Section 2(d) of the Indian Contract Act defines the consideration for the promise. It says that 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 simple terms, consideration means doing something in return for the promise. As a general rule, in India, an agreement without consideration is void.
As per the above-mentioned definition, the essentials of the consideration are:
- Consideration to be given ‘at the desire of the promisor’.
- It must have been given at the desire of the promisor, rather than merely voluntarily or at the instance of some third party.
- Consideration to be given ‘by the promisee or any other person.
Also Read: Free Consent under Contract Law
As per Indian Law, the promisee or any other person may give the consideration. But on the other hand, as per the English Law, consideration must move from the promise and nobody else.
- Consideration may be Past, Present or Future
- Past Consideration: It means the consideration that is given before the promise is made. Consideration must however be given at the desire of the promisor. This constitutes an exception to the rule that an agreement without consideration is void. According to English Law, a promise in lieu of a past act is not enforceable.
- Present Consideration: it is there when one of the parties to the contract has performed his part of the promise, which constituted the consideration for the promise by the other side. The performance of the promise by the other side is the only thing now to be done.
- Executory or Future Consideration: When the two parties make a promise in favor of each other, the performance by each side to be made subsequent to the making of the contract, the consideration id known as executory.
- Consideration consists of an act, abstinence, or promise by the promise.
A contract that is supported by consideration is valid irrespective of the fact that the consideration is inadequate. Although inadequacy of consideration by itself does not affect the validity of a contract, it may be a factor in deciding whether the consent of a party to the contract was free or not.
Performance of an existing duty is no consideration
To constitute good consideration, there should be a promise to do something more than what a person is already bound to do. Doing something which a person is already legally bound to do is no consideration. Doing something more than what one has to do under a statutory duty is a good consideration.
Performance to perform an already existing contractual duty
If the plaintiff is already bound to perform a particular contractual duty owed to the defendant, the defendant’s promise to pay something additional for the same promise is no consideration.
Performance of an existing duty owed to the third party
Performance of an existing duty owed to the third party may be a good consideration in respect of another contract subsequently entered into.
Subscription For a Charitable Purpose
Mere promise to contribute for a charitable purpose is not enforceable, as it is without consideration. If, however, on the faith of the promise, some liability is incurred by the promise, then the promise is enforceable. Consideration may be inadequate, but it must be real and not unsubstantial.
Also Read: Role of Minor in Contracts
Exceptions when an agreement without consideration is valid
Three exceptions when an agreement without consideration results in a valid contract:
- Promise due to natural love and affection
- Compensation for past voluntary services
- Promise to pay a time-barred debt