Presence of consideration is one of the requisites of Valid Contract. Consideration must be of two directional nature. That means both parties should get benefited mutually. Then only the Contract becomes capable of creating legal relations. Consideration may be in the form of cash, goods, act or Abstinence.
Definition of Consideration
According to Section 2(d) : “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 promise to do or abstain from doing something, such act or abstinence or promise is called consideration for the promise”. - Sec.2 (d), Indian Contract Act.
Sec. 2 (d) – Refines consideration as when at the desire of the promise the promisee orany other person -
(i) Has done or abstained from doing something.
(ii) Does or abstains from doing something.
(iii) Promises to do or abstains from doing something.
Then such an act abstinence or promise is called a consideration
Essentials of Valid Consideration
1. Consideration should be passed at the request of offerer: Offeree should send only such consideration which is wanted by offerer. In case where offeree sends un-wanted consideration, he has no right to claim counter consideration.
• A case on this point is Durga Prasad Vs Baldeo. In this case there is a contract between A and B according to which A has to provide for all requirements to B to run a market and the profits are to be shared between them. Upon C`s request B makes the market 24 hours market for a consideration from C. There after C refuses to give remuneration to B on the ground that he (C) has no consideration from B. Afterwards B claims remuneration from A for rendering additional work to which A refuses. Here Court decides that the additional work done by B is not wanted by A and hence B cannot claim anything from A.
2. Consideration may move from promise or any other person:According to Indian law, consideration may move from promise or any other person. It is specified in Section 2(d) of Indian Contract Act definition itself. But according to England law – Consideration should move from promise only. Though it is said so England law has given an exception where consideration may move from a person other than promise. Here condition is there should be blood relationship between promisee and that other person who is sending the consideration.
• A case on this point is Dutton Vs Poole. In this case A has a son called B and a daughter called C. A wants to conduct his daughter`s marriage out of the sale proceeds of branches of mango plantation which is inherited property. But B does not like it. A Contact gets formed between A and B according to the terms of which B has to conduct C`s marriage out of his (B`s) own savings and A should not destruct the plantation. Afterwards B says to C that it is his (B`s) obligation to perform her marriage to which C has given her acceptance. Thereafter A becomes no more and B does not render her (C) marriage on the ground that he (B) has no consideration from C. Here Court decides that there is blood relation between C and A. B had already obtained consideration from A in the form of abstinence. There it is decided that B has to perform C`s marriage.
3. Consideration may be Past, Present or Future: Consideration are of three types namely Past, Present and Future consideration. The consideration which is sent before formation of contract is called past consideration. The consideration which gets passed at the time of formation of contract is called Present Consideration. The Consideration which is to be passed in future i.e. after the contract is called Future Consideration. As per Indian Law three types of considerations are Valid. But as per England law Past Consideration is not valid.
i. Past Example: - Mr. Nash lost his car and Mr. Frank a finder delivers it to him. Mr. Frank cannot demand payment of his services due to the past consideration.
ii. Present Example: - Mr. Ali sells a house to Miss Sana. She pays its price immediately. It is called present consideration.
iii. Future Example: - Mr. Shah promises to deliver a shop to Mr. Khan after a one month for Rs. 1 lac upon the promise of Mr. Khan to pay the agreed price at the time of delivery. It is called future consideration.
4. Consideration need not be adequate/ Consideration must be 'something of value: Consideration of the Contract need not have equal magnitudes. In adequacy of consideration will not infect Validity of the Contract.
• A case on this point is Thomas Vs Thomas. In this case there is a Contract between A and B according to the terms of which A has to provide his house to B at a rent of one rupee. Court decides that it is a Valid Contract because Consideration need not be adequate.
5. Consideration must be Lawful: Presence of unlawful Consideration makes the Contract illegal and hence Void.
• Example: there is a Contract between X and Z according to which Z has to murder Y for a Consideration of Rs. 10000 from X. Here Consideration from Z to X is unlawful and it is illegal contract.
6. Consideration Must be Real: Consideration should not be of illegal contract. It must be a believable concept.