Section 2(d) of the Indian Contract Act defines consideration as follows: “When at the desire of the promiser, the promisee or any of the person has done or abstain from doing, or does or abstains from doing, or promises to do or abstains from doing something, such act or abstinence or promise is called or Consideration for the promise”.
An analysis of the above definition will show that it consists of the following four components:
The act or abstinence or promise which forms the consideration for the promise, must be done at the desire of the promisor.
It must be done by the promiser or any of the person.
It may have already been executed or is in the process of being done or may be executed in near future;
It must be something to which the law attaches a value.
Essentials of a Valid Consideration
Consideration must move at the desire of the promiser –
In order to constitute a legal consideration, the act or abstinence forming the consideration for the promise must be done at the desire or request of the promisor. Thus, acts done or services rendered voluntarily, or at the desire of the third party, will not amount to valid consideration so as to support a contract. The logic for this may be found in the worry and expense to which every one might be subjected, if he were obliged to pay for services, which he does not need or require.
Consideration may move from the promisee or any other person -
The second essential of a valid consideration, as contained in the definition of consideration in Section 2(d), is that consideration need not move from the promisee alone but may proceed from a third person. Thus, as long as there is a consideration for promise, it is immaterial who has furnished it. It may move from the promisee or from any other person. This means that even a stranger to the consideration can sue on a contract, provided he is a party to a contract. This is sometimes called the “Doctrine of Constructive Consideration”. This leading case of Chinayya v. Ramayya provides a good illustration on the point.
Consideration may be pass, present or future –
The words, “has done or abstained from doing; or does or abstraints from doing; or promises to do or abstains from doing”, used in the definition of consideration clearly indicates that the Consideration may consist of either something done or not done in the past, or done or not done in the present, or promised to be done or not to be done in the future.
Consideration must be ‘Something of the Value’ -
The fourth and the last essential of valid consideration is that it must be ‘something’ to which the law attaches a value. The conservation need not to be adequate to the promise for the validity of an agreement. The law only insists on the presence of consideration and not on its adequacy. It leaves the people free to make their own bargains. Thus, where, A agrees to sell his motor car worth Rs. 2000 rupees for Rs. 1000 only and his consent is free, the agreement is a valid contract, notwithstanding the inadequacy of the consideration. However, if the consideration be glossy or shockingly inadequate, and if one of the parties to a contract alleges that his consent was obtained by fraud, coercion or undue influence, the court will treat inadequacy of consideration as an evidence in support of such allegation and will declare the contract void.
Inadequacy of consideration being no bar to a valid contract, unless it is an evidence of unfree consent, it has been correctly observed that “in many cases, the doctrine of consideration is a mere technicality irreconcilable either with business expediency or common sense.”