Proposal or offer

The entire process of entering into a contract begins with the proposal or an offer made by one
party to another. The proposal must be accepted to enter into an agreement.

According to the Indian Contract Act 1872, proposal is defined Section 2(a) as "when one person
will signify to another person his willingness to do or not do something (abstain) with a view to
obtain the assent of such person to such an act or abstinence, he is said to make a proposal or an
offer."

Features of a valid offer -The person making the offer/proposal is referred to as the "promiser"
or the "offeror". And the person who accepts an offer is referred to as "promisee" or the "acceptor"

Element of a valid offer

Here are some essentials which make the offer valid.

• There must be two parties

• There have to be at least two parties a person making the proposal and the other person
agreeing to it. All the persons are included i.e, Legal persons as well as artificial persons.

• Every proposal must be communicated. Communication of the proposal is mandatory. An

offer is valid if it is conveyed to the offeree. The communication can either be express
implied. It can be communicated by terms such as word of mouth, messenger, telegram,
etc. Section 4 of the Indian Contract Act says that the communication of a proposal is
complete when it comes to the awareness of the person to whom it is made. Example ‘A’
proposes, to sell a car to ‘B’ at a certain price. Once ‘B’ receives the letter, the proposal
communication is complete.

• It must create Legal Relations .An offer must be such that when accepted it will result in a
valid contract. A mere social invitation cannot be regarded as an offer, because if such an
invitation is accepted it will not give rise to any legal relationship. Example ‘A’ invited ‘B’
to dinner and ‘B’ accepted the invitation. It is a mere social invitation. And ‘A’ will not be
liable if he fails to provide dinner.
• It must be certain and definite The terms of the offer must be certain and clear in order to
create a valid contract, it must not be ambiguous.

• It may be specific or general The specific offer is an offer that is accepted by any specific
or particular person or by any group to whom it is made. Whereas, The general offers are
accepted by any person.
Classification of offer.

• Express Offer An offer may be made by express words, spoken or written. This is known
as Express offer. Example When ‘A’ says to ‘B’, “will you purchase my car for Rs
2,00,000”?

• Implied Offer -An offer may be derived from the actions or circumstances of the parties.
Example There is an implied offer by the transport company to carry passengers for a
certain fare when a transport company operates a bus on a particular route.

• General Offer -A general offer is not made by any specified party. It is one that is made
by the public at large. Any member of the public can, therefore, accept the offer and have
the right to the rewards/consideration. Example ‘A’ advertises in the newspaper that
whosoever finds his missing son would be rewarded with 2 lakh. ‘B’ reads it and after
finding the boy, he calls ‘A’ to inform about his missing son. Now ‘A’ is entitled to pay 2
lakh to ‘B’ for his reward.

• Specific Offer- It is the offer made to a specific person or group of persons and can be
accepted by the same, not anyone else. Example ‘A’ offers to sell his house to ‘B’. Thus, a
specific offer is made to a specific person, and only ‘B’ can accept the offer.

• Cross offer -Two parties make a cross-offer under certain circumstances. It means that
both make the same offer at the exact time to each other. However. In either case, the cross-
offer will not amount to accepting the offer. Example ‘A’ and ‘B’ both send letters to each
other offering to sell and buy B’s house at the same time. This is the cross offer made where
one party needs to accept the offer of another.

• Counter-offer- A counter-offer is an answer given to an initial offer. A counter-offer means

that the original offer has been refused and replaced by another. The counteroffer offers
three choices to the original offerer; accept, refuse or make another offer.
Lapses and revocation of an offer .

• An offer lapses after a defined or reasonable time.

• An offer lapse by not being accepted in the specified mode .

• An offer lapses by rejection.

• • An offer lapses by the offeror or the offeror’s death or insanity until acceptance.
• • An offer lapses by revocation before acceptance.
• • An offer lapses by subsequent illegality or destruction of the subject matter.
When communication is complete

• Communication of offer (section 4)

The communication of the offer is complete when it comes to the knowledge of the person to
whom it is made.

Revocation of the offer (Section 4)

A proposal can be revoked at any time before the communication of its acceptance is complete as
against the proposer but not afterward. The offeror can withdraw his offer before it is accepted
“the bidder can withdraw (revoke) his offer at an auction sale before being accepted by any
auctioneer using any of the customary methods. Example ‘A’ agreed to sell the property to ‘B’ by
a written document which stated “this offer to be left over until Friday 9 AM”. On Thursday ‘A’
made a contract to sell the property to ‘C’. ‘B’ heard of this from ‘X’ and on Friday 7 AM he
delivered to ‘A’ acceptance of his offer. Held ‘B’ could not accept A's offer after he knew it had
been revoked by the sale of the property.

Acceptance
 • The Indian Contract Act 1872 defines acceptance in Section 2 (b) as “When the person to
whom the proposal is made signifies his assent thereto, the offer is said to be accepted.
Thus the proposal when accepted becomes a promise.”

• An offer can be revoked before it accepted. As specified in the definition, if the offer is
accepted unconditionally by the offeree to whom the request is made, it will amount to
acceptance. When the offer is accepted it becomes a promise. Example ‘A’ offer to buy B’s
house for rupees 40 lacs and ‘B’ accepts such an offer. Now, it has become a promise. When
an offer is accepted and it becomes promise it also becomes irrevocable. No legal
obligation created by an offer.

Types of Acceptance

Expressed Acceptance -If the acceptance is written or oral, it becomes an Expressed Acceptance.
Example ‘A’ offers to sell his phone to 'B' over an email. ‘B’ respond to that email saying he accepts
the offer to buy.

Implied Acceptance-If the acceptance is shown by conduct, It thus becomes an Implied

acceptance. Example The Arts Museum holds an auction to sell a historical book to collect charity
funds. In the media, they advertise the same. This says that a Mere Invitation to an Offer as per
Indian Contract Act, 1872. The invitees offer for the same. Offer is expressed orally, so the offer
to buy is an Express Offer, but by striking the hammer thrice the final call is made by the auctioneer.
This is called Implied Acceptance.

Conditional Acceptance- A conditional acceptance also referred to as an eligible acceptance,

occurs when a person to whom an offer has been made tells the offeror that he or she is willing to
accept the offer provided that certain changes are made to the condition of the offer. This form of
acceptance operates as a counter-offer. The original offeror must consider a counter-offer before a
contract can be established between the parties.

Legal Rules and Conditions for Acceptance .

 • Acceptance must be absolute and unqualified- The offeree's approval cannot be
conditional.For example, ‘A’ wants sell her car to ‘B’ for Rs 2 lakh, ‘B’ can’t come back
and says that she accepts the offer but will buy the same for Rs. 1 lakh.

• Acceptance must be told to the offeror- If the acceptor just accepts the offer in his head
and he does not mention the same to the offeror, it cannot be called an Acceptance, whether
in an express manner or an implied manner.

• Acceptance must be recommended in the following mode- Acceptance is sometimes

required in a prescribed/specified communication mode.

• In a reasonable amount of time- the acceptance is given It’s very rare that an offer is
always to get acceptance at any time and at all times. Therefore, the offer defines a time
limit. If it does not, it should not be acknowledged forever.

• Mere silence is not acceptance- If the offeree fails to respond to an offer made to him, his
silence can not be confused with acceptance. But, there is an exception to this rule. It is
stated that, within 3 weeks of the date on which the offer is made, the non-acceptance shall
be communicated to the offeror. Otherwise, the silence shall be communicated as
acceptance.

When communication is complete?

Communication of acceptance (Section 4)

Communication of acceptance is complete when it is put in the course of transmission to him as to

be out of the power of the acceptor to withdraw the same and when it comes and when it comes to
the knowledge of the proposer.

Time of revocation of acceptance -An acceptance may be revoked at any time, but not afterward,
before the communication of the acceptance is complete as against the acceptor.

Agreement
The definition of the agreement is defined in section 2(e) of the Indian Contract Act 1872. An
agreement is a kind of promise between the two parties, there is a consideration also involve in it.
The perfect example of the agreement is the rent agreement. In the rent agreement, both parties
(the owner and the tenant) involve, the consideration is in the form of the money, rent etc.

There is various important aspect that is necessary for the agreement and is as follows –

Parties- there is always a minimum of two parties involved in the agreement and, more than two
parties also. It is totally depending upon the conditions or circumstances.

Offer- there must be an offer between two parties, one party have to make an offer to another party
and this offer is also mentioned in the agreement.

Acceptance – one party made an offer and another party have to accept the offer. Acceptance of
the party is very important for the agreement and the acceptance should be according to the will
of the party.

Promises- both parties have to promise that they fulfil all the duties and obligations mentioned in
the agreement.

Consideration- consideration means the money in any form or the price for the promise we can
say.

Conditions for Agreement

It is not possible that all the agreements are valid agreements. Sometimes the agreements are void
or considered null. It is important for all of us to understand that what are the certain conditions
which are not valid in the eyes of law-

1. No consideration- first is that, if there is no consideration for the promise mentioned in

the agreement it means that there is no price/ money involved between the two parties. For
a valid agreement, there should be a consideration.
 2. Agreement in restrain the trade- If one party mentioned that the other party was not to
do any word or in simple words, one party restrain the other party to do any kind of trade
or business or any work for the livelihood of the rest of life. Then in this case the contract
between the two parties is void and there is no legal agreement formed.
3. Agreement to restrain marriage- If one party restrain the other person to not marry any
other person and in return he/ she will gift something but that person can’t marry for the
rest of his life. This agreement or contract is not valid.
4. Agreement to restrain of legal proceedings- It means that, if one party interfere with
another party to not involved in any kind of legal proceeding then that contract is
considered as null and void contract. This is not right in the eyes of law.
5. Impossible act- If one party mention the condition to an act which is impossible in nature
then that agreement is considered to be null and void because it states that the condition is
impossible to do by a party.

All these conditions should be fulfilled for a valid agreement, if one of the conditions is mentioned
in the contract which is illegal in the eyes of the law, then it is a void agreement under the Indian
contract act.

Contract

Contract (Section 2(h)) A contract is a lawful agreement. In other words, an agreement enforceable
by law is a contract. Contract = Agreement + Legal enforceability .Contract = Legally enforceable
.Agreement A type of agreement which is enforceable by law is a contract (Section 2(h) of the
ICA). Enforceable by law means that, if somebody I aggrieved then he may approach the court for
remedies. For example: In case of a Fire Insurance Contract where Titu wants to insure his goods
in the warehouse, he pays the insurance premium and promises to avoid insurance fraud whereas
the insurance company agrees to compensate losses in case of a fire. So Mathematically,
Agreement + Enforceable by Law = Contract .When an offer is made with the intention to create
a legal obligation it becomes an offer for entering into a contract. Thus an agreement becomes a
contract when there is free consent of the parties, capacity of the parties to contract, lawful
consideration and lawful object or subject matter (Section 10 of the ICA). For an agreement to
become a Contract it must give rise to a legal obligation and if it is incapable of doing so, it is not
a contract.
In the case of Balfour v Balfour [1919] 2 KB 571, Mr. Balfour promised to pay his wife
£30/month as she stayed in England for medical reasons. When he failed to pay, Mrs. Balfour sued
him. Her action failed because there was no intention to create a legally binding agreement between
Mr. and Mrs. Balfour. A contract cannot be made without proper indication about the legal rights
and obligations of the parties to the contract. So, if this were to be a contract then the wife would
have had a right to receive payment and the husband would have had the obligation to pay his
wife. This makes an agreement a wider term than a contract.

So, an agreement is a contract when:

1. Free consent of the parties: When there is absence of Coercion (Section 15), Undue Influence
(Section 16), Fraud (Section 17), Misrepresentation (Section 18) and Mistake (Section 20, 21, 22),
the consent is said to be free.

2. Capacity of the parties to contract: Section 11 and 12 lay down that the competent parties are
persons who have attained majority {Exception for this was laid down in Mohori Bibee v.
Dharmodas Ghose ILR (1903) 30 Cal 539 (Pc)), persons who are of sound mind and persons who
are not disqualified by law.

3. Lawful consideration and Lawful object: Section 23 lays down that the consideration and object
is lawful unless it is forbidden by law or it defeats provisions of any law or is fraudulent or involves
injury to person or property or is violative of public health, morality, peace and order.

Some examples where agreements are not contracts: 1. Gabbar asked Samba to kill Jay and Veeru
and Samba agreed. This is an agreement but the object of the agreement makes it an illegal one.
Therefore, it cannot be enforced and so it is not a contract. 2. Rajesh promises his wife Chitra that
he will bring for her the stars and the moon and Sonam agrees. Here, the object of the agreement
is impossible to perform and so it is not enforceable and cannot be termed as a contract.

Types of Contracts Based on Performance

I. Executed Contracts

Executed Contracts are defined as those contracts where every party related to the contracts has
fulfilled their respective and agreed obligations, as specified in the agreement. To be considered
as an Executed contract, the contract is to be verified whether the obligation has been carried out
exactly how it was supposed to be carried out. Under the Executed Contract, the parties have
fulfilled their agreed promises and duties. Generally, the buying and selling of goods or services
fall under the category of executed contracts as the seller provides the goods to the buyer and the
buyer pays for the goods. The contract executes at the time when both parties have discharged their
legal obligations.

For example: A shopkeeper sells his goods in cash. Yasmin visited the shop purchased 1 KG of
flour, and paid in cash. The following contract is executed where the shopkeeper has provided the
flour and Yasmin has paid the price for the goods purchased. The time of execution will be when
Yasmin pays the price for goods purchased and the contract is executed instantly.

II. Executory Contracts

Executory Contracts are defined as the contracts where both the parties in a contract are yet to
perform their agreed obligations and duties. Executory Contracts also constitutes the time
agreements or deadlines mentioned in the provisions of contract. In an executory contract, the
consideration acts as a reciprocal promise or obligation. Such consideration is to be performed in
the near future and therefore, these contracts are described as executory contracts as one of the
party is still required to act. A lease agreement is most popular type of executory contract which
prevails in business. In a lease agreement, the time duration is mentioned and the conditions in the
agreement will be fulfilled in near future and they are performed and fulfilled over a period of
time. Further, Executory Contracts can be further classified into two types, Unilateral and Bilateral
Contracts.

A. Unilateral Contracts

Unilateral contracts are defined as one sided contract, in which one party has already performed
their duty or obligation and the other party to contract is still required to fulfill their obligation.
Under unilateral contracts only one party vows to perform their duty. The agreement is open to
anyone who wishes to vow the same and enter into the contract with other party.

For example, An entertainment company declares a prize money of ₹20,000 for a quiz contest. (a
unilateral contact has already been initiated by the company, declaring prize money) and anyone
who successfully wins the quiz contest by following the set of provision guided by the company
can claim this prize money and the contract will get executed.

B. Bilateral Contracts

Bilateral Contracts are the most common binding agreements one can observe in practical business
environment. Bilateral contracts are defined as those contracts where promises made by both
parties lack discharge of obligation, both parties to contract are yet to fulfill there obligation.
Bilateral contracts are two sided and are mutual contracts. Here one promise is made in exchange
of another promise, as there is mutuality of obligation.

For example, A property owner agrees to sell his property to another party. Here a bilateral contract
has taken place, as property owner will be giving his property and the other party will pay him the
consideration.

Quasi-Contract

They are not contracts in the sense that no agreements are made between any of the parties. In fact,
there is no contract prior to some court order. Let us first see an example and then we will get a
clear idea of what we mean by Quasi-Contract.

For example, a bank mistakenly transfers a large amount of money into your account. Now there
is no written or oral or any sort of agreement between you and the bank but the money doesn’t
belong to you.You will have to return the money even if you don’t want to. The bank will approach
the court and the court will issue an order to return the money, which is becoming a quasi-contract.

So here we see that a quasi-contract is not agreed upon by the two parties but it comes into
existence by a court order. It is thus enforced by the law which also creates it. Most of the times
the quasi-contract is created to stop any of the parties from taking unfair advantage of the other.

Consider this example. You have a yard and you commission a person to build a small door for
your car. You come home one day to find out that the mansion has made a big door which is very
expensive. At the same time very good for the value of your property. Now, what would happen if
you both approach the court?
The courts usually enforce what is known as the “Quantum Merit” which means “as much as is
deserved.” Since the work was done also increased the value of your property, it would be immoral
if the worker doesn’t get paid for the extra work and materials. The payment might be lesser than
the normal cost but the quantum merit will apply. This is a quasi-contract.

E-Contract

When a contract is formed by the use of electronic devices and means, it is called an electronic
contract or an e-contract. The electronic means and devices may include emails, tests, telephones,
digital signatures etc. They are also known as the Cyber contracts, the EDI contracts or the
Electronic Data Interchange contracts. The terms of the contract are listed by electronic means or
implied by the actions of the users.

Essential elements of a valid contract

According to Section 10, “All agreements are contracts if they are made by the free consent of the
parties, competent to contract, for a lawful consideration and with a lawful object and are not
expressly declared to be void.” An agreement, to be enforceable by law, must possess the essential
elements of a valid contract as contained in Section 10 of the Indian Contract Act.

• Offer- In order to create a valid contract, there must be a “lawful offer” by one party and
“lawful acceptance” of the same by the other party.Section 2(a) defines offer Section 2(b)
states that “when the person to whom the offer is made, signifies his assent thereto, the
offer is said to be accepted.”

• Intention to create legal relations- If there is no intention to create legal relationship on the
part of the parties, there is no contract. Agreements of social or domestic nature do not
contemplate legal relations.

• Lawful Consideration- As per Section 2(d), when at the desire of the promissor, 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 consideration for the promise.” Consideration should not be unlawful,
immoral and against public policy.
• Competent Parties- The following persons are not competent to contract. Minor: A person
less than the age of 18 years is a minor. Unsound Mind: Any person who is unable to
understand the terms and conditions of contract at the time of its formation is considered
to be of unsound mind. Persons disqualified by law: The following persons are disqualified
from entering into contract by law,Alien Enemy and Foreign Sovereigns and Diplomats.
Convicts and Insolvent

• Free Consent- “Consent” means the parties must have agreed upon the same thing in the
same sense.As per Section 14, Consent is said to be free when it is not caused by:
Coercion Undue influence Fraud Misrepresentation Mistake 6) Lawful
ObjectObject is the purpose or design of the contract. The object of the contract should be
lawful.The object is said to be unlawful ifa) It is forbidden by law;b) It is of such nature
that if permitted, it would defeat the provision of any law;c) It is fraudulent;d) It involves
an injury to the person or property of any other;e) The court regards it as Immoral or
opposed to public policy.7) Certainty of Meaning- Agreements, the meaning of which is
not certain or capable of being made certain, are void.For example, A agrees to sell to B
100 tonnes of oil, but the kind of oil intended is not shown, then the agreement is said to
be void due to absence of certainty. 8) Possibility of Performance- Condition for a contract
should be capable of performance. If the act is impossible in itself, physically or legally, it
cannot be enforced at law. 9) Not declared to be void or illegal. Agreements mentioned in
Section 24-30 of the Act have been expressly declared to be void. Such agreements cannot
be contracts. Such agreements are Agreements in restraint of marriage (Sec.
26)Agreements in restraint of trade (Sec. 27)Agreements in restraint of legal proceedings
(Sec. 28)Agreements the meaning of which is uncertain (Sec. 29)Agreements by way of
wager (Sec. 30)Agreements contingent on impossible events (Sec. 36)Agreements to do
impossible acts (Sec. 56)10) Legal FormalitiesAccording to Indian Contract Act, 1972, a
contract may be oral or in writing. An oral contract is valid, except in those cases where
writing, registration etc. is required by some statute. In India, writing is required in case of
sale, mortgage, lease and gift of immovable property, negotiable instruments,
Memorandum and Articles of Association of a company etc.
Consideration

What is consideration?

The meaning of consideration can be derived from the Latin term “quid pro quo,” which means
“something for something.” It states that each party entering into a contract should offer something
to the other party. The definition of consideration under Indian law (Indian Contract Act, 1872)
has a more flexible approach than that of English law.

According to Section 2(d) of the Indian Contract Act, 1872, “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 the promise.”

In the following definition, a promissor is the party that performs a promise and a promisee is the
party to which a promise is made. Many other legal scholars have also defined the term
“consideration.” Blackstone says, “Consideration is the recompense given by the party contracting
to the other.” Pollock says, “Consideration is the price for which the promise of the other is
brought, and the promise thus given for value is enforceable.”

Essential elements of consideration

Consideration is one of the essential elements of a contract, and at the same time, consideration
itself has some essentials for it to be considered valid. Some important essential elements are as
follows.

• The consideration must move at the desire of the promisor .The definition of
consideration under the Indian Contract Act, 1872, starts with “when, at the desire of the
promisor…”, which clearly specifies that any act or abstinence or promise by the promisee
should act at the desire of the promisor. It means that any act or abstinence done voluntarily
or without the desire of the promissor is not a valid consideration in the eyes of the law. To
 understand it more clearly, let’s take an example, if you help a person lift his luggage and
then demand payment for the service provided, that person is not liable or bound to pay
you. The service or help provided by you was a voluntary act that was not asked for by the
person. Thus, the desire of the promissor is a must when it comes to consideration. The
consideration may move from the promise.

• The consideration may move from the promisee to any other person or a third party
As long as there is no objection by the promissor, the consideration may move to any other
person or proceed from any other person than the promisee. In simple words, it states that
it is not a mandate that only the promisee should grant the consideration; it can also be
provided by any other person. The following example will make it easier for you to
understand, imagine your friend Mr. A has taken a loan of a certain amount from you. After
a few days, Mr. A comes you and says that the remaining debt amount will be paid by his
elder brother, Mr. B. Here, the consideration has moved from Mr. A (the promisee) to his
brother, Mr. B. This transfer of obligation to pay from one person to another does not have
any effect on the validity of the consideration involved in the promise, which also means
the doctrine of privity of consideration is, thus, not applicable in India.

• The consideration must not be unlawful .It’s very obvious that any act, abstinence or
promise made that is considered illegal in the eyes of the law is not a valid consideration.
Also, if there is an involvement of any injury to a person or property of another person or
is immoral in nature, it makes the consideration invalid under the Indian Contract Act,
1872. Such considerations make the contract void. For example, if you promise a person
to pay Rs. 10,000 for selling drugs at his workplace, such consideration will not be valid.

• The consideration must not be physically impossible. A consideration that is not

physically possible to be performed or carried out is considered invalid. A decision should
always be something that is capable of being performed or carried out. For example, X
makes a promise to Z to pay Rs. 1,00,000 if Z runs 100 km in 1 minute. Here, it is
Impossible to perform the said task. Thus, such considerations that are physically
impossible to perform are deemed invalid.

• The consideration may not be adequate .While entering into a contract, consideration is
something that is to be mutually decided by the parties to that contract. When the question
 of adequacy of consideration arises while enforcing the contract, the court is not concerned
with the adequacy of consideration in it. In simple words, the court has nothing to do with
the question of whether the consideration in the contract is adequate or not. But at the same
time, the court may take into account the inadequacy of consideration to verify whether
there was free consent given by the parties or not. If the contract is signed with the free
consent of the parties, the consideration stands to be valid regardless of its inadequacy. To
get a clear understanding of this part, we can refer to Explanation 2 of Section 25 of the
Indian Contract Act, 1872, which clarifies that “an agreement to which the consent of the
promisor is freely given is not void merely because the consideration is inadequate; but the
inadequacy of the consideration may be taken into account by the Court in determining the
question whether the consent of the promisor was freely given.”

Types of consideration

Now that we have gone through the concept of consideration and its various essential ingredients,
it will be easier to understand and differentiate between several types of consideration. It can be
mainly classified into three types:

1. Executory consideration

2. Executed consideration

3. Past consideration

Executory consideration

Whenever there is a contract between two parties, there are some promises and obligations that
need to be fulfilled. When these promises or obligations are not yet fulfilled by the parties involved
in the contract, it is known as executory consideration. It generally refers to those promises or
obligations that will be executed in the future. Just like a general contract, here also there is an
exchange of promises or obligations between the promissor and the promisee, but the execution of
the same tends to be on a future date. For example, if you hire a freelancer to provide legal services
for your company and you both enter into a contract wherein you promise to pay Rs. 50,000 for
the services in the next month, then in this scenario, till the promises made in the contract are not
fulfilled, the status of the consideration in the contract stands to be executory.
Past consideration

Till now, we have observed that a voluntary act or abstinence done by the promisee does not
amount to a valid consideration in the eyes of the law. But here comes an exception to the rule if
certain circumstances are associated with the parties. This part can be a little tricky to understand,
so rather than jumping into the legal interpretation of this concept, let’s take a real-life scenario to
understand it easily. Imagine you are an unpaid intern in a law firm and after the completion of
your internship, your senior pays you Rs. 8,000 for your hard work and performance shown during
the internship. The reason for paying you turned out to be the acts you have done in the past. This
consideration is known as the past consideration.

Agreement without consideration is void:

Exceptions No doubt consideration is an integral part of every legal contract; however, this rule
is accompanied by certain exceptions. These exceptions are laid down under Section 25 of the
Indian Contract Act, 1872. It states that “agreement without consideration is void, unless it is in
writing and registered, or is a promise to compensate for something done, or is a promise to pay a
debt barred by limitation law

. An agreement in the absence of consideration is void unless: Section 25(1)- This Section
exempts the rule of consideration in cases of agreements made on account of natural love and
affection between the parties.

Section 25(2)- This Section spells out the concept of past consideration as an exception to the rule
of consideration. Generally, past consideration is not considered as valid but there are certain
exceptions that we have previously gone through under the types.

Section 25(3)- When a promise is made to pay a debt that is barred by law of limitation, such
promise is valid even in absence of any new consideration.

Section 185- This Section simply says that there is no need for consideration to create an agency.