CONSIDERATION

Presence of consideration is one of the essentials of a valid contract.

Subject to certain exceptions, the general rule in India is that an
agreement without consideration is void.
Consideration means something in return for the promise. It may be
either some benefit conferred on one party or some detriment suffered
by the other.
In the words of ush !. In Curie Vs. Misa (1875)
" valuable consideration in the sense of the law may consist either in
some right, interest, profit or benefit accruing to one party, or some
forbearance, detriment, loss or responsibility given, suffered or
underta#en by the other.$
Definition under setion !(d)
Section %&d', Indian Contract "ct, defines consideration as under (
)hen at the desire of the promisor, the promisee or any other person
has done or abstained from doing, or promises to do or abstain from
doing something, such act or abstinence or promise is called a
consideration for that promise$.
*he definition mentions the following re+uirements to be satisfied in
order that there is valid consideration (
,. Consideration must be given -at the desire of the promisor.
%. Consideration must be given - by the promisor or any other
person -.
.. Consideration may be past, present or future in so far as the
definition says that the promisee (
&i' has done or abstained from doing, or
&ii' does or abstains from doing, or
&iii' promises to do or abstain from doing, something.
/. *here should be some act, abstinence or promise by the
promisee, which constitutes consideration for the promise.
1. Consideration on"# at t$e desire of t$e %ro&isor
It is essential that the consideration must have been given at
the desire of the promisor, rather than voluntarily or at the
instance of some third party.
In Dur'a (rasad Vs. )a"deo (188*) the consideration for the
promise had not moved at the desire of the promisor but some
other person, and that was held not to be sufficient
consideration to support the promise. *he facts of the case are
T$e ("aintiff constructed certain shops in a mar#et at the
instance of the collector of that place. Subse+uently the
defendants occupied one of the shops in the mar#et. *he
money for the construction of the mar#et having been spent by
the plaintiff, the defendants, in consideration thereof, made a
promise to pay to the plaintiff commission on the articles sold
through their agency in that mar#et. *he defendants failed to
pay the promised commission. In an action by the plaintiff to
recover the commission it was observed that the consideration
for the promise to pay the commission for the construction of
the mar#et was not at the desire of the defendants, but on the
%
order of the collector. It was, therefore, held that since the
consideration did not move at the desire of the defendants
&promisors' in this case, this did not constitute valid
consideration and therefore the defendants were not liable in
respect of the promise made by them.
Su+sri%tion for a $arita+"e %ur%ose
" promise to contribute an amount for a charitable purpose may
not be enforceable because against this promise there may be
no consideration. If there is a promise to contribute on the part
of one of the parties but no act done in exchange thereof by
the other, there is no consideration in such a case. In A+du"
A,i, Vs. Masu& A"i (1-1.) *he defendant promised to pay a
sum of 0s. 12234 as donation for the repair and reconstruction
of a mos+ue. 5othing was done to carry the repairs and
reconstruction of the mos+ue. *he defendant refused to pay
the amount. It was held that since nothing was done on the
faith of the promise, there was no consideration in this case
and, therefore, the defendant was not liable to pay the
subscription promised by him.
!. Consideration +# (ro&isee or an# ot$er %erson
"ccording to Indian law consideration may be given by the
promisee or an# ot$er %erson. In India there is a possibility
that the consideration for the promise may move not from the
promisee but a third person, who is not a party to the contract.
In 6ngland the position is different. *he position in India may
be explained by referring to the case of C$inna#a Vs.
Ra&a#a (188!) In this case ", an old lady, granted an estate
to her daughter &defendant' with a direction that the daughter
should pay an annuity of 0s. 71.34 to "8s brother &plaintiff'. 9n
.
the same day the defendant made a promise to the plaintiff that
she would pay the annuity as directed by ". *he defendant
failed to pay the stipulated sum. In an action against her by the
plaintiff she contended that since the plaintiff himself had
furnished no consideration, he had no right of action. *he
:adras ;igh Court held that in this agreement between the
&defendant' and &the plaintiff', the consideration has been
furnished by the defendant8s mother and that is enough
consideration to enforce the promise between the plaintiff and
the defendant.
(RIVIT/ O0 CONTRACT
*he doctrine of privity of contract means that only those
persons who are parties to the contract can enforce the same.
" stranger to the contract cannot enforce a contract even
though the contract may have been entered into for his benefit.
If in a contract between " and < some benefit has been
conferred upon =, = cannot file a suit to enforce the contract
because " and < are the only parties to the contract whereas
= is only a stranger to the contract.
*he rule that a stranger to contract cannot sue has to be
distinguished from the rule discussed above that in India a
person who is stranger to consideration can sue. It has been
noted above that a person may not have himself given any
consideration but he can enforce the contract if he is a party to
the contract, because according to the Indian aw consideration
may be given either by the promisee or even a third party. *hat
does not affect the rule of privity of contract.
En'"is$ 1a2
/
>nder the 6nglish law old view was that a person, who is not a
party7 to the contract but is intended to be the beneficiary under
the contract and is nearly related to the promisee, has a right of
action. In Dutton Vs. (oo"e (1378) " intended to sell his
wood to ma#e a provision for the marriage expenses of his
daughter. *he defendant, "8s son re+uested " not to sell the
wood and in return made a promise toi his father that he would
pay ,,222 pounds to "8s daughter, the plaintiff. *he father
forebore to sell the wood but the defendant did not pay the
promised amount to the plaintiff. It was held that even though
there was no contract between the plaintiff and the defendant,
but the plaintiff, who was a beneficiary in the contract was
nearly related to the promisee, i.e. her father, she was entitled
to recover.
*he above mentioned view was rejected in T2edd"e Vs.
At4inson (1831) In that case the plaintiff married a girl. "fter
this marriage there was a contract in writing between the
plaintiff8s father and the girl8s father that each would pay a
certain sum of money to the plaintiff and the plaintiff would have
a right to sue for such sums. "fter the death of the two fathers,
the plaintiff brought an action against the executors of the girls
father to recover the promised amount. It was held that the
plaintiff could not sue for the same. )ightman ! observed (
Some of the old decisions appear to support the proposition
that a stranger to the consideration of a contract may maintain
an action upon it, if he stands in such a near relationship to the
party from whom consideration proceeds, that he may be
considered a party to the consideration ????. 9n the
contrary it is now established that no stranger to consideration
1
can ta#e advantage of a contract, although made for his
benefit.$
In the above stated case the plaintiff was both a stranger to the
contract as well as stranger to consideration and he could not
enforce the claim.
*he rule of privity of contract was reaffirmed by the ;ouse of
ords in Dun"o% (neu&ati T#re Co. 1td. Vs. Se"frid'e 5
Co. 1td. (1-!1) in the following words (
In the law in 6ngland certain principles are fundamental. 9ne
is that only a person who is a party to a contract can sue on It.
9ur law #nows nothing of a Jus quaesitum territo arising by
way of a contract. Such a right may be conferred on a stranger
to a contract as a right to enforce the contract in personam.$
In @unlop8s case the appellants, who were manufacturers of
motor4car tyres, sold some tyres to one @ew A Co. with an
agreement that these tyres will not be sold below the list price.
@ew A Co. in their turn sold some of those tyres to the
respondents, with an agreement between @ew A Co. and the
respondents that they shall observe conditions as to price and
the respondents also promised that they would pay to the
appellants a sum of 1 pounds for every tyre sold below the list
price. *he respondents sold some tyres below the list price, the
appellants brought a action against the respondents to recover
damages for the same.
*he ;ouse of ords $e"d t$at Dun"o% 5 Co. ou"d not +rin'
an ation a'ainst Se"frid'e and Co. because there was no
contract between the two parties. It was further observed that
7
even if it is ta#en that @ew A Co. were acting as agents for
@unlop A Co., the latter still cannot maintain an action as there
was no consideration between @unlop A Co and Selfridge A
Co. since the whole of the purchase price was paid by Selfridge
A Co. to @ew A Co.
Indian 1a2
STRAN6ER TO A CONTRACT CAN NOT S7E
*he rule that privity of contract$ is needed and a stranger to
contract cannot bring an action is e+ually applicable in India as
in 6ngland.. 6ven though under the Indian Contract "ct the
definition of consideration is wider than in 6nglish aw, yet the
common law principle is generally applicable in India, with the
effect, that only a party to th.e contract is entitled to enforce the
same. *he authority for the application of the rule in India is the
decision of the Privy Council in 8a&na Das Vs. Ra& Autar.
In that case " had mortgaged some property to =. " sold this
property to < , < having agreed with " to pay off the
mortgage debt. = brought an action against < to recover the
mortgage money. It was held by the Privy Council that since
there was no contract between = and <, = could not enforce
the contract to recover the amount from <.
E9e%tion to $e ru"e t$at a stran'er to ontrat annot sue
(1) Trust of ontratua" ri'$ts
9ne of the exceptions to the doctrine of privity of contract was
recognised by ord ;aldine in Dun"o% (neu&ati T#re Co.
Vs. Se"friid'e 5 Co. )hile it was mentioned that only a party
to a contract can sue on it and no such right is conferred on a
third party, it was also stated that su$ a ri'$t &a# +e
B
onferred +# 2a# of %ro%ert#: as: for e9a&%"e: under a
trust.$ *he basis of an action by the third party is actually not
enforcing the contract but the right conferred by a particular
contract in favour of a third party in the form of trust etc. Cor
example, in a contract between " and < , beneficial right in
respect of some property may be created in favour of C. In
such a case C can enforce his claim on the basis of the right
conferred upon him.
*he Privy Council in the case of ;$2a<a Mu$a&&ad ;$an
Vs. =usaini )e'u& (1-1*) has recognised this exception. In
this case there was an agreement between the fathers of a boy
and a girl that if the girl &plaintiff in this case' married a
particular boy, the boy8s father &defendant in this case' would
pay certain personal allowance #nown as Kharch-i-pandan
&betel4box expense' or pin money to the plaintiff. It was also
mentioned that a certain property had been set aside by the
defendant and this allowance would be paid out of the income
of that property. *he plaintiff married the defendant8s son but
the defendant failed to pay the allowance agreed to by him. *he
plaintiff therefore brought an action against the defendant. It
was held that in this case the basis of the plaintiff8s claim being
a specific charge on the immovable property in her favour she
is entitled to claim the same as a beneficiary, and as such, the
common law rule is not applicable to the facts and
circumstances of the present case.
(!) Condut: A4no2"ed'e&ent: or Ad&ission
Sometimes there may be no privity of contract between the two
parties, but if one of them by his conduct, ac#nowledgement, or
D
admission recognises the right of the other to sue him, he may
be liable on the basis of the law of estoppel against him. In the
case of Narayani Devi Vs. Tagore Commercial Corporation
Ltd. !"#$% where there was no contract between the plaintiff
and the defendants but the defendants in their agreement with
the plaintiff8s husband had agreed to pay certain amounts to the
plaintiff8s husband during his life time and thereafter to the
plaintiff, the +uestion of the right of the plaintiff to sue to
defendants had arisen. It was established that the defendants
had made certain payments to the plaintiff, in pursuance of the
agreement, after her husband8s death, and had thereafter
as#ed for the extension of time to pay. "part from that it was
found that the defendants, by their admission, had earlier called
upon the plaintiff to executive certain documents in this
connection, which implies that they considered the plaintiff to be
entitled to certain rights. It was, therefore held that the
defendants have created such privity with the plaintiff by their
conduct and by ac#nowledgement and by admission, that the
plaintiff is entitled to her action even though there was no privity
of contract between the plaintiff and the two defendants, when
the said contract was entered into.
(>) (ro?ision for &arria'e e9%enses or &aintenane
under a fa&i"# arran'e&ent
)here, under a family arrangement, the contract is intended to
secure a benefit to a third party he may sue in his own right as
a beneficiary. Such an action has been allowed in many cases
where, on the partition of joint family property between the male
members, a provision is made for the maintenance of the
female members of the family. *he basis of the recognition of
E
such an action is the application of the rule laid down in
;$2a<a Mu$a&&ad ;$an Vs. =usaini )e'a& to such
situations.
In Veera&&a Vs. A%%a##a ( 1-57) under a family
arrangement the father conveyed his house to his daughter and
the daughter undertoo# to maintain him in his life time. *he
daughter being a beneficiary under the compromise agreement,
it was held that she was entitled to sue for the specific
performance in her favour.
(>) Consideration &a# +e %ast: E9euted or E9eutor#
Indian Contract "ct recognises three #inds of consideration,
vix., Past, 6xecuted and 6xecutory.
)hen, in return for the promise, the promisee or other person (
&,' ;as done or abstained from doing, the consideration is
past.
&%' @oes or abstain from doing, the consideration is
6xecuted, or present.
&.' Promises to do or abstains from doing, the consideration
is 6xecutory or future.
)hether the consideration is past, 6xecuted or 6xecutory, it is
essential that it must have been given at the desire of the
promisor$
(1) (ast Consideration
"s noted above, Indain Contract "ct recognises past
consideration. It means that the consideration for any promise
was given earlier and the promise is made thereafter. It is, of
course, necessary that at the time the consideration was given
,2
that must have been done at the desire of the promisor. Cor
example, I re+uest you to find out my lost dog. )hen you have
done the same, I promise to pay you 0s. ,2234 for that, it is a
case of past consideration. Cor my promise to pay you
0s.,2234 the consideration is your efforts in finding my lost dog
and the same, had been done before I promised to pay the
amount. In this case the consideration had been given at my
re+uest, because it is only when I re+uested you that you found
out the dog. *his constitutes valid &past' consideration under
Section %&d', and therefore the promise is enforceable.
(ast ser?ies ?o"untari"# rendered
Indian Contract "ct recognises only such consideration which
has been given at the desire of the promisor, rather than
voluntarily. If consideration has been given voluntarily, it is no
consideration. Cor example, if my dog has been lost and
without any re+uest from me to find the same, you find that of
your own and deliver the dog to me. *his a is case of past
services rendered voluntarily. In case I promise to pay 0s. ,22
to you after you have rendered these services, the +uestion
which arises in such a case is , can such an agreement be
enforced F
It has been noted above that rendering of such voluntary
services does not constitute valid consideration to support the
promise. " valid contract is created in such a case also
because the situation is covered by sec. %1 &%' of the Indian
Contract "ct, which contains an exception to the rule that an
agreement without consideration is void. *he provision is as
under (
,,
Sec %1 "n agreement made without consideration is void unlessG
&%' It is a promise to compensate, wholly or in part, a person who has
already voluntarily done something for the promisor, or something
which the promisor was legally compellable to do$
*he point may be further explained by the following illustrations.
&i' " finds <8s purse and gives it to him. < promises to give "
0s.12. *his is a contract.
&ii' " supports <8s infant son. < promises to pay "8s expenses in
so doing. *his is a contract.
En'"is$ 1a2 re'ardin' %ast onsideration
"ccording to 6nglish law past consideration is no consideration. "
promise in lieu for a past act is deemed to be only expression of
gratitude for the benefit already received, rather than any
consideration motivating the other side to ma#e the promise. "
promise after the consideration has already been given and
independent of it, is not enforceable for want of any consideration in
exchange for the promise. *he case of Re M@Ard"e (1-51) explains
the point. In that case, in accordance with the will of a father, his five
children were entitled to an e+ual share in a house after their mother8s
death. @uring the mother8s lifetime one of the testator8s son and his
wife lived in that house. "t that time the wife made some
improvements to the house, incurring an expense of /DD pounds.
Subse+uently all the five children, who were to inherit the house,
signed a document in her favour, stating that in consideration of your
carrying out certain alterations and improvements to the property, we
hereby agree that the executors shall repay to you from the said
estate, the sum of /DD pounds in settlement of the amount spent on
,%
such improvements.$ 9n the mother8s death the promisee claimed
/DD pounds from the executors on the strength of the above promise,
but except her husband all the other promisors refused to pay. It was
held by the Court of "ppeal that since the expenditure had been
incurred before the document was signed, the consideration was past
and therefore the promise could not be enforced.
(ast onsideration at t$e %ro&isorAs reBuest
Past consideration though given prior to the promise but at the re+uest
of the promisor is deemed to be a good consideration for the promise.
It is deemed that when the previous re+uest was made the promisor
had in mind his promise which he expresses afterwards. *he previous
re+uest and the subse+uent promise are not considered to be
independent of one another but part of the same transaction. *he
authority for this point is the case of 1a&%"ei'$ Vs. )rat2ait (1315)
*homas <ratwait, the defendant, who was guilty of having committed
a murder, re+uested ampleigh, the plaintiff to ma#e all efforts to
obtain pardon for him from the Hing. *he plaintiff made his efforts to
secure the pardon, going from one place to another, at his own
expense. In consideration for these efforts the defendant promised to
pay ,22 pounds to the plaintiff. *he +uestion was, whether the plaintiff
;ad a legal right to recover this amount. It was held that the plaintiff
had a right to enforce the promise and recover the said amount
because for this promise, consideration in the form of efforts by the
plaintiff to obtain the pardon, had been there at the earlier re+uest of
the defendant.
(!) E9euted or (resent Consideration
Executed consideration is there when one of the parties to the contract
has performed his part of the promise, which constitutes the
,.
consideration for the promise by the other side. Performance of the
promise by the other side is the only thing now to be done. Cor
example, a advertises an offer of reward of 0s. ,2234 to any one who
finds out his lost dog and brings the same to him. < finds out the lost
dog and brings the same to him. )hen < did his part of the job that
amounted to both the acceptance of the offer, which results in a
binding contract under which " is bound to pay 0s. ,2234 to <, and
also simultaneously giving consideration for the contract. *he contract
is case is said to be Ce9eutedD
E9euted consideration may be distinguished from past consideration.
In case of executed consideration, the consideration is provided
simultaneously along with the ma#ing of the contract. In such a case at
the time of providing of the consideration the promise is non4existent.
(>) E9eutor# or future onsideration
)hen one person ma#es a promise in exchange for the promise by
the other side, the performance of the obligation by each side to be
made subse+uent to the ma#ing of the contract, the consideration is
#nown as e9eutor#. Cor example, " agrees to supply certain goods
to <, and < agrees to pay for them at a future date, this is a case of
executory consideration.
(.) T$ere s$ou"d +e so&e At: A+stinene or %ro&ise
"ccording to the definition of consideration contained in Section % &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
promises to do or to abstain from doing something, su$ at or
a+stinene or %ro&ise is a""ed onsideration for t$e %ro&ise.
,/
Consideration need not +e adeBuate
" contract which is supported by consideration is valid irrespective of
the fact that the consideration is inade+uate. "ccording to 6xplanation
% section %1 (
"n agreement to which the consent of the promisor is freely given is
not void merely because the consideration is inade+uate I but the
inade+uacy of the consideration may be ta#en into account by Court in
determining the +uestion whether the consent of the promisor was
freely given.$
*he parties are free to ma#e any contract of their choice. If, with their
free consent, they stri#e a bargain where the consideration is too high
or too little, the courts will not go into the +uestion of ade+uacy or
inade+uacy of consideration. *he ade+uacy of the consideration is for
the parties to consider at the time of ma#ing the agreement, not for the
court when it is sought to be enforced. Cor example, " agrees to sell
a horse worth 0s. ,,222 for 0s. ,2. "8s consent to the agreement
was freely given. *he agreement is a contract notwithstanding the
inade+uacy of the consideration.
"lthough inade+uacy of consideration by itself is not a ground for
treating the contract as valid but it may be a factor which the court may
ta#e into consideration to #now whether the consent of a party was
free or not. Cor example, " agrees to sell a horse worth 0s. ,,222 for
0s. ,2. " denies that his consent to the agreement was freely given.
*he ade+uacy of the consideration is a fact which the Court should
ta#e into account in considering whether or not "8s consent was freely
given.
,1
Consideration &ust +e rea"
"lthough it is not necessary that consideration should be ade+uate, it
is, however, necessary that it should be real and should not be
unsubstantial. Promise not to bore the promisor is not enough to
constitute consideration. In 2$ite Vs. )"uett (185>) a son used to
complain to his father that his brothers had been given more property
than him. *he father promised that he would release the son from a
debt if the latter promised stopped complaining. "fter the father8s
death an action was brought by the executors to recover the debt. It
was held that the promise by the son not to bore his father with
complaints in future did not constitute good consideration for the
father8s promise to release him, and, therefore, the son continued to
be liable for the debt.
(erfor&ane of an e9istin' dut# is no onsideration
In order to constitute proper consideration there should be a promise
to do something more than what a person is already bound to do.
@oing of something what a person is already legally bound to do is no
consideration.
In Co""ins Vs. 6odefr# (18>1) the plaintiff received a subpoena to
give evidence in a case. *hereafter the defendant promised to pay to
the plaintiff some money for the trouble which was to be ta#en by him
in appearing in that case. It was held that the plaintiff having received
the subpoena was already under a public duty to give evidence, and
therefore, the promise by the defendant to pay did not constitute
consideration for the promise.
(ro&ise to %erfor& an a"read# e9istin' ontratua" dut#
If the plaintiff is already bound to perform a particular contractual duty
owed to the defendant, defendant8s promise to pay something
additional for the same promise is no consideration. In Sti"4 Vs.
,7
M#ri4(18*-) *wo sailors having deserted in the course of a voyage,
the captain of the ship promised to distribute the wages of those two
sailors amongst the other members of the crew if they would wor# the
ship home. It was held that the members of the crew being already
duty bound to wor# the ship home, there was no consideration to pay
the additional amount and hence the promise to pay that amount could
not be enforced.
(erfor&ane of an e9istin' dut# o2ed to a t$ird %art#
)hether performance of an existing duty towards a third party
constitutes consideration for a promise or not came for consideration
in the case of S$ad2e"" Vs. S$ad2e"" (183*) *he plaintiff had
already promised to marry one :iss 5icholl. *he plaintiff8s uncle wrote
a letter to the plaintiff as under (
I am glad to hear of your intended marriage with 6llen 5icholl I and,
as I promised to assist you at starting, I am happy to tell you that I will
pay to you ,12 pounds yearly during my life or until your annual
income derived from your profession of a Chancery barrister shall
amount to six thousand guineas, of which your own admission shall be
the only evidence that I shall receive or re+uire$
*hereafter the plaintiff married :iss 5icholl. ;e could not earn 722
guineas from his profession but no annuity was paid by his uncle to
him. "fter his uncle8s death he brought an action against his
executors to recover the amount promised to be paid by his uncle to
him. It was decided by a majority that the promise was enforceable as
it was supported by consideration. Consideration in this case being a
benefit to the uncle as marriage of a near relative could be of interest
to him, and also detriment to the plaintiff as he might have incurred
pecuniary liabilities on the faith of the promise.
,B
(ro&ise to %a# "ess a&ount t$an due
*he +uestion which sometimes arises is that ( If I am bound to pay
you 0s. ,,222 and if pay or promise to pay you 0s. 122 instead and
you agree to the same, can this promise to treat the payment of lesser
amount in lieu of the whole amount bind the parties F
En'"is$ 1a2 @@@ T$e Ru"e in (inne"As Case
"ccording to 6nglish law such an agreement is not binding because
there is no consideration for the same. *his rule was laid down in
(inne"As ase.
*he facts of this case are as follows ( " sum of D pounds and ,2
shillings was due to be paid on 5ovember ,,, ,722 on the basis of a
bond executed by Cole in favour of Pinnel. 9n 9ctober ,, ,722 Cole
paid 1 pounds , % shillings , and 7 pennies to Pinel, and Pinnel
accepted this smaller amount in full payment of the original debt.
Subse+uently Pinnel brought an action against Cole to enforce the
payment of the full amount on the basis of the bond. It was held that
he was entitled to succeed, on the ground that mere partial
performance of the original contract would not discharge the original
contract. It was, however, stated that the original debt could be
discharged only by introduction of a new element in the contract at the
creditor8s re+uest e.g. tender of a chattel in lieu of cash, or payment at
a fresh place or at an earlier date. *he rule laid down is as under (
Payment of a lesser sum on a day in satisfaction of a greater sum
cannot be any satisfaction for the whole, because it appears to the
judges that by no possibility can a lesser sum be a satisfaction to the
plaintiff for a greater sum. <ut the gift of a horse, haw# or robe, etc. in
satisfaction is good. Cor it shall be intended that a horse, haw# or
,D
robe, etc. might be more beneficial to the plaintiff than the money in
respect of some circumstances, or otherwise the plaintiff would not
have accepted it in satisfaction?. *he payment and acceptance of
parcel before the day in satgisfaction of the whole would be a good
satisfaction in regard of circumstances of timeI for pre4adventure
parcel of it before the day would be more beneficial to him than the
whole at the day, and the value of the satisfaction is not material$
Jarious exceptions to the rule in Pinnel8s case have been recognised
in 6ngland, which are as follows (
,. (a#&ent in 4ind E@ It was held in Pinnel8s case itself that the gift
of a horse, haw# or robe, etc. in satisfaction &of a claim for money' is
good. Cor it shall be intended that a horse, haw#, or robe, etc. might
be more beneficial to the plaintiff than the money in respect of some
circumstance, or otherwise the plaintiff would not have accepted it iEn
satisfaction.$
F$en t$e %ro&ise is &ade to de"i?er so&e $atte" in "ieu of a
su& due: t$e %ro&ise is ?a"id e?en if t$e $atte" is 2ort$ a
s&a""er su& t$an t$e a&ount due.
!. (a#&ent +efore t$e due date E@
"nother exception, which has been recognised in Pinnel8s case is the
payment and acceptance of the smaller sum of money than originally
due in satisfaction of the whole, before the payment is due.
>. (art %a#&ent +# a t$ird %art# E@
Payment of a part of the sum due by a third party has been recognised
to be enough to discharge the whole of the debt. If one party has
accepted part payment from a third party he cannot subse+uently sue
for the balance of the amount.
,E
*he reason for such a discharge has been explaiEned by )illes !. in
Coo4 Vs. 1ister (183>'
If a stranger pays a part of the debt in discharge of the whole, the
debt is gone, because it would be a fraud on the stranger to proceed.
So, in the case of a composition made with a body of creditors, the
assent to receive the composition discharges the debt, because
otherwise fraud would be committed against the rest of the creditors.$
.. Co&%osition 2it$ t$e reditors E@
" compromise between the debtors and his creditors, according to
which the creditors agree to be satisfied with a certain percentage of
the amount due in satisfaction of the whole debt, has been recognised
to be valid contract. *he reason behind this exception appears to be
that no creditor will be allowed to go behind the composition
agreement, to the prejudice either of the other creditors or of the
debtor himself, because this would be a fraud upon all the parties
concerned.$
*hus, an agreement between a debtor and a single creditor for
payment of lesser amount than due will come under the ban in
Pinnel8s case but an agreement between a debtor and his creditors will
come under this exception.
5. Dotrine of (ro&issor# Esto%%e" E@
T$is is an eBuita+"e esto%%e" preventing a person from denying what
he asserted earlier. *he doctrine was invo#ed by @enning !. in
Centra" 1ondon (ro%ert# Trust Vs. =i'$ Trees =ouse: 1td. (1-.7)
*he facts of the case are(
*he plaintiffs leased a bloc# of flats to the defendants in ,E.B for EE
years on a ground rent of %,122 pounds. In !anuary ,E/2 because of
%2
wartime conditions the plaintiffs could not let many of the flats, and
because of these conditions they agreed in writing to reduce the rent
of the defendant8s flats to ,,%12 pounds. In ,E/1 the situation became
normal and all the flats were let again but the defendants continued to
pay the reduced rent. *he plaintiffs brought an action against the
defendants to recover full original rent for the last two +uarters of
,E/1 as well as in future. It was held that the intention of the parties
was that the reduction of the rent was a temporary measure until the
flats could be fully let, the plaintiffs were therefore entitled to full rent
as claimed. It was also stated by @enning !. that had an action been
brought to claim full rent between ,E/2 to first two +uarters of ,E/1.
the action would have failed because of the estoppel against the
plaintiffs due to their agreement to accept lesser amount.
Indian 1a2
In India promisee may accept in satisfaction of the whole debt an
amount smaller than that. 5o consideration is needed for such a
promise. *he law on this point is stated in Section 7., which is as
under (4
6very promisee may dispense with or remit, wholly or in part, the
performance of the promise made to him, or may extend the time for
such performance, or &a# ae%t instead of it an# satisfation
2$i$ $e t$in4s fit.D
*he position is further explained by the following illustration (
&,' " owes < 1,222. " pays to < , and < accepts, in satisfaction
of the whole debt, %,222 rupees paid at the time and place at which
1,222 rupees were payable. *he whole debt is discharged.
&%' " owes < 1,222 rupees. C pays to < ,,222 rupees, and <
accepts them in satisfaction of claim on ". *his payment is a
discharge of the whole claim.
%,
&.' " owes < , under a contract, a sum of money, the amount of
which has not been ascertained . " without ascertaining the amount
gives to <, and <, in satisfaction thereof, accepts the sum of %,222
rupees. *his is a discharge of the whole debt, whatever may be its
amount.
&/' " owes < %,222 rupees, and is also indebted to other creditors.
" ma#es an arrangement with his other creditors, including <, to pay
them compensation of eight annas in a rupee &I.e. 12K' upon their
respective demands. Payment to < of ,222 rupees is a discharge of
<8s demand..
It may be noted here that the part payment discharges the debtor of
the whole claim, whether the payment is made by the debtor himself
as in illustration &,' above, or by a third party, as in illustration &%'
above.
E9e%tions 2$en a'ree&ent 2it$out onsideration is ?a"id.
Section %1, as a general rule declares, that an agreement without
consideration is void. *he section, however, mentions three
exceptions , when there is no need of any consideration for the validity
of the contract. *he provision is as under (
%1. "n agreement made without consideration is void unless L
&,' It is expressed in writing and registered under the law for the time
being in force for registration of documents and is made on account of
natural love and affection between parties standing in a near relation
to each other ( or unless
&%' It is a promise to compensate , wholly or in part, a person who
has voluntarily done something for the promisor, or something which
the promisor was legally compellable to do I or unless
&.' It is a promise, made in writing and signed by the person to be
charged therewith, or by his agent generally or specifically authorised
%%
in that behalf, to pay wholly or in part a debt of which the creditor might
have enforced payment but for the law for the limitations of suits.
In any of these cases, such an agreement is a contract.
(1) (ro&ise due to natura" "o?e and affetion E@
)hen the promise is made in favour of a near relation on account of
natural love and affection, the same is valid even though there was no
consideration for such a promise. *he following re+uirements have
got to be satisfied in order that the case is covered under this
exception.
,. *he parties to the agreement must be standing in a near
relationship to each other.
%. *he promise should be made by one party out of natural love
and affection for the other.
.. *he promise should be in writing, and
/. *he agreement is registered.
*he parties should be nearly related to one another in such an
agreement. )hat is near relationship has neither been defined in the
"ct, nor in any judicial pronouncement. <ut from the various decided
cases it appears that it will cover blood relations or those related
through marriage, but would not include those relations which are not
near$, but only remotely entitled to inherit.
5atural love and affection$ between the parties so nearly related is
also needed. If one brother, although not legally bound to do so,
transfers half of his property in favour of another brother, so that they
have cordial relations, that is deemed to have been done out of natural
love and affection, and such an agreement is binding. ()$i?a Vs.
S$i?ara&) 18--
In Ra<"u4# Da+ee Vs. )$ootnat$ Moo4er<ee (1-**) it has been
held that relations between the two parties does not necessarily imply
%.
natural love and affection between them. In this case after lot of
disagreements and +uarrels between a ;indu husband and his wife
they decided to live apart. "t this stage the husband executed a
registered document in favour of the wife whereby he agreed to pay
for her separate residence and maintenance. In that agreement
mention was also made about +uarrels and disagreements between
the two. It was held that from the recitals in the document it was
apparent that the document had been executed not because of natural
love and affection between the parties but because of the absence of
it, and therefore the wife was not entitled to recover the sums
mentioned in the document.
It is further necessary that the agreement should be in writing and
registered under the law relating to registration of documents.
&!) Co&%ensation for %ast ?o"untar# ser?ies E@
)hen something has been done at the desire of the promisor$, that
constitutes a good consideration in respect of a subse+uent promise to
compensate for what has already been done. *he second exception to
Section %1 covers cases where a person without the #nowledge of
the promisor, or otherwise than at his re+uest does the latter some
service, and the promisor underta#es to recompense him for it. *he
promise to compensate, though without consideration, is binding
because of this exception. *he exception also covers a situation
where the promise is for doing something voluntarily which the
promisor was legally compellable to do.$
*hus, when " finds <8s purse and gives it to him and then <
promises to pay " 0s. 12, or, " supports <8s infant son and <
promises to pay "8s expenses in so doing, there is valid contract in
each case although the promisor8s act was a voluntary one.
*he exception covers situations where the service iEs rendered
voluntarily and without promisor8s #nowledge. It is also necessary that
%/
the service must have rendered to the promisor and nobody else. It is
further necessary that at the time of doing of the act the promisor must
have been competent to contract..
(>) (ro&ise to %a# a ti&e +arred de+t
"nother situation when an agreement is a valid contract even
without any consideration is a promise to pay a time4barred debt.
Section %1 &.' re+uires the following essentials to be satisfied in such
a case.
,. *he promise must be to pay wholly or in part a time4barred debt,
i.e. a debt of which the creditor might have enforced payment but for
the law for the limitation of suits.
%. *he promise must be in writing and signed by the person to be
charged therewith, or his duly authorised agent.
It is necessary that the debt must be one of which the creditor might
have enforced payment but for the law for limitation of suits. It,
therefore, does not cover such debts which are un4enforceable for
some other reasons. *hus if an insolvent debtor has been discharged
from payment under the insolvency law a subse+uent promise by him
to pay that debt cannot be enforced unless there is a fresh
consideration for the same.
Similarly, if the payment of the debt cannot be enforced because the
debt was contracted by a person during his minority, the same is not
now enforceable if, on attaining majority, a promise is made to pay the
same, because a minor8s agreement which is void is incapable of
being validated by ratification. It has been held in Aru&u'an Vs.
Duraisin'a (1-1.) a promissory note to pay the sum received
minority is not enforceable.
%1
De+t due +# 2$o& G
In (eston<i Vs. )ai Me$er+ai (1-!8) the <ombay ;igh Court has
expressed the view that under this exception the promise should be to
pay time4barred debt due from the promisor, and not a promise to pay
time4barred debts due from other persons.
Section %1 &.', it may be further noted, permits a promise to pay
wholly or in part a time barred debt. If a person promises to pay a
portion of a barr/ed debt, he can only be sued for that portion alone
and not for the whole debt. If, however, the promise to pay the whole
debt is there then the whole of the amount can be claimed. " owes <
0s. ,,222, but the debt is barred by limitation "ct. " signs a written
promise to pay < 0s. 122 on account of the debt. >nder this contract
" is bound to pay 0s. 122.
T$ere s$ou"d +e e9%ress %ro&ise
*he promise to pay the time4barred debt must be an express one and
cannot be held to be sufficient if the intention to pay is unexpressed
and has to be gathered from a number of circumstances. It has been
held in De+i (rasad Vs. )$a'2ati (rasad (1-.>) that when the
ac#nowledgement &of the time barred debt' is coupled with an
agreement to pay interest, it cannot be regarded as a mere
ac#nowledgement and it should be regarded as an agreement with a
promise to pay &the debt' within the meaning of Section %1 &.'. In
A%%a Rao Vs. Sur#a%ra4asa Rao (1-**) the defendant wrote a
letter duly signed by him to the plaintiff after the debt had become time
Gbarred mentioning the periods for which the rents were due was
held that the document contained the ingredients mentioned in Section
%1 &.' and the defendant was entitled to enforce his claim.
%7