DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

SABBAVARAM, VISAKHAPATNAM, A.P., INDIA

PROJECT TITLE

KINDS OF CONSIDERATION

SUBJECT
LAW OF CONTRACTS

NAME OF THE FACULTY

MISS. B.V.S. SUNEETHA

NAME OF THE CANDIDATE: ABDUL QUADIR

ROLL NUMBER: 18LLB001

SEMESTER: 2nd

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ACKNOWLEDGMENT

It is our privilege to express our sincerest regards to our faculty for his valuable inputs, able
guidance, encouragement, wholehearted corporations and constructive criticism throughout the
duration of our project.
I deeply express our sincere thanks to our MISS. B.V.S. SUNEETHA for encouraging and
allowing for the History project on the topic “KINDS OF CONSIDERATION”
I take this opportunity to thank all our lecturers who have directly or indirectly helped me in the
particular project.

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TABLE OF CONTENTS

SYNOPSIS......................................................................................................................................... 4

ABSTRACT ................................................................................................................................... 4

OBJECTIVE OF STUDY ................................................................................................................. 5

SIGNIFICANCE OF STUDY ............................................................................................................ 5

SCOPE OF STUDY ......................................................................................................................... 5

RESEARCH METHODOLOGY ....................................................................................................... 5

INTRODUCTION ............................................................................................................................... 6

WHAT IS CONSIDERATION .............................................................................................................. 7

NECESSITY FOR CONSIDERATION .............................................................................................. 7

DEFINITION OF CONSIDERATION ................................................................................................ 7

SECTION 2(D) OF ICA, 1872 ....................................................................................................... 8

ELEMENTS OF CONSIDERATION ..................................................................................................... 8

AT THE DESIRE OF THE PROMISOR............................................................................................. 9

PROMISEE OR ANY OTHER PERSON.......................................................................................... 10

PRIVITY OF CONTRACT ............................................................................................................ 11

PRIVITY OF CONTRACT IN INDIA .............................................................................................. 12

EXCEPTION TO RULE OF PRIVITY ............................................................................................ 14

BENEFICIARIES UNDER TRUST OR CHARGE ............................................................................ 14

MARRIAGE SETTLEMENT, PARTITION OR OTHER FAMILY ARRANGEMENTS ............................ 15

ACKNOWLEDGEMENT OR ESTOPPEL....................................................................................... 16

COVENANTS RUNNING WITH LAND ......................................................................................... 17

HAS DONE OR ABSTAINED FROM DOING SOMETHING ............................................................. 17

EXECUTORY AND EXECUTED CONSIDERATION -DISTINCTION BETWEEN: .............................. 17

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PAST AND EXECUTED CONSIDERATION-DISTINCTION BETWEEN: ........................................... 18

PAST CONSIDERATION-ENGLISH LAW ................................................................................... 18

PAST CONSIDERATION- INDIAN LAW ...................................................................................... 19

OR DOES OR ABSTAINS FROM DOING SOMETHING ................................................................... 20

OR PROMISES TO DO OR TO ABSTAIN FROM DOING SOMETHING ............................................ 20

SUCH ACT OR ABSTINENCE OR PROMISE IS CALLED A CONSIDERATION FOR THE PROMISE .. 21

CONSIDERATION NEED NOT BE ADEQUATE ............................................................................. 21

CONSIDERATION MUST BE REAL ............................................................................................ 22

EXCEPTIONS TO CONSIDERATION ............................................................................................... 23

NATURAL LOVE AND AFFECTION ............................................................................................ 23

PROMISE TO COMPENSATE SOMETHING DONE VOLUNTARILY................................................ 24

PROMISE TO PAY A TIME- BARRED DEBT ................................................................................. 24

CONCLUSION ................................................................................................................................ 25

BIBLIOGRAPHY ............................................................................................................................. 27

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SYNOPSIS

ABSTRACT

In this research project we will discuss about the important element of Contract called
Consideration. The main aim will be to cover the all essentials of the consideration and to find any
problem which is coming during the making of contract related to consideration. The section 25
of the Indian Contract Act, 1872 openly declares that “an agreement made without consideration
is void…” In other words, the presence of consideration is an essential for a contract to be valid.
Consideration in simple words means something in return of a promise which may either be benefit
gained by one party or something lost by the other. So generally, there can be no doubt that for a
valid contract, there must be consideration, and also free consent. There are different types of
consideration and various application of consideration. In this project we will deal with all the
aspect of contract law related to consideration with comparing Indian and English Law.

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OBJECTIVE OF STUDY

The objectives of study are as follow: -

 To get the clarity of concept of consideration.
 To acquire knowledge on the project topic.
 To know the difficulties faced during making contract.

SIGNIFICANCE OF STUDY

The significances of study are as follow: -

 By doing research work to get concept clarity of subject.
 The use of consideration during contract.
 To get the better understanding of the subject.

SCOPE OF STUDY

The scope of this research work is limited: -

 To the Indian Contract Act, 1872.
 To the concept of consideration in Indian Law and English Law.

RESEARCH METHODOLOGY

The research methodology is of Doctrinal Type Research.

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INTRODUCTION

The Latin phrase Quid Pro Quo which means “something in return of something” is very evident
while studying the concept of consideration. The concept of consideration is based on that phrase.

While making contract there is a one important element called Consideration. Consideration is the
basic element to make contract enforceable in court of law. The Role of consideration can be
understood by the section 25 of Indian Contract Act, 1872 which states that “agreements without
consideration are void”. There are several applications of consideration. In this research work we
will discuss the entire concept of Consideration and exception to the general rule of consideration.
For an agreement to be valid, there must be consideration from both sides otherwise the contract
is not enforceable in the court of law. There are some differences in the consideration in Indian
and English law but the core of the principle is that the consideration must be from both sides then
only the agreement is the valid agreement.

Section 25 of Indian Contract Act, 1872 states that “an agreement made without consideration is
void…”1. While According to English Law the observance by HEATH J. “promises without
consideration are not enforced, because they are gratuitous”.2 It was observed in by Lord SKYNNER
in the case of Rann v. Hugnes3 that “It is undoubtedly true that every man is by law of nature
bound to fulfil his engagements. It is equally true that the law of the country supplies no means,
nor affords any remedy, to compel the performance of an agreement made without sufficient
consideration”.

In simple words consideration is something in return of promise which may either be benefit
gained by one party or something lost by other. So generally, contract without valid consideration
and free consent is not valid.

1
Indian Contract Act, 1872, s. 25. (this section also provides some exceptions to that general rule)
2
Lee v Muggeridge, (1813) 128 ER 559.
3
House of lords, (1778) 7 Term reports 350n (HL).

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WHAT IS CONSIDERATION

NECESSITY FOR CONSIDERATION

According to Anson law of contract “Consideration is necessary for the for the formation of every
simple contract. An informal promise without consideration is not enforceable in English Law
even though the promisor has acted upon the promise.”4

In the case of Combe v. Combe5, Lord DENNING said “Consideration is a cardinal necessity of the
formation of contract.”

Under Indian law Section 10 of Indian Contract Act states that “All agreements are contracts if
they are made by the free consent of the parties competent to contract, for a lawful consideration
and with a lawful object, and are not hereby expressly declared to be void.”6 Which clearly provide
us with the importance or necessity of consideration.

DEFINITION OF CONSIDERATION
There are several definitions given by jurist for consideration. The simple definition given by
Blackstone is “Consideration is the recompense given by a party contracting to the other.”

According to Pollack “Consideration is the price of which the promise of the other is bought, and
the promise thus given for the value is enforceable.”7

In Thomas v. Thomas8 the definition of consideration has been given by Justice PATTERSON states
that “Consideration means something which is of some value in the eyes of the law…. may be give
some benefit or profit to the parties to the contract or determinant to the parties.”

During the course of time the definition of consideration has evolved and the widely accepted
definition was given in the case of Currie v. Misa9, which says that “A valuable consideration in
the sense of the law may consist either in some right, interest, profit or benefit accruing to the one

4
Anson, Law of Contract (ed., A.G Guest, 23rd eds., p. 83, 1971).
5
(1851) 2 KB 215, p.220.
6
Indian Contract Act, 1872, s.10.
7
Sir Frederick Pollock, Pollock on contract 13th ed p.133.
8
(1842) 2 QB 851, 859.
9
(1875) 10 Ex 153, 162.

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party, or some forbearance, determent, loss, or responsibility given, suffered or undertaken by the
other.”

In other words, consideration simply means a “price to the promise”. For the same Calcutta High
Court Observed in the case of Fazalaldin Mandal v. Panchanan Das10, “consideration is the price
of the promise or quid pro quo, something of value received by the promise as inducement of the
promise.”
SECTION 2(d) OF ICA11, 1872
Section 2(d) of contract act defines consideration in the following way: -
“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.”
The Supreme Court in the case of Chindambara Iyer v. Renga Iyer12 has approved the definition
given in the Currie v. Misa 13case by stating that the definition of the case is almost similar to the
definition contained in section 2(d) of contract act.

ELEMENTS OF CONSIDERATION

According to the given definition there are some important elements which have to be fulfilled for
a valid consideration. After analysing, we can break the definition of consideration provided by
section 2(d) of contract act in the following manner: -

 At the desire of the promisor

 The promise or any other person
 Has done or abstained from doing something
 Or does or abstains from doing something
 Promises to do or to abstain from doing something
 Such act or abstinence or promise is called a consideration for a promise.

10
AIR 1957 Cal 92.
11
Indian Contract Act, 1872 s. 2(d).
12
AIR 1966 SC 193.
13
Supra Note 9.

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AT THE DESIRE OF THE PROMISOR

The essential element of the consideration is that it has to be given by the promiser or the act or
abstinence must be done according to the desire of the promisor. In other words, the Promisee has
to work according to the direction given by the promisor. If an act is done at the desire of third
person or person other than promisor then it will not constitute as good consideration. This can be
understood with the help of the case Durga Prasad v. Baldeo14, in this case the Collector of District
gave responsibility to plaintiff to build the market, defendant approached the plaintiff and make
the offer that if plaintiff allowed him to start his shop in the market, he will pay commission for it.
After the market got ready, defendant denied to pay commission. Plaintiff filed suit for breach of
contract. The suit of plaintiff was dismissed on the ground that the plaintiff built the market at the
desire of the collector and not that of the defendant. Hence, promise was without consideration
and could not be enforced.

Thus, to constitute a good consideration, act or abstinence must be at the desire of the promisor.

In the case of Kedarnath v. Gouri Mohamed15, Calcutta high court observed that an act done at
the promisor’s desire is good consideration. In kedarnath16 case a Town Hall was to be built by
the municipal corporation; plaintiff was the commissioner of the corporation. He issued
subscriptions of a certain amount. Defendant took subscription and also many others persons had
taken subscription, on the faith of the promised subscription the plaintiff entered into a agreement
with a builder and the builder start building the Town Hall. But the defendant failed to pay the
promised amount, the question arises whether the defendant is liable for the contract made by
plaintiff on the faith of the defendant’s promise. Defendant held liable to pay the promised amount.

Madras High Court followed the decision of Kedarnath17 case and laid down that “a promise to
pay a subscription becomes enforceable as soon as definite steps have been taken in the furtherance
of the object and on the faith of the promised subscription.”18

14
ILR (1880) 3 All 221.
15
ILR (1886) 14 Cal 64.
16
Id.
17
Id.
18
Perumal Mudaliar v. Sendanatha Mudaliar, AIR 1918 Mad 311.

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In the case of Doraswami Iyer v. Arunachala Ayyer19, Madras HC explained the principle of
Kedarnath20 case that there was not just a bare promise, but also a request that promisee should do
an act, and if there is no such request the promise will be a bare promise without consideration.

Thus, the principle laid down in this case is “a promise is enforceable if on the faith of it, the
promise incurs some liability.” But if no liability incurred on the faith of the promise, the decision
would have been different. That is exactly what happened in the case of Abdul Aziz v. Masum
Ali21, in this case the defendant had taken a subscription of Rs. 500 for the restoration of Mosque,
and later denied to pay. Plaintiff brought action against the defendant. It was held by the court that
no action has been taken on the faith of the promised subscription and hence, defendant not made
liable.

PROMISEE OR ANY OTHER PERSON

The next essential element of consideration is that the consideration may be given by promisee or
any other party. The rule in English law is Contrary to the Law in India. In English law
consideration must move from the promise only but section 2(d) of contract act provides promisee
or any other such person which means consideration may move at the desire of other person also.
This means a party who wishes to enforce a contract must show that he himself furnished
consideration for the promise of the other party.22

In case of Dutton v Poole23 a contrary view to the present English rule was taken. In this case, the
father of decided to cut off his family tree for the marriage of his daughter, the plaintiff. Defendant,
son of the plaintiff’s father promised the father to pay £ 1000 for the marriage of the plaintiff and
asked him not to cut the family tree, the father agreed. After father’s death, the plaintiff sued
defendant for the recovery of the amount. It was held that even though plaintiff is not a party to a
contract but she is entitled to recover the amount.

19
AIR 1936 Mad 135.
20
Supra Note 15.
21
AIR 1914 All 22.
22
Supra Note 4, p.89.
23
(1677) 2 Lev. 210: 83 ER 523.

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Nearly, after two centuries the abovementioned rule not followed. In the case, Tweddle v.
Atkinson24 , a contract is made between the fathers of the plaintiff and defendant that the defendant
will pay a certain sum of money to the plaintiff and was also agreed that plaintiff will have full
power to sue the said party in any court of law. The defendant having failed to pay the sums
promised; plaintiff filed suit against defendant relaying on the decision of Dutton’s case. But the
Court refused to follow the decision and dismissed the action. Justice WIGHTMAN observed, “It is
now well established that no stranger to the consideration can take advantage of a contract even
though made for his benefit.

The rule of Atkinson’s case was affirmed in the case Dunlop Pneumatic Tyre Co. Ltd. v. Selfiridge
and Co. Ltd.25, the plaintiff entered into contract with M/s. Dew and Co. to sold some tyres, it was
mentioned in the agreement that M/s. Dew and Co. will not sell the tyres below the listed price of
plaintiff’s company. If they sell tyres below listed price they have to pay 5 euro on each tyre. M/s.
Dew and Co. sold some tyres to Selfiridge company on the same terms. Selfridge company sold
tyres below listed price, plaintiff filed case against the Company. It was held by the court that the
action is not maintainable as the plaintiff not a party to contract.

Thus, in English law consideration must be moved at the desire of promisee, but in Indian law it
can be moved by the other party. The same could be seen in Venkatchinnaya v. Venkatramaya26,
where Madras HC applied the rule of Dutton v. poole.

PRIVITY OF CONTRACT
In Dunlop Pneumatic Tyre Co. Ltd. v. Selfiridge and Co. Ltd., it was observed by court that, “in
the law of England certain principles are fundamental. One is that only person who is party to a
contract can sue on it.

After spend of time it is noticed that, in many cases the doctrine of privity of contract has proved
inadequate in view of modern needs of trade and commerce. A number of exceptions of the privity
rule i.e. agency, lease, trust have already been recognised. The rule has been generally criticized.27

24
(1861) 1 BS 393.
25
(1915) AC 847.
26
ILR (1881) 4 Mad 137.
27
Corbin, Contract for the benefit of third person, (1930) 46 LQR 12.

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In 1937, Law Revision Committee suggested that “where a contract by its terms expressly confers
a benefit to third party, it shall be enforceable by the third party in his own name subject to any
defences that would have been valid between the contracting parties.”

House of Lords, in the case of Beswick v. Beswick28, had taken different opinion and did not judge
the case on the basis of doctrine of privity of contract.

In this case, Peter Beswick, a coal merchant decided to sell his business to his nephew john on the
consideration that he will pay 6.10 euro per week and after his life, will pay 5 euro to his wife.
After the death of the Beswick, john refused to pay the amount, plaintiff brought action against the
defendant for the specific performance of contract. Her action was dismissed by trail court but
reversed by court of appeal. The defendant appeal in House of Lords against the decision of court
of appeal but the appeal was dismissed by the House of Lords.

Lord HUDSON observed that in this case the plaintiff was not only personal representative of
deceased but also his widow and she beneficially entitled to the claimed.

Thus, notwithstanding with the fact that the third party cannot enforce the contract, the promise
under contract may be able to obtain an order for specific performance of contract, to compel
promisor to carry out the promise in the favour of third party.29

PRIVITY OF CONTRACT IN INDIA

In India there was several different opinions on the doctrine of privity of contract. Several decisions
have taken on the basis of Tweddle v. Atkinson, that person who is not party to the contract can not
enforce a person for specific performance of contract. But Indian contract act does not talk about
the doctrine. It is no where mentions about privity, no provision of contract act is for or against
this rule.

In the case of Jamuna Das v. Ram Autar30, privy council extended the scope of the doctrine. In
Jamuna Das’s case, a borrowed Rs. 40,000 from B for executing her zamindari for mortgage. After

28
(1967) 2 All ER 1197.
29
Supra Note 4, p.387.
30
(1911) 91 A 7.

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some time, she sold the property to C for Rs. 44,000. B sued C to get the mortgage debt back.
Privy council held that C was not liable to pay the debt of A.

Thus, it was observed in Subbu Chetti v Arunachalam Chettiar31 case that a person transfers
property to another and ask him for the payment of money to third party, the suit to enforce the
stipulation cannot enforceable.

But if third party is gaining benefit from the contract, he may enforce contract. 32 Similarly, if a
lease is given to the person the zamindar of land cannot enforce the lessees to pay the amount.33
In the case Krishna Lal v. Promila Bala34, the court observed that , “even though the scope of
section 2(d) of Indian contract act is wider than that of English law, but it doesn’t mean that to
allow a third party to enforce a contract which is not a party to a contract.” The observation of the
Court was approved by the Supreme Court in M.C. Chacko v. State Bank of Travancore.35 Also,
Calcutta HC in the case Smt. Narayani Devi v. Tagore Commercial Corporation Ltd.36 has
reaffirmed the principle of Krishna Lal’s Case by stating that “even though the definition of
consideration in Indian contract is wider than English law but the common law principles are
generally applicable in India.”

Some decisions have taken against the rule of English Law. Court did not follow the rule laid down
in the case of Tweddle v Atkinson. Privy Council in the case of Nawab Khwaja Muhammad Khan
v. Nawab Hussaini Begum37, observed that

“In India and communities, the marriage of the minors has contracted by the parents of guardians
so it may be great injustice to the person if we apply a Common Law doctrine.”

In this case, a Mohammedan lady was brought action against her father-in-law to pay the amount
of the betel leaf ritual, for which the father-in-law had come into an agreement with his son at the

31
ILR (1930) 53 Mad 270.
32
K. Gopalaswamy Chetty v. Selliamman Koil Coop Housing Society Ltd., (2003) 1 ICC 184 (mad).
33
Mangal Sen v. Mohd Husain, ILR (1915) 37 All 115.
34
AIR 1928 Cal. 518.
35
AIR 1970 SC 504.
36
AIR 1973 Cal 401.
37
(1909-10) 12 Bom. LR 638.

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time of the marriage when they both are minors, the court held that as she is not party to the contract
but the father-in-law is liable to pay.

EXCEPTION TO RULE OF PRIVITY

During the course of time, the court has made several exceptions to the general rule of privity.
There are some exceptions to the rule: -

BENEFICIARIES UNDER TRUST OR CHARGE

A person who is not a party to the contract can enforce the contract, if he or she is getting benefit
from it or may have any other interest in the contract. In the case of Nawab Khwaja Muhammad
Khan v. Nawab Hussaini Begum38, the privy council illustrate the following exception. In this
case, a Mohammedan lady was brought action against her father-in-law to pay the amount of the
betel leaf ritual, for which the father-in-law had come into an agreement with his son at the time
of the marriage when they both are minors, the court held that as she is not party to the contract
but the father-in-law is liable to pay.

It was held that the respondent, although is not a party to a contract but she was having some
benefit from the contract so that she can enforce the contract.

Rana Uma Nath Bakshsh Singh v. Jang Bahadur39, is also an example of trust in favour of third
party. In this case, A was appointed by his father as his successor with the condition that, A has to
give a village to his Father’s illegitimate son B. A agreed to the condition, and after his father died
he refused to perform his part of promise. B brought an action against A for the specific
performance of contract. It was held that A is liable to perform although B is not party to a contract
but from the circumstances mentioned it was cleared that a trust was created in favour of B.
In England also there are cases in which ‘trust’ has been used as a device for holding the promisor
to his promise.

In the case of Gregory & Parker v. Williams40

38
Id.
39
AIR 1938 PC 245.
40
(1817) 3 Mer 582.

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“Parker was indebted to both Williams and Gregory. Parker assigned all his property to Williams
in satisfaction of the debt and Williams promised to pay Parker’s debt to Gregory. Williams failed
to pay. But he was held liable to pay Gregory in terms of his promise with Parker.”

Another illustration can be shown in the case of Touche v Metropolitan Rly Warehousing Co.41,
the facts of the case are: -
“The plaintiff rendered services to the promoters of the defendant-company and they promised
that he should receive £2000 from the company. Later, when the company was formed, its articles
of association provided that £2000 should be paid to Walker, one of the promoters, for the benefit
of the plaintiff. The plaintiff sued the company in his own name. It was held that the defendant-
company’s promise was for the benefit of the plaintiff and that the plaintiff had the right to obtain
the benefit of the arrangement entered into between the promoter and the company.”

“An airline company made an arrangement with a hotel for accommodating its passengers. One of
the passengers so accommodated was injured because of negligent maintenance of the hotel
premises. His action directly against the hotel-keeper was allowed. The court said the doctrine of
privity of contract is subject to many exceptions, one of them being that a beneficiary can sue on
a contract which is meant only to provide some benefits to him.”42
MARRIAGE SETTLEMENT, PARTITION OR OTHER FAMILY ARRANGEMENTS
When an agreement made is within the connection of marriage, family arrangements and these
agreements are providing a benefit to a person who is not a party to the contract, but they can
enforce that agreement.

The following can be understood by the case of Rose Fernandez v. Joseph Gonsalves43, in this
case, “a girl’s father entered into an agreement for her marriage with the defendant, it was held
that the girl after attaining majority could sue the defendant for damages for breach of the promise
of marriage and the defendant could not take the plea that she was not a party to the agreement.”

41
(1871) 6 Ch App 671.
42
Klaus Mittelbachert v. East India Hotel Ltd., AIR 1997 Del 201.
43
ILR (1924) 48 Bom 673.

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Similarly, in the case of Shappu Ammal v. Subramaniyam44, two brothers entered into an
agreement that they will invest equal share of money for the maintenance of their mother, after the
breach mother filed suit against them and the court held that they are liable to pay.

And in the case of Veeramma v. Appayya45, the daughter and her husband entered into an
agreement with her father that if he transfers his property to her she will take care of her mother
and provide her with maintenance, father agreed to the same and transferred his property. After
the death of the father, Daughter did not provide any maintenance to her mother. The mother
brought an action against the daughter and her husband. It was held that the plaintiff, although not
a party to contract but can enforce the specific performance of contract as it was for her benefit.
ACKNOWLEDGEMENT OR ESTOPPEL
This is another exception to the doctrine of privity of contract. In this where under a contract a
party undertakes obligation to make a payment to third party and he acknowledges it to the said
third party, the third party, though not a party to a contract can enforce the contract. This is
probably due to the application of the principle of estoppel. This can be understood by the case of
N. Devaraja Urs v. Ramakrishniah46, in which “A sold his house to B under a registered sale deed
and left a part of the sale price in his hand& desiring him to pay this amount to C, his creditor.
Subsequently B made part payments to C informing him that they were out of the sale price left
with him and that the balance would be remitted immediately. B, however, failed to remit the
balance and C sued him for the same. The suit was held to be maintainable.”

“Though originally there was no privity of contract between B and C, B having subsequently
acknowledged his liability, C was entitled to sue him for recovery of the amount.”

Another illustration can be given by the case of Kshirodebihari Datta v. Mangobinda Panda47,
“The tenant and the sub-tenant of a piece of land agreed between themselves that the sub-tenant
would pay the tenant’s rent direct to the landlord. The agreement was acted upon by all the parties
interested. Under these circumstances the landlord was allowed to obtain a decree for his rent
direct against the sub-tenant. In other words, the sub-tenant was estopped from denying his

44
ILR (1910) 33 Mad 238.
45
Air 1957 AP 965.
46
AIR 1952 Mys 109.
47
AIR 1934 Cal 682.

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liability to pay the tenant’s rent on the ground that there was no such contract between him and
the landlord.”

“In a tripartite building contract, the builder contracting with his employer simultaneously agreed
to be directly responsible to the owner of the building. It was held that the employer had no right
to sue the builder for any loss caused to the owner by any deficiency in works. Such liability was
incurred directly to the owner.”48
COVENANTS RUNNING WITH LAND
The rule of privity of contract is not also directly applicable to the transfer related to immovable
property.
“a person who purchases a land with notice that the owner of the land is bound by certain duties
created by an agreement or covenant affecting the land, shall be bound by them although he was
not a party to the agreement.”49

HAS DONE OR ABSTAINED FROM DOING SOMETHING

According to English law, “A consideration may be executory, a promise given for the promise,
or it may be executed, an act or forbearance given for the promise: but it must not be past, for in
that case it is a mere sentiment or gratitude or honour prompting return for benefits received
.............. in other words, it is no consideration at all.”50

EXECUTORY AND EXECUTED CONSIDERATION -DISTINCTION BETWEEN:

“An executory consideration consists, of a promise to do, forbear, or suffer, given in return for a
like promise. Thus, mutual promises to marry, or a promise to do work in return for a promise of
payment are illustrations of executory consideration ........... A contract arises upon a present or
executed consideration when one of the parties has, either in the act which constitutes an
acceptance, done all that he is bound to do under the contract, leaving an outstanding liability on
the one side only.”51

48
McAlpine Construction Ltd. v. Panatown Ltd., (2001) 1 AC 518.
49
Tulk v. Moxhay, (1919) 88 LJKB 861 (HL).
50
Supra Note 4, p.85.
51
Id.

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Cheshire and Fifoot52 have summed up the distinction between executory and executed
consideration in a single line. They aptly write, “Consideration is called executory when the
defendant's promise is made in return for a counter promise from the plaintiff executed when it is
made in return for the performance of an act.”

PAST AND EXECUTED CONSIDERATION-DISTINCTION BETWEEN:

“If the defendant makes a further promise, subsequent to and independent of the transaction, it
must be regarded as a mere expression of gratitude for past favours or as a designated gift, and no
contract will arise. It is irrelevant that he may have been induced to give the new promise because
of the previous bargain. In Such a case the promise is declared in traditional language, to be made
upon past consideration; or more accurately, to be made without consideration at all.”53
As regards the distinction between executed and past consideration, it has been rightly pointed out:
“In the case of executed consideration, both the promises and the act which constitutes the
consideration are integral and correlated parts of the same transaction but in the case of past
consideration the promise is subsequent to the act and independent of it.”54

PAST CONSIDERATION-ENGLISH LAW

Since past consideration arises out of a promise “subsequent to and independent of the
transaction,” it is considered to be no consideration at all under English Law. In the case of
Eastwood v. Kenyon55, “on the death of one John Sutcliffe, his infant daughter, was looked after
and taken care of by the plaintiff as her guardian. He spent money on her education and also for
the benefit of her estate. In this connection, the plaintiff borrowed money from a person on a
promissory note. When Sarah became a major, she promised to pay the amount of the said
promissory note. She was subsequently married to the defendant who also promised to pay the
amount of the note. An action brought by the plaintiff to recover the amount of the note was
dismissed because in the words of Lord Denman, C.J., it states no consideration but a past benefit
not conferred at the request of the defendant.”

52
Cheshire and Fifoot, The law of contract (7th eds. p. 61).
53
Id.
54
Supra Note 4, p.68.
55
9 LJ (QB) 409.

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Similarly, in Re McArdle56, “according to the will of the father a certain number of children were
entitled to a house after the death of their mother. In consideration of certain improvements made
in the house by the wife of one of the children (who lived with his mother during her life), all the
children subsequently undertook to pay a sum of £ 488 to the said wife. But the Court of Appeal
held that the said promise was without consideration for the obvious reason that improvement in
the houses hold been completed when the document containing the promise was signed. Thus, it
was past consideration which is no consideration at all.”

In the case of Lampleigh v. Brathwait57 it is established that if the act is subsequent and
independent of the transaction, has been done at the desire of the promisor, it will constitute a good
Consideration. In this Case, “the defendant was guilty of having committed a murder. He requested
the plaintiff to obtain for him pardon from the king. The plaintiff made his best possible endeavours
(though unsuccessfully) in this Connection and incurred certain expenses. In consideration of this,
the defendant promised to pay him E 100. The plaintiff sued him to recover the promised sum. he
Court observed that a mere voluntary courtesy will not have h consideration to uphold an
assumpsit. But if that courtesy were moved by a Suit or request of party that gives the assumpsit,
it will bind, for the promise though it follows, it is not naked, but couples itself With the suit before
and merits of the party procured by that suit, which is the difference.”

Thus, in English Law, the general rule is past consideration is no consideration but if the
consideration is given at the desire of promisor than it will constitute as good consideration.

PAST CONSIDERATION- INDIAN LAW

“Under Indian law, a past consideration is a good consideration under the Indian Contract Act. If
the act or abstinence had been done at the desire of the promisor, it constitutes a good consideration
within the meaning of the definition of consideration contained in Section 2 (d) of the Act. In case,
it is not done at the desire of the promisor and is a promise to compensate for something voluntarily
done, it will be covered under an exception to the general rule enshrined in Section 25 that
an/agreement without consideration is void. Section 25 (2) provides that if an agreement is a
promise to compensate wholly or in part, a person who has already voluntarily done something for

56
(1951) Ch 699.
57
(1956) Hob. 105.

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the promisor which the promisor was legally compellable to do, it shall not be deemed to be void
for want of consideration.”

In the case of Sindha v. Abraham58, “the defendant promised to give to the plaintiff an allowance
of Rs. 125 a year in consideration of the plaintiff's service rendered to him during the whole of 5
years of litigation which went on between his father and himself in which his legitimacy was
questioned. The services were rendered first when the defendant was a minor and were continued
after he had attained majority. It was not intended by the parties that the plaintiff's services should
be rendered gratuitously. In fact, they were intended to be recompensed although the nature and
extent of the proposed recompense was not fixed. The plaintiff sued the defendant to enforce the
said promise. The defendant was held liable.”

In the case of Central Bank of India v. Traseema Compress Wood Manufacturing Co.59, it was
held that consideration can be either past or present or even future. So, it can be said that in English
law past consideration is not valid but in Indian law, Consideration can be past, present or future.

OR DOES OR ABSTAINS FROM DOING SOMETHING

When, at the desire of the promisor or any other person does or abstains from doing something, it
will constitute a good consideration within the meaning of Section 2 (d) of the Contract Act. As
pointed out by Pollock and Mulla.60 “Where the consideration is a present performance and not a
promise the detriment may consist either in actually parting with something of value or in
undertaking a legal responsibility or in foregoing the exercise of a legal right. Thus, the
performance which constitutes a consideration may be negative as well as positive provided that
the promisee’s abstinence from exercising a right was undertaken at the request of the promisor.”

OR PROMISES TO DO OR TO ABSTAIN FROM DOING SOMETHING

If the promisee or any other person, at the desire of the promisor, promises to do or to abstain from
doing something it will constitute a good consideration within the meaning of Section 2 (d) of the
Contract Act. It is called an executory consideration which has been already discussed earlier and
hardly need any further elaboration here.

58
9 LJ (AB) 409.
59
AIR 1997 Bom. 225.
60
Pollock and Mulla, Indian Contract Act and Specific Relief Act (9th edition p.43).

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Forbearance to sue, whether constitutes a good consideration

Forbearance to sue will constitute a good consideration within the meaning of the definition of
consideration contained in Section 2 (d). But forbearance to sue on the agreement which is void
and known to the party so forbearing will not constitute a good consideration.

It was observed by the Bombay HC in the case of Tulsabai Nathudas and Others v. Narayan
Ajabrao Raut61 that “There can be forbearance to sue a person only if the person suing has a
subsisting right which could be enforced against the other person.”

The facts of the case are, “the plaintiff had given up all his rights to recover the instalments from
one Rambhan, the debtor and therefore the plaintiff did not have any subsisting right to sue
Rambhan. The Court, therefore, held that since he had no subsisting right he could not be said to
be in a position to forbear or abstain from suing Rambhan.

SUCH ACT OR ABSTINENCE OR PROMISE IS CALLED A CONSIDERATION FOR THE PROMISE

It means any act done at the desire of the promisor is considered as a good consideration. In this
connection we have to understand following points.
CONSIDERATION NEED NOT BE ADEQUATE
As pointed out by Cheshire and Fifoot62, “It has been settled for well over three hundred years that
the courts will not inquire into the 'inadequacy of consideration'. By this is meant that they will not
seek to measure the comparative value of the defendant's promise and of the act or promise given
by the plaintiff in exchange for it, nor will they denounce an agreement merely because it seems
to be unfair.”

It was held in the case of Bolten v. Madden63 that, “the consideration need not be adequate to the
promise although it must be of some value in the eye of the law. It is not for the courts but for the
parties while making the agreement to consider the adequacy of consideration.”

And further, in De La Bare v. Pearson64, “the defendants were the proprietors of a newspaper.
Through their paper they offered to render financial advice to their readers. In response to the said

61
AIR 1974 Bom. 72.
62
Supra note 52.
63
(1873) LR 55.
64
(1908) 1 KB 280.

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offer, the plaintiff sought the defendant’s advice for safe investment of their moneys. He also asked
the name of a good stock broker. The editor of newspaper recommended the name of a stock broker
who was an undischarged bankrupt. The editor however, did not know this fact. Relying on the
said information, the plaintiff sent a certain sum to the said stock broker which was
misappropriated. The plaintiff filed the suit against the defendant to recover the said sum.”

The question for consideration before the court was whether the offer of advice had sufficient
consideration for the defendant argued that there was insufficient consideration for the offers of
advice. The Court held that there was good consideration because such offers in the newspaper are
intended to increase the sale of the papers. As regards the inadequacy of the consideration, the
court said that it is not the business of the court to look into the adequacy of consideration.

CONSIDERATION MUST BE REAL

Even if the courts will not look to the sufficiency or adequacy of consideration, an act or abstinence
will have to possess certain qualities before it can be regarded as a good consideration. For
example, the consideration “must be of some value in the eye of law.”65

Cheshire and Fifoot66 have also remarked, the courts will not “denounce an agreement merely
because it seems to be unfair. The promise must, indeed, have been procured by the offer of some
return capable of expression in terms of value.”

In White v. Bluet67 wherein “the defendant had to pay a sum of money to his father and for the
same he had executed a promissory note in favour of his father. He charged his father for
inequitable distribution of property and complained all the time for it. Consequently, the father
offered to discharge him from all liability in regard to the promissory note if he stopped
complaining.” The Court was confronted with the question whether the defendant's promise not to
complain was sufficient or good consideration so as to make the father's promise enforceable. The
Court held that this was not a good consideration. The consideration must be real and illusory. It
must be of some value in the eye of law.

65
Supra Note 4, p. 91.
66
Supra Note 53.
67
(1853) 23 LJ Ex. 36.

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In India, the Indian Contract Act does not expressly say that the consideration must be of some
value in the eye of law but the courts have generally followed the English law on this point. That
is to say in India also, the consideration must be valuable in the eye of law and not that must be
real and not illusory.68

EXCEPTIONS TO CONSIDERATION

A pertinent question arises whether consideration is essential for all valid agreements or whether
all agreements are void for lack of consideration? “While Section 25 lays down a general rule that
an agreement without consideration is void, it also provides the exceptions to this general rule,
Besides this, a fourth exception is recognised under Section 185 which provides that no
consideration is necessary to create an agency. The exceptions provided under Section 25 are the
following:
NATURAL LOVE AND AFFECTION
Section 25 (1) provides that an agreement without consideration is void: unless “it is expressed in
writing and registered under the law for the time being in force for the registration of documents
and is made on account of natural love and affection between parties standing in a near relation to
each other, the agreement will not be void for want of consideration.”

Sometimes it may happen that the parties stand in a near relation to each other yet the agreement
may not be out of natural love and affection or there may be no love and affection between them.
In such a case this exception cannot be invoked. In Rajlukhy Debee v. Bhootnath Mookerjee69,
the suit was filed by the wife against her husband to recover the arrears of the allowance which
her husband agreed to pay under the registered agreement. The agreement referred to the mutual
quarrels and proceeded as follows: “It having become inconvenient for you in many respects to
live as aforesaid finding it difficult to live in my family you have claimed proper maintenance and
suitable habitation from me, I therefore make the following provision for your maintenance (and)
habitation by this ekranama.” Thus, instead of expressing love and affection between the parties,
the agreement rather expressed the absence of the same. The Court, therefore, held, “there was no

68
Kulasekara Perumal v. Pathakutty, AIR 1961 Mad. 405.
69
(1900) 4 Cal. WN 488.

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consideration for this agreement moving from the wife, it was voluntary arrangement on the part
of the husband, and the present suit cannot therefore be maintained.”

PROMISE TO COMPENSATE SOMETHING DONE VOLUNTARILY

According to Section 25 (2) an agreement without consideration is void; unless “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” will not be void for
want of consideration.

For example, A finds B’s purse and gives it to him. B promises to pay Rs. 50. This promise can be
enforced.70 Similarly, if A has supported B’s son and subsequently B promises to pay A’s expenses
in so doing A is entitled to sue and get the said promise enforced.71

In order to invoke successfully the exception contained in Section 25 (2), the following essential
elements must be there: (i) The act must have already been done; (ii) It must have been done
voluntarily: (iii) It must be done for the promisor or something which the promisor was legally
bound to do; (iv) The promisor must be in existence at the time when the act is done; and (V) The
promisor must promise to compensate for the act already done.

PROMISE TO PAY A TIME- BARRED DEBT

Section 25 (3) provides that agreement without consideration is void: Unless “it is a promise made
in writing and signed by the person to be charged therewith, or by his agent generally or specially
authorised in that behalf, to pay wholly or in part a debt which the creditor might have enforced
payment but for the law for the limitation of suits.”

For example, A owes B Rs. 1,000 but the debt is barred by the Limitation Act. A sign a written
promise to pay B Rs. 500 on account of the debt. This will be a valid contract and shall not be void
for want of consideration.72

70
Indian Contract Act, 1872, Illustration (c) to section 25.
71
Id, Illustration (d) to section 25.
72
Id, Illustration (e) to section 25.

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In order to invoke successfully the above exception, the following essential conditions must be
present:

(i) The promise to pay must be in writing and signed by the person concerned or his agent generally
or specially authorised in that behalf; (ii) The promise may be either for the whole of the debt or a
part thereof; and (iii) The promise to pay must be in respect of the debt which the creditor might
have enforced payment but the law for the limitation of suits.

In Curwen v. Milburn73 it was held that “Statute barred debts are dues, thought payment of them
cannot be enforced by action”. The same was confirmed by the Supreme Court in case of Khadi
Gram Udyog Trust v. Shri Ram Chandraji Virajman Mandir.74 Therefore the legal position is
that the creditor's right to release the debt is barred by limitation, the ‘debt’ survives. This logic
gains support from the fact a time-barred ‘debt’ would constitute a valid consideration for a new
contract.75

CONCLUSION

Contract law assumes an essential job in business law. It is hard to continue any exchange, business
or any movement without contract law. It impacts businesspeople as well as everyone. The point
of the agreement law is to guarantee that rights and cures are regarded which raised by contract.
Contract law sets down conditions for gatherings to go into contract. Anson expressed that contract
is a blend of subjectivity and objectivity idea. Section 10 states that the concept of consent is
subjective, but the entire concept is objective. Accords cover offer and acceptance, and are vital
for the conclusion of a contract. All contracts are contracts but not all agreements, only those
agreements are contracts that meet the requirements of Section 10. The contractual consent shall
be essential and should be free of coercion, fraud or error if it is not free and void under paragraphs
19 and 19 A. The contract is not free from coercion. However, if the consent is obtained by error,
then paragraph 20-22 is void. However, it is essential in English law to establish a legal
relationship. Anson said that contract law is a trade and business child and is the cause of the origin

73
(1889) 42 Ch d 424.
74
AIR 1978 SC 287.
75
AIR 1985 Kar. 265.

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of contract law. Although discomfort, hardship and liability are also taken into account, such
agreements do not constitute a contract. It does not mean that legal relations should be established.
It's for a friendly and social relationship.

Contract law is important for at least two reasons in the economic and social development of
societies. The division of first of all. The legal machinery through which free property and service
transfers are made available. Contract law is part of the exchange law regulating ways of
exchanging goods and services for money.

Therefore, as contract law is the most important for the agreements between government and
people and people between people. So, the consideration as an important element of contract must
be fair enough in the eyes of parties to the contract.

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BIBLIOGRAPHY

CASES

1. Abdul Aziz v. Masum Ali, AIR 1914 All 22.

2. Beswick v. Beswick, (1967) 2 All ER 1197.
3. Bolten v. Madden, (1873) LR 55.
4. Central Bank of India v. Traseema Compress Wood Manufacturing Co., AIR 1997 Bom.
225.
5. Chindambara Iyer v. Renga Iyer, AIR 1966 SC 193.
6. Combe v. Combe, (1851) 2 KB 215.
7. Currie v. Misa, (1875) 10 Ex 153, 162.
8. Curwen v. Milburn, (1889) 42 Ch d 424.
9. De La Bare v. Pearson, (1908) 1 KB 280.
10. Doraswami Iyer v. Arunachala Ayyer, AIR 1936 Mad 135.
11. Dunlop Pneumatic Tyre Co. Ltd. v. Selfiridge and Co. Ltd., (1915) AC 847.
12. Durga Prasad v. Baldeo, ILR (1880) 3 All 221.
13. Dutton v Poole, (1677) 2 Lev. 210: 83 ER 523.
14. Eastwood v. Kenyon, 9 LJ (QB) 409.
15. Fazalaldin Mandal v. Panchanan Das, AIR 1957 Cal 92.
16. Gregory & Parker v. Williams, (1817) 3 Mer 582.
17. Housing Society Ltd., (2003) 1 ICC 184 (mad).
18. Jamuna Das v. Ram Autar, (1911) 91 A 7.
19. Kedarnath v. Gouri Mohamed, ILR (1886) 14 Cal 64.
20. Khadi Gram Udyog Trust v. Shri Ram Chandraji Virajman Mandir, AIR 1978 SC 287.
21. Klaus Mittelbachert v. East India Hotel Ltd., AIR 1997 Del 201.
22. Krishna Lal v. Promila Bala, AIR 1928 Cal. 518.
23. Kshirodebihari Datta v. Mangobinda Panda, AIR 1934 Cal 682.
24. Kulasekara Perumal v. Pathakutty, AIR 1961 Mad. 405.
25. Lampleigh v. Brathwait, (1956) Hob. 105.
26. Lee v Muggeridge, (1813) 128 ER 559.

LAW OF CONTRACTS
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27. M.C. Chacko v. State Bank of Travancore, AIR 1970 SC 504.

28. Mangal Sen v. Mohd Husain, ILR (1915) 37 All 115.
29. McAlpine Construction Ltd. v. Panatown Ltd., (2001) 1 AC 518.
30. N. Devaraja Urs v. Ramakrishniah, AIR 1952 Mys 109.
31. Nawab Khwaja Muhammad Khan v. Nawab Hussaini Begum, (1909-10) 12 Bom. LR 638.
32. Perumal Mudaliar v. Sendanatha Mudaliar, AIR 1918 Mad 311.
33. Rajlukhy Debee v. Bhootnath Mookerjee, (1900) 4 Cal. WN 488.
34. Rana Uma Nath Bakshsh Singh v. Jang Bahadur, AIR 1938 PC 245.
35. Rann v. Hugnes, House of lords, (1778) 7 Term reports 350n (HL).
36. Re McArdle, (1951) Ch 699.
37. Rose Fernandez v. Joseph Gonsalves, ILR (1924) 48 Bom 673.
38. Shappu Ammal v. Subramaniyam, ILR (1910) 33 Mad 238.
39. Sindha v. Abraham, 9 LJ (AB) 409.
40. Smt. Narayani Devi v. Tagore Commercial Corporation Ltd., AIR 1973 Cal 401.
41. Subbu Chetti v Arunachalam Chettiar, ILR (1930) 53 Mad 270.
42. Thomas v. Thomas, (1842) 2 QB 851, 859.
43. Touche v Metropolitan Rly Warehousing Co., (1871) 6 Ch App 671.
44. Tulk v. Moxhay, (1919) 88 LJKB 861 (HL).
45. Tulsabai Nathudas and Others v. Narayan Ajabrao Raut, AIR 1974 Bom. 72.
46. Tweddle v. Atkinson, (1861) 1 BS 393.
47. Veeramma v. Appayya, Air 1957 AP 965.
48. Venkatchinnaya v. Venkatramaya, ILR (1881) 4 Mad 137.
49. White v. Bluet, (1853) 23 LJ Ex. 36.

BOOKS
1. Anson, Law of Contract (ed., A.G Guest, 23rd eds., 1971).
2. Avtar Singh, Law of Contract and Specific Relief Act (Eastern Book Company, 11th ed.,
2013).
3. Cheshire and Fifoot, The law of contract (7th eds.).
4. Corbin, Contract for the benefit of third person, (1930) 46 LQR 12.
5. Edwin Peel, The Law of Contract (Sweet & Maxwell, south Asian ed., 2017).
6. Pollock and Mulla, Indian Contract Act and Specific Relief Act (9th edition).

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7. Prabhat K. Gupta, Contract with Specific Relief Act (Central Law publications, ed., 1st ed.,
2007).
8. S. K. Kapoor, Contract and specific relief Act (Central Law Agency, 12th ed., 2010).
9. Sir Frederick Pollock, Pollock on contract 13th ed.

STATUTE

1. Indian contract act, 1872.

2. Specific Relief act, 1969.

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