All about Consideration

Definition

• Consideration is what a promisor demands as the price for his promise. In simple words, it means singlequotesomething in return.singlequote 

• Consideration has been defined as 

"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 promises to abstain from doing some¬thing, such act or abstinence or promise is called a consideration for the promise." Sec.2 (d)



IMPORTANCE OF CONSIDERATION

• A promise without consideration is purely gratuitous and, however sacred and binding in honour it may be, cannot create a legal obligation. 

• A person who makes a prom¬ise to do or abstain from doing something usually does so as a return or equivalent of some loss, damage, or inconvenience that may have been occasioned to the other party in respect of the promise. The benefit so received and the loss, damage or inconvenience so caused is regarded in law as the consideration for the promise.



KINDS OF CONSIDERATION

• A consideration may be:

1. Executed or Present

2. Executory or Future

3. Past

(Note: Past consideration is not valid in England).



LEGAL RULES REGARDING CONSIDERATION



1. Consideration must move at the desire of Promisor: Example X polished Y’s shoes without obtaining any permission of Y. In this case, Y is not liable to pay anything to X, as the action of polishing was not done at the desire of X.



2. Consideration may move from the promise or any other person on his behalf: Example : A agreed to transfer his property to son B upon fulfilment of certain conditions like that he will pay Rs.20,000 annually to his mother.

 Important Case:

Chinnaya V. Ramaya (1818)

Facts of Case: A father, by a gift deed, made over certain property to his daughter, with the direction that the daughter should pay an annuity to the father’s brother. On the same day, the daughter entered into an agreement with her uncle and agreed to pay the annuity. Later, the daughter declined to fulfil her promise on the ground that no consideration was paid by father’s brother to her.

Decision of the Case: The Court held that the consideration was paid by the father on behalf of her uncle. So the uncle was entitled to recover the annuity.



3. Consideration may be Past, Present or Future: 

(a) Past Consideration: If a person has already done something for another, and then comes a promise from the other, the consideration is said to be past consideration. Example: A found B’s lost watch and returned to B. After a month, B announced to give Rs.1000 to A, as reward for the services rendered by him. In this case, B is paying Rs.1000 for past consideration.

(b) Present/ Executed Consideration: When consideration is given simultaneously with promise, it is called present consideration. Example A promise to give Rs.1000 to B for bringing a bag from the market, B brings and A gives him Rs.1,000 as per promise.

(c) Future Consideration: When the consideration is to move at some future date. Example: A promises to pay Mr.B after one month, if he sends him the goods now.



4. Consideration must be real and illusory: It should exist in the eyes of law.

A promised to give Rs.1,00,000 to a doctor (over and above his fees), who performs a successful heart operation of his father. The consideration is illusory, as it was the duty of the doctor to do his best. Therefore, in this case, A is not legally bound to pay money.



5. Consideration need not to be adequate: Example: A agrees to sell his Car for Rs.10,000. The Car could be sold for Rs.50,000. Later on, A cannot refuse to sell his car to C on the ground that the consideration is not adequate.



6. Consideration must not be illegal, impossible, Uncertain, Ambiguous, Fraudulent, Immoral or Opposed to Public Policy.