Meaning of Consideration.
Consideration is one of the essential of a valid contract. It is vital and important element since it imports in measure the safeguard of deliberations. In the words of Blackstone, "a consideration is something in return." It is the price for which the promise of the other is bought. Thus consideration is the very foundation of a contract.
It is a reasonable equivalent or other valuable benefits passed on by the promiser to promisee or by the transferor to the transferee.
Definition of Consideration.
1. Section 2(d) of Indian Contract Act defines consideration 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 abstains from doing something, such act or abstance or promise is called consideration for the promise".
2. According to Justice Patterson, "consideration means something which is of some value in the eyes of law. It may be some benefits to the plaintiff or some detriment to the defendant".
3. In the words of Sir Fedrick Pollock, "consideration is the price for which a promise is bought."
Characteristics of Consideration
On analysing the aforesaid definitions, the following are its essential elements :
(1) Consideration is an act of doing something.
(2) It is an abstinence from doing something.
(3) Consideration may be past, present and future.
(4) It is a return promise.
Essentials of Valid Consideration
(1) Consideration must move at the desire of promisor : The act or abstinence forming consideration for the promise must be done at the desire (or request) of the promisor.
Thus, services rendered voluntarily or at the desire of the third party will not amount to valid consideration.
Illustration : 'A' sees B's house on fire and helps in extinguishing the fire. 'A' cannot demand payment for his services because 'B' never asked him to come foe help.
(2) Consideration may move from the promisee or any other person : It means that the consideration need not move from the promisee alone but may proceed from a third.
As such, so far as there is a consideration for a promise, it is immaterial who has furnished it. It may move from the promisee or from any other person. It means, even a stranger to the consideration can sue on a contract, provided he is a party to the contract. This is called doctrine of constructive consideration.
(3) Consideration may be past, present or future : The works, "has done or abstained from doing, does or abstains from doing, or promises to do or abstain from doing" as used in definition clearly indicate that consideration may be of a present, past and future act or abstinence.
Illustration : (a) 'A' teacher the son of 'B' on 'B's request in the month of January. In February, 'B' promises to pay Rs.200 for his service. The service of 'A' is the past consideration.
(b) A lawyer, gave up his practice and served as a Manager of a landlord at the latter's request in lieu of which the landlord subsequently promised a pension. It was held that there was a good past consideration.
(4) Consideration must be of some value : It means that the consideration must be something to which the law attaches some value. It need not be adequate to the promise for a validity of an agreement.
Exception to the rule, "No Consideration, No Contract."
The general rule is that "an agreement made without consideration is void." But there are a few exceptions to this rule, where an agreement without consideration will be perfectly valid and binding. These exceptions are as follows:
(1) An agreement made on account of natural love and affection: An agreement made without consideration is enforceable at law, if it is
(i) expressed in writing,
(ii) registered under the law,
(iii) made on account of natural love and affection,
(iv) between the parties standing in near relations.
Illustration: (i) 'A' for natural love and affection, promises to give his son 'b', Rs. 1,000/-. 'A' puts this promise to 'B' in black and white and registers it. It is a valid agreement.
(ii) 'A' registered agreement whereby an elder brother, on account of natural love and affection, promised to pay the debts of his younger brother. It was held to be a valid contract.
(2) An agreement to compensate past voluntary service : A promise made without consideration to compensate wholly or partially a person who has already voluntarily done something for the promiser or done something which the promisor was legally compelled to do so is a valid contract.
Illustration : A' rescued 'B' from drowning in the river, and 'B' appreciating the service rendered by 'A', promises to pay Rs. 1,000/. This is a valid contract between 'A' and 'B'.
(3) An agreement to pay a time-bared debt: An agreement made in writing and signed by the debtor or by his authorised agent to pay wholly or in part a debt barred by the law of limitation, it is a valid agreement although it is not supported by any consideration.
Illustration: 'A' owes 'B' Rs. 1,000/- but the debt is barred by the limitation act. 'A' gives a promise in writing to pay Rs. 500/- on account of the debt. It is a valid contract.
(4) Gift which is completed in all respect: A gift does not require any consideration in order to be legally enforceable. As between the doner and the donee, any gift actually made will be valid and binding though without consideration. In this case, there need not be natural love and affection or nearness of relationship between the doner and donee. The gift must be complete.
(5) Contract of agency: In a contract for agency, no consideration is necessary for the creation of agency.
(6) Contribution to charity: A promise to contribute for charity would be enforceable if on the faith of the promised subscription, the promisee takes steps in furtherance of the object and undertakes a liability. It is enforceable either to the amount of liability incurred or the promised amount whichever is less.
As such, it is evident that any agreement without consideration s not enforceable at law, except in the aforesaid six exceptions discussed above.
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