from doing, or
• does or abstains from doing, or
• promises to do or to abstain from doing,
something, such act or abstinence or promise is called a
consideration for a promise.”
➢ The above definition brings out following characteristics of ‘consideration’
• It can be an act or abstinence
• The act or abstinence can be past, present or future.
• The consideration moves at the desire of the promisor
• Consideration is given by promisee or any other person.
Example :-- A promised to sell his car to B for ₹ 50000. Here, ₹ 50000/- is the consideration for A,
who promises to give his car. For B, car is the consideration in return of his promise to pay ₹
50000/-.
34 CA. Ashish K Agrawal Chapter 1.3
Essential elements of valid consideration
1 Consideration ➢ The promisee should give the consideration (act or abstinence) at the desire
must move at of the promisor. Promisee should not give it voluntarily at his own will or at
the desire of the will of a third party.
the promisor. ➢ Example – A sees that some thieves are trying to break into the shop of B. A
calls the police and save the shop of B. Now, A cannot claim any
compensation for his services as B never asked for help. A gave his services
voluntarily.
➢ It is compulsory that the consideration must move at the desire of the
promisor, but it is not compulsory that the consideration should benefit the
promisor only. Consideration may benefit even a third party.
➢ Example – B requested A to sell and deliver to him goods on credit. A agrees
to to do so, provided C will guarantee the payment of the price of the goods.
C promises to guarantee the payment. The contract between A and C is a
‘contract of guarantee’ and is perfectly valid though the benefit which A
confers in return of C’s guarantee is conferred not on C but on B (in shape of
sale of goods on credit). A’s promise to deliver the goods is the consideration
of C’s promise of guarantee. (Illustration appended to Section 127)
2 Consideration ➢ It is not necessary that only the promisee should give the consideration to the
may move promisor. Even a third party can give the consideration to the promisor.
from the ➢ As long as there is a consideration, it is not material who has given it.
promisee or ➢ This rule gives the power to a ‘stranger to the consideration’ to sue on the
any other contract, but only if he is a party to the contract.
person. ➢ Example - A gifted her property to her daughter G on the condition that G
will give a lifelong annuity to C (A’s brother). G agreed in writing to give
annuity to C. Later on, G denied to give annuity on the ground that no
consideration has moved from C to G and, hence, the contract between C and
G is invalid for want of consideration. It was held that consideration may not
move only from promisee (C ). The consideration in this case moved from A
(third party) to G. Hence, the contract between C & G was valid.(Chinayya vs
Ramayya).
➢ In the contract between C &G, C was a stranger to the consideration. But C
was not a stranger to the contract. Hence, C could sue. But in the contract
between A and G, C was a stranger to the contract. Hence, C could not sue
on the basis of contract between A and G.
3 Consideration Past ➢ When at the desire of the promisor, some act(or
may be past, Consideration abstinence) has already been done, it is known as past
present or consideration.
future ➢ Example – X requested to Y to teach his daughter. Y
teaches the daughter of X for a month. Later on X
promises to pay ₹ 1000/- to Y for his services. Here,
consideration for X is past consideration (teaching given
by Y to X’s daughter)
➢ If Y had taught the daughter of X without the request of
