TOPIC 4

LAWFUL CONSIDERATION AND OBJECT

CONSIDERATION:
The definition of consideration is careful thought or attention or compassionate regard for
someone or something.
Consideration is essential for a valid contract. It is the price for a promise – a quid pro quo
(which means "something for something"). It is the value received as incentive for the promise.
A contract without consideration is not binding on the parties.
Blackstone defined consideration as “the recompense given by the party contracting to the
other”.
Pollock took consideration to be “the price for which the promise of the other is bought, and the
promise thus given for value is enforceable”.
According to Section 2(d) of Contract Act 1872;
“When at the desire of the promisor, the promisee or any other person who 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.”
It can be defined as When a party to an agreement promises to do something, he must get
something in return. This something in return is consideration. The analysis of the above
definition reveals that a consideration may be the value by which promise is bought.
Consideration may be following:
 An act i.e. doing something
 An abstinence or forbearance i.e. abstaining or refraining from doing something.
 A promise in return (of another promise)
Example 1: Azam promises Babar to guarantee payment of price of the goods which Babar sells
on credit to Misbah. Here selling of goods by Babar to Misbah on credit is consideration for
Azam’s promise.
Example 2: Adeel asks Habib not to sue Arslan for a year for his debts and promises in case of
default of Arslan, Adeel would be liable. Here Habib not filing a suit for a year is abstinence,
which is a sufficient consideration for Adeel.
Example 3: Ameer promises to deliver iPhone to Burhan and Burhan promises to pay Rs.
85,000 on delivery. Here the consideration for Ameer will be Rs. 85,000 on delivery and
consideration for Burhan will be delivery of goods.

Essentials of Consideration:
In accordance with Section 2(d), the essential features of a valid consideration are as follows:
 1. It is given ‘at the desire of the promisor’;
2. It may move from any person;
3. It can be past, present or future consideration;
4. It must possess value.
5. It must be real and not be illusory;
6. It must be something other than the Promisor’s existing obligation;
7. It must be lawful.

1. Desire of the promisor

An act or abstinence of promise constituting consideration must have been done or made at the
desire or request of the promisor. Thus, an act done at the desire of a third party or without the
desire of the promisor cannot constitute a valid consideration.
This essential does not require that the consideration must confer ‘some benefit’ on the promisor;
the benefit may accrue to a third party.
Example 1: Adeel saves Arslan’s goods from fire without being asked to do so. Adeel cannot
demand payment for his services.
Example 2: B promised to pay a commission on goods sold in his market if D constructed a
market in that area. Later, the collector requested D to construct the market and D constructed
the market on his request. D demanded commission from B. Held, the promise was not
enforceable because the market was not constructed at the desire of B.
Example 3: At the request of the collector of the District, X spent money and constructed some
shops. Y, a shopkeeper who occupied one of those shops, promised to pay to X commission on
the sale of goods made by him as consideration for the money X spent on the construction. X
sued Y to recover the promised commission. Since, X had not constructed the shops at the desire
of the Y (the promisor here); there was no valid consideration as required by Section 2 (d). Thus,
the agreement was void and Y was held not liable to pay the promised amount.
2. Move / from promisee or any other person
It does not matter who furnishes the consideration. The consideration may be moved by the
promisor himself or any other person including. This means that even a stranger to the
consideration can sue on a contract, provided he is a party to the contract.
Example 1: Arif transferred certain property to his daughter Humera with a direction that
Humera should pay Noman annuity. On the same day Humera executed a deed in writing in
favour of Noman and agreed thereby to pay the annuity. Later, Humera refused to pay the
annuity on the plea that no consideration had moved from Noman. Here Noman is entitled to
maintain suit because a consideration not necessarily move from the promisee, it may move from
any other person (by Arif in this case).
Example 2: X – an old woman, gave away certain immovable property to her daughter through
by a registered deed. She also directed her daughter to pay an annuity to Y – the old woman’s
sister. The same day, the daughter executed a deed in writing and undertook to pay annuity to Y.
Subsequently, the daughter failed to pay annuity and Y brought a suit for its recovery. The
daughter pleaded that she was not liable because no consideration had moved from Y. The Court
held that the words’ the promisee or any other person’ in Section 2(d) made it clear that
consideration need not move from the promise only and Y was entitled to maintain the suit for
recovery.
3. Consideration may be past, present or future
The consideration may be past (done or abstained from doing), present (does or abstains from
doing) or future (promises to do or to abstain from doing).
a) Past: Consideration is the price for a promise and thus, it is usually given in response to
and as an inducement for the promise. If the consideration is given earlier than the date of
promise by the promisor, then it is known as past consideration.
For instance, the promise to pay a debt that one is already under an obligation to pay is
past consideration. Past consideration is usually not considered to be consideration for the
new promise because it has not been given in exchange for the ‘new’ promise. It is not
valid unless it is given by the promisee, ‘at the desire of the promisor’
Example 1: Akram renders some service to Wasim in the month of August. In September
Wasim promises to compensate Akram an amount of Rs. 10,000 for the services he rendered to
him. Past services amount to past consideration. Akram can recover Rs. 10,000 from Wasim.
Example 2: X renders service to Y during months of agricultural harvesting. Y promises to pay
Rs 1000 to X for his past services when the new crop is being sown in the fields. The past
services of X constitute valid consideration.
English law does not recognize past consideration. However, the English law treats an act done
at request to be good consideration for a subsequent promise. In the case of Lampleigh vs.
Brathwait, X – guilty of committing murder, requested Y to try and get him a pardon from the
King. Y travelled at his own expense and put in effort to secure a pardon. X promised to pay him
a certain sum of money but refused subsequently. It was held that Y had a right to enforce the
promise.
b) Present (executed): The consideration which moves simultaneously with the promise is
called present or executed consideration. For instance, in cash sales, the promise to pay
the price and promise to deliver the goods are performed at the same time. Executed
consideration is good consideration.
Example 3: Waqar sells his car for Rs. 1 million and delivers the car at the time of payment.
Here the consideration is moving simultaneously with the promise and is called present
consideration.
Example 4: A sells a book to B and B pays the price immediately. It is a case of present
consideration
Example 5: X goes to a shop and buys a bottle of water from there. He also pays the price on the
spot.
c) Future (Executory): If the consideration for a promise moves after the formation of the
contract, it is called future or executory consideration. It is a promise to do, abstain or
suffer which is made by one party in return for a similar promise from the other party.
Even is the promise given for a promise is dependent on a condition, it serves as valid
consideration.
Example 6: Akhtar promises to deliver certain goods to Shoaib after 5 days and Shoaib promises
to pay after 5 days from the date of delivery. Consideration in this case is future consideration.
Example 7: X promises to landscape the garden of Y and Y agrees to pay X as long as the
landscape plans are approved by Z, a third party. Y’s promise is valid consideration for X’s
promise.
4. Consideration to have some value
Consideration must have some value in the eyes of law. A worthless act cannot satisfy the spirit
of the definition. There is no requirement for the adequacy of consideration but it should have
some value. There should be something in return and this something in return need not
necessarily be equal in value to something given. It is for the parties to consider what is adequate
consideration for them.
A contract is not invalid merely due to inadequacy of consideration. However, the Courts may
look into inadequacy of consideration to ascertain whether the consent of a party was free or not.
Consideration need not be adequate but it must be sufficient in the eyes of law.
Example 1: Adeel, with his free consent, agrees to sell his car worth Rs. 3 million for Rs. 1
million to Saima. The contract is valid.
5. Consideration must be real
The consideration must be real and not illusory. The following shall not be valid consideration:
a) Physically impossible;
b) Legally impossible;
c) Uncertain consideration; or
d) Illusory consideration.
Example 1: Azam engages Babar to work as an accountant in his office and promises to make
him happy. This promise is not enforceable because the consideration is not real but illusory.
Example 2: Azam promises to put life into Babar’s dead wife and Babar promises to pay Rs. 1
million. This agreement is void because consideration is impossible to perform and not real.
Example 3: 75,000 per month. This is a real consideration for both the parties.
Example 4: A promise to do something which is too vague and uncertain, e.g. a promise to pay
such remuneration “as shall be deemed right” is no consideration in the eyes of law.
Example 5: In the case of White v Bluett, X – the son of Y, used to constantly complain to his
father that his brothers had received more property than X. Y promised to release him from an
outstanding debt if X promised to stop complaining. It was held that the promise by X to not
bore Y in the future did not constitute good consideration for Y’s promise to release him from a
debt.
The following consideration are also regarded real and valid:
a) Forbearance to sue at the instance of the debtor is sufficient consideration but there must
be existing and lawful liability; and
b) The compromise of a disputed or doubtful claim is a good consideration for the fresh
agreement of compromise.
‘Forbearance to sue’ refers to a scenario where a party has a right of action against the other
party or a third person and he refrains from bringing action in consideration of promise by the
other or third party. Forbearance to sue is valuable consideration provided such action does not
give rise to an illegal contract.
Example 6: A, has a right to sue his debtor B for Rs. 5,000, but in fact forbears as B agreed to
pay Rs. 100 more. Such forbearance is a valuable consideration for the promise, being in the
nature of abstinence and a can later on sue B for Rs. 5,100.
Example 7: H sued S for breach of contract. Both decided to settle the matter out of court by
entering into new agreement with new terms and withdrawing the earlier suit from the court.
Held, the compromise of disputed claim is valid consideration.
6. Something which the promisor is not already bound to do
The consideration must be something which the promisor is not already bound to do because a
promise to do what a promisor is already bound to do adds nothing to the existing obligation.
Example 1: Hamid was summoned to give evidence in a court where Sajid was in litigation.
Sajid promised to pay certain amount to Hamid for giving the evidence. Later, Sajid refused to
pay. Hamid sued and failed. Held, the consideration was not valid as it was Hamid’s duty to give
evidence.
Example 2: In case of Collins vs. Godefroa, X receives summons to appear before court of law
as a witness for Y. He is promised certain amount of money by Y for appearing in Court. The
promise to pay X is void because of lack of consideration for Y as X was already under a legal
duty to appear as a witness before the Court.
7. Lawful
The consideration must neither be unlawful nor opposed to public policy.
Example 1: Azam promises Babar to pay Rs. 100,000 to beat Sarfaraz. Babar beats Sarfaraz and
claims Rs. 100,000 from Azam. Azam refuses to pay. Babar cannot recover because the
agreement is void on the ground of unlawful consideration.
Example 2: Azam promises Babar to obtain an employment in the public service and Babar
promises to pay Rs. 100,000 to Azam. The agreement is void on the ground of unlawful
consideration.

Exception to Consideration:
The following are exceptional situations when a contract may be valid even without
consideration:
1. Natural love and affection [Section 25(1)]
Agreements made on account of natural love and affection without consideration will be valid if:
 expressed in writing,
 registered under the law,
 made on account of natural love and affection, and
 between parties standing in a near relation to each other.

Example: Azam, for natural love and affection; promises to give his son, Babar, Rs. 10,000.
Azam puts his promise to Babar into writing and registers it. This is a valid contract.
2. Promise to compensate past voluntary services [Section 25(2)]
Such promise made without consideration is valid if:
 it is a promise to compensate and
 the person who is to be compensated has already done something voluntarily or has done
something which the promisor was legally bound to do.
Contract is valid in such case if all of the following present.
1. The service should have been rendered voluntarily for the promisor;
2. The promisor must be in existence at the time the services were rendered;
3. The promise must be to compensate a person who has himself done something for the
promisor and not to a person who has done nothing for the promisor;
4. The intention of the promisor ought to be to compensate the promisee;
5. The promisor to whom the service has been rendered need not be competent to contract at
the time the service was rendered; and
6. The service rendered must also be legal
Example 1: Ameer finds Bushra's purse and gives it to her. Bushra promises to give Ameer
Rs.5,000. Now this promise of Bushra is a contract.
Example 2: Azam supports Babar’s infant son. Babar promises to pay Azam’s expenses in so
doing. This is a contract.
Example 3: A saves B from drowning in the river, B promises to pay Rs. 10,000 to A. This is a
valid contract.
3. Time barred debt [Section 25(3)]
A debt becomes time-barred if it is not claimed for a period of three years from the date it
becomes due. A time-barred debt cannot be recovered and therefore a promise to repay such a
debt is without consideration.
A promise to pay time barred debt is enforceable if:
 it is made in writing,
 it is signed by the debtor or his agent, and
 it relates to a debt which could not be enforced by a creditor because of law of limitation.
Example: Adeel owes Rs. 1,000 to Kashif but the debt has become time barred. Adeel signs a
written promise to pay Kashif Rs. 900 of this time barred debt. It is a valid contract.
4. Gifts
As between the donor and the donee, any gift actually made will be valid and binding even
though without consideration. In order to attract this exception, there need not be natural love
and affection or nearness of relationship between the donor and donee. The gift must, however,
be complete and it is said to be completed when possession is given to the donee by the donor.
The gifts which are accepted by the donee are called completed gifts and are valid.
Example 1: Arif transferred some property to Haseeb by a duly written and registered deed as a
gift. This is a valid contract even though no consideration was given by Haseeb.
Example 2: A gifted a watch to B on his birthday. Later A cannot get his watch back on the
ground that there was no consideration for him
5. Contract of agency [Section 185]
A consideration is not necessary for a contract of agency.
Example: Arslan promises to sell Faisal’s house on his behalf. An agreement between Arslan
and Faisal is valid even without consideration.
6. Contract of bailment
A consideration is not necessary for a contract of bailment i.e. gratuitous contract of bailment.
Example: Zaheer lends a laptop to Imran to prepare assignment without any charge. This is a
valid contract.
7. Charitable subscription
Where the promisee on the strength of the promise makes commitments i.e. changes his position
to the detriment.
Example 1: Hussain promised to subscribe Rs. 5,000 to a fund started for construction of
Community Hall. A contractor was entrusted with the construction, which in now in process.
Hussain is liable to pay the amount.
Example 2: Zahra promised to subscribe Rs. 5,000 to a fund started for rebuilding a mosque but
no steps had been taken to carry out the repairs. Held, Zahra was not liable to pay any amount.
8. Contract of guarantee [Section 127]
Consideration received by the principal debtor is sufficient for the surety and it is not necessary
to result in some benefit to the surety himself.
Example: Babar requests Arslan to sell and deliver to him goods on credit. Arslan agrees to do
so, provided Adeel will guarantee the payment of the price of the goods. Adeel promises to
guarantee the payment in consideration of Arslan’s promise to deliver the goods. This is
sufficient consideration for Adeel’s promise.

Privity of contract
Privity of contract means the relationship subsisting between the parties who have entered into
contractual obligations. Therefore, only parties to the contract may sue or may be sued under the
contract. However, there are few exceptions (not examinable) to this rule, when a stranger to
contract (non-party to the contract) may sue for enforcement of legal rights or obligations arising
under the contract
Basic Rule
A person may be stranger to the consideration but he should not be a stranger to the contract
because doctrine of ‘privity of contract’ states that a stranger to a contract cannot sue, only a
person who is party to the contract can sue on it.
Example: Dunlop sold tyres to D, on the condition that he will not sell the tyres to the public
below Dunlop’s list price. D sold tyres to S on this condition. S sold the tyres below list price.
Held Dunlop could not sue S as he was a stranger to the contract.

LAWFUL / UNLAWFUL OBJECT AND CONSIDERATION

Circumstances where object or consideration is unlawful:
The situations, under which the consideration or object is considered to be unlawful, and void.
Collateral agreement to such agreement is also void. No suit can be filed for recovery of any
amount under such agreements.

Legality of object and consideration [Section 23]

The consideration or object of an agreement is lawful unless:
 1. It is forbidden by law
2. It is of such a nature that if permitted would defeat the provisions of any law
3. It is fraudulent
4. It involves an in injury to the person or property of another
5. The court regards it as immoral, or opposed to public policy.
The analysis of above definition is given below:
1. Forbidden by law
If the law of the state prohibits an object or the consideration of an agreement then such
agreements are void. An act is forbidden by law when it is punishable by the law of the country.
The effects of such agreements are following:
 The collateral transactions to such an agreement also become tainted and hence cannot be
enforced.
 No action can be taken for the recovery of money paid or property transferred under such
an agreement and for the breach of any such agreement.

Example 1: Ameer promises to obtain for Faqeer an employment in the public service, and
Faqeer promises to pay Rs.1,000/- to Ameer. The agreement is void as the consideration for it is
unlawful.
Example 2: Abid, Sajid and Amjad agreed to divide the cash obtained by tax refund on the basis
of fake documents. Held, the object was unlawful and agreement is void. They also agreed to
invest the amount in the business of Abid for mutual benefit for a year. After a year when Sajid
and Amjad demanded their share, Abid refused to pay. Held, the collateral transaction to invest
was also void and they could not sue for the recovery or breach.
2. Defeats the provisions of any law
If the object or the consideration of an agreement is of such nature that, if permitted, it would
defeat the provisions of any law, the agreement is void.
Example: Defeats the provisions of any law Qadir fails to pay his loan and his house is
auctioned for recovery. According to law, the defaulter (Qadir) is prohibited to bid so he
appoints an agent to bid for him and later transfer the house. The agreement is void as the
transaction, in fact, is a purchase by the defaulter, and would so defeat the object of the law.
3. Fraudulent
Where the object of an agreement is fraudulent the agreement is void.
Example 1: Abid, Sajid and Amjad enter into an agreement of the division among them of gains
acquired by them by fraud. The agreement is void, as its object is unlawful.
Example 2: Azam, being agent for a landed proprietor, agrees for money, without the
knowledge of his principal, to obtain for Babar a lease of land belonging to his principal. The
agreement is void, as it implies a fraud of concealment by Azam, on his principal.
4. Involves or implies injury
The object of an agreement will be unlawful if it tends to injure a person or the property of
another. Property can either be movable or immovable.
Example: Involves or implies injury Abid promised to pay Rs.100,000 to Sajid on agreeing to
publish a defamatory article against Arslan. It was held that Sajid could not recover the amount
because the agreement was void as it involves injury to a person.
5. Court regards it as immoral or opposed to public policy
Where the object or consideration of an agreement is such that the court regards it as immoral or
opposed to the public policy then the agreement is void.
Example 1: Abid, who is guardian of Tanveer, promises to exercise his influence, as such, with
Tanveer in favour of Farhan, and Farhan promises to pay Rs 1,000 to Abid. The agreement is
void, because it is immoral.
Example 2: A married woman was given money to obtain divorce from her husband and the
marry the lender. Later, the woman refused to take divorce. The agreement is void, though the
taking such divorce may not be punishable under the law.

Where object or consideration is partly unlawful [Section 24, 57 and 58]:

Non–separable promises
When an agreement contains things to do legal as well as illegal and the legal part cannot be
separated from illegal part, the whole agreement is illegal and void.
Example: Azam promises to superintend, on behalf of Babar, a legal manufacture of indigo, and
an illegal traffic in other articles. Babar promises to pay to Azam a salary of Rs. 30,000 a month.
The whole agreement is unlawful and void because it cannot be ascertained as to what was due
on account of legal manufacture and what was due on account of illegal trafficking.
Separable promises
When an agreement contains things to do legal as well as illegal and the legal part can be
separated from illegal part, the legal part is a contract and the illegal part is a void agreement.
Example: Azam and Babar agree that Azam shall sell Babar a house for Rs.10,000,000 but that,
if Babar uses it as a gambling house, he shall pay Rs.50,000,000 for it. The first set for reciprocal
promises, namely, to sell the house and to pay Rs.10,000,000 for it, is a contract. The second set
is for an unlawful object, namely, that Babar may use the house as a gambling house and is a
void agreement.
Alternative promise being illegal
In the case of an alternative promise, one branch of which is legal and the other illegal, the legal
branch alone can be enforced.
Example: Akram and Wasim agree that Akram shall pay Wasim Rs.1,000 for which Wasim
shall afterwards deliver to Akram either rice or smuggled opium. This is a valid contract to
deliver rice, and a void agreement as to the opium.

Agreements opposed to public policy:

An agreement is said to be unlawful if the court regards it as opposed to public policy. Following
are the agreements which are held to be opposed to public policy:
1. Trading with enemy
A person cannot enter into an agreement with an alien enemy during the period of war on the
ground of public policy. This is because the further performance of the agreement involves
commercial interaction with the enemy and the continued existence of agreement would confer
upon the enemy an immediate or future benefit. Contracts entered before the declaration of war
are either suspended or terminated during the period of war.
Example: Imran agrees to buy goods from Narendra, a citizen of a country at war with Pakistan.
The agreement is void.
2. Stifling prosecution
Criminals should be prosecuted and punished; hence an agreement for stifling prosecution is
illegal. It is in public interest that if a person has committed crime he must be prosecuted and
punished.
Example: Anjum, who knows that Kanwar has stolen goods amounting to Rs.500,000, receives
Rs.100,000 from Kanwar in consideration of not exposing him. This agreement is illegal being
opposed to public policy.
3. Sale of public offices
The agreements of sale of public offices are illegal as such agreements, if enforced, would led to
inefficiency and corruption on public life. Similarly, an agreement to pay money to a public
servant to induce him to act corruptly or to retire and thus make way for the appointment of
promisor are void on the ground of public policy.
Example: Sale of public offices Ameer promises to obtain for Faqeer an employment in the
public service, and Faqeer promises to pay Rs.1,000/- to Ameer. The agreement is void as the
consideration for it is unlawful.
4. Restraint of parental rights
An agreement which prevents a parent to exercise his right of guardianship is void. A father is
entitled by law to the custody of his child. He cannot enter into an agreement which is
inconsistent with his duties arising out of such custody.
Example: Asif entered into an agreement with his in-laws to never meet his children if they pay
him Rs. 5 million. The agreement is void.
5. Restraint of personal liberty
An agreement which unduly restricts the personal liberty of a person is void as law generally
allows all persons with a freedom to enter into any contract they please.
Example: An employer and employee agree that employee cannot enter into any contract for
five years whether personal or professional in nature. The agreement is void as it unduly restricts
the personal liberty of a person.
6. Agreement to create monopoly
An agreement to create monopoly is void as this will impair consumer sovereignty and result in
high prices for law quality of goods and services.
Example: nearby fuel stations agree to charge price above the price fixed by regulatory
authority. The agreement is void.
7. Marriage brokerage agreement
An agreement in which a person promises for reward to procure marriage for another is void
being opposed to public policy.
Example: Asif offered Basit to pay him Rs. 1 million if he procures a woman to marry his
brother. The agreement is void.