PROJECT REPORT ON

ELEMENT OF CONSIDERATION AND GENERAL ISSUE INVOLVED

WITH STANDARD FORM OF CONTRACT

IN THE COURSE

CONTRACT & SPECIFIC RELIEF

SUBMITTED BY

PRINCELIE LESLIE FEREIRA

ROLL NO & PROGRAM NAME

27- FYLLB - A

UNDER THE GUIDANCE OF

PROF. POOJA KHANDELWAL

ACADEMIC YEAR

2023-2024
 Acknowledgement

I the undersigned Mr. Princelie Leslie Fereira here by, declare that the work
embodied in this project work titled entitled “DISCUSS THE ELEMENT OF
CONSIDERATION & ITS IMPORTANCE IN A CONTRACT & WHAT ARE THE
GENERAL ISSUES INVOLVED WITH STANDARD FORM OF CONTRACT?”
forms my own contribution to the project work carried out under the
guidance of PROF. Pooja Khandelwal it is a result of my own project
work.

Princelie Leslie Fereira

Name and signature of the learner

Certified by
Prof. Pooja Khandelwal

Name and signature of the Guiding Teacher

Date: 20/Dec/2023
Place: Mumbai, Maharashtra
INDEX
 Sr. PAGE
TOPICS
No NUMBERS
1 Meaning of contract 1
2 What is Consideration 1
3 Nature of Consideration 2
4 Essential elements of a valid consideration 2-6
4.1 Consideration given at the desire of the promisor 2
4.2 Case law Durgaprasad v. Baldeo, ILR (1880) 3 All 221 3
4.3 Consideration given by the promisee or any other person 3
4.4 Case law Dulton v. Poole, (1677) 2 Lev 210 4
4.5 Consideration can be Past, Present or Future 4
4.6 An act, abstinence, or promise by the promisee forms consideration. 5
4.7 It is not necessary that Consideration must be adequate. 5
4.8 Consideration should be real. 5-7
4.9 Consideration must be Lawful. 6
5 Exceptions to agreements without consideration 6-7
6 What are the general issues involved with standard form of contract 7
7 Introduction 7
8 Reasons for use of standard form of contract 8
9 Issues involved with standard form of contract 8-9
10 Case law: Olley v Marlborough Court Ltd [1949] 1 KB 532 9
11 Conclusion 9-10
12 Suggestions 10
13 Bibliography and Webliography 11

Q1) DISCUSS THE ELEMENT OF CONSIDERATION & ITS IMPORTANCE IN

CONTRACT?

Meaning of contract
A contract is a legally enforceable agreement where two parties make mutual promises. Each
party is obligated by the promises they make in the contract.

Contract.-According to section 2(h) of the Indian Contract Act, 1872-"An agreement enforceable
by law is a contract."

According to Anson: "A Contract consists in an actionable promise or promises. Every such
promise involves two parties a promisor and promisee and an expression of a common intention
and of expectation as to the act or forbearance promised."

All agreements are not enforceable by law and therefore, all agreements are not contracts. Some
agreement may be enforceable by law and others are not. For example, An agreement to sell a
radio set may be a contract but an agreement to go to see a movie may be a mere agreement and
not enforceable by law.

This contract is a bilateral transaction between two or more person. Every contract has to go
through several stages beginning with the stage of negotiation during which the parties discuss
and negotiate proposals and counter proposals as also the consideration resulting finally in the
acceptance of the proposals.
What is a Consideration?

Consideration is the price of the contract, and it can be right, interest or responsibility etc.
According to section 2(d) of the Indian Contract Act "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;" In simpler terms, consideration is the price that the
promisee pays (in terms of an act, abstinence, or a promise) for the promisor’s obligation1. It’s
an essential element of a contract

Consideration can be either doing something (like paying money) or refraining from doing
something. For example: If you promise to give Rs10,000 to B in exchange for B selling you his
mobile, that's a positive action. On the other hand, if one party agrees not to do something in
exchange for a promise from the other party, it's considered negative, but it still forms a valid
part of a contract. This way, one party can gain benefits because the other refrains from some
action.
As defined by Sir Frederick Pollock, consideration is an act or forbearance of one party, or the
promise thereof, is the price for which the promise of the other is bought, and the promise thus
given for value is enforceable.
Nature of Consideration

There are mainly two natures of consideration as derived from the types of contracts given on the
basis of the nature of consideration. They are as follows:

Unilateral: In a unilateral contract, the consideration moves in only one direction after the
contract is formed.

Bilateral: In a bilateral contract, the consideration moves in either direction after the contract is
formed.

Essentials Elements of a Valid Consideration

The essentials of a valid consideration are derived from the definition of ‘consideration’ given
under section 2(d) of the Indian Contract Act, 1872. They are:

1) Consideration given at the desire of the promisor.

2) Consideration given by the promisee or any other person.
3) Consideration can be past, present or future.

4) An act, abstinence, or promise by the promisee forms consideration.

5) It is not necessary that consideration must be adequate.
6) Consideration should be real.
7) Consideration must be lawful.

1) Given at the desire of the promisor.

It is essential that the consideration must have been at the desire of the promisor, rather than
merely voluntarily or at the instance of third party. The act or abstinence must be done at the
desire of the promisor. An act done at the desire of a third person will not constitute a good
consideration.

Case law: Durgaprasad v. Baldeo 1

Facts of the case: The case involves the District Authority of Etawah and the complainant. The
District Authority proposed a market plan, and the complainant, in response, set up two markets
named Hume Ganj and Ram Ganj. The complainant spent a significant amount on constructing
shops and buying land to fulfill the request.

To formalize their arrangement, both parties agreed on a 6-anna commission in 1875. The
defendants, who operated as commission specialists in lookout shops, signed a contract. The
complainant, following advice from the Municipal Corporation, registered the commission
agreement to ensure its legality and security for receiving promised commissions.

However, a problem arose when the defendants refused to register the agreement, leading to a
dispute. The plaintiff had to file a lawsuit to clarify and enforce his rights. The case initially went
to the lower court, but dissatisfied with the decision, the plaintiff appealed to the high court.
Issues: - In this case, two primary issues emerged:

1. Determining whether the mentioned agreement qualifies as a legally enforceable contract.

2. Assessing whether the said contract can indeed be enforced under the law.

Judgement: -The plaintiff's requests were rejected, and the judge dismissed the case. The court
ruled that the arrangement didn't qualify as a contract under section 2(d) of the Indian Contract
Act, 1872, due to the absence of substantial consideration. Section 25 of the Act deems the
transaction flawed for lacking consideration. The court stated that an appeal wasn't possible as
the law emphasizes consideration as a crucial element for a contract, leading to the dismissal of
the appeal.

2) Consideration given by the promisee or any other person.

In India, it's possible for the consideration for a promise to come not from the promisee but from
a third person, who isn't considered a third party to the contract. For instance, if A promises to
give his watch to B, and X provides the consideration of Rs. 2,000 to A instead of B, it remains a
valid contract in India. However, in England, this wouldn't be recognized as a valid contract
because the consideration for A's promise to B was not provided by B, the promisee, but by
someone else.

________________
1. Durgaprasad v. Baldeo, ILR (1880) 3 All 221

Case law: Dulton v. Poole2

Facts of the Case: In Dutton v. Poole, the defendant's father intended to sell timber trees. The
defendant promised to pay £1000 to his sister, Grizil (Mrs. Dutton), on the condition that their
father refrained from cutting down the trees. Mrs. Dutton, along with her husband, sued for
breach of this promise.

Issues Involved: The primary issue was whether a third party, in this case, Mrs. Dutton, who
was a sister to the defendant and not a direct party to the contract, could maintain an action for
breach of contract. The case explored the applicability of the doctrine of privity of contract and
the recognition of a stranger as a beneficiary.

Judgement: The court held that Mrs. Dutton, despite being a stranger to the contract, could
maintain the action as a beneficiary due to the very close and affectionate relationship between
her and the promisee (her father). The court disregarded the strict doctrine of privity of contract,
emphasizing the natural love and affection that constituted consideration in the family
relationship. While Mrs. Dutton was a stranger to the contract, she was not a stranger to the
consideration, and therefore, she was deemed to have provided consideration, making her
entitled to sue for breach of the promise.

3) Consideration can be past, present or future.

The Indian Contract Act recognizes past, present, and future considerations, whereas English law
does not acknowledge past considerations.

i) Past Consideration: Past consideration occurs when a party provides consideration for a
present promise in the past, i.e., before the promise date. Example: A renders a service to B,
which B desired. After a week, B promises to pay Rs. 1000 to A for the service. This is
considered past consideration, and A is entitled to the promised amount.

ii) Present Consideration: Present consideration is when the consideration for a promise is
provided simultaneously with the promise. Example: A cash sale.

______________
2. Dulton v. Poole, (1677) 2 Lev 210

iii) Future Consideration: Future consideration involves a promise to do or give something in the
future in return for the current promise. Example: If A promises to sell 100 quintals of rice from
the upcoming crop at Rs. 2800 per quintal to B, and B promises to make the payment within a
week of its receipt, it constitutes a case of future consideration.

4) An act, abstinence, or promise by the promisee forms consideration.

Another aspect of valid consideration is that it can take the form of an act, abstinence, or promise
by the promisee. An act involves doing something that one is not legally obligated to do, while
abstinence refers to refraining from exercising a legal right. On the other hand, a promise entails
making a commitment to perform an action in the future.

Section 2(d) of the Indian Contract Act specifies that consideration can be in the form of "an act
or forbearance or promise." This implies that consideration can assume various forms, and as
long as it encompasses an act, abstinence, or promise by the promisee, it qualifies as valid
consideration.

5) It is not necessary that consideration must be adequate.

Consideration refers to something given in return. It's important to note that the value of what is
given need not necessarily be equal to what is received.

According to the law, a contract should be backed by consideration. If there is consideration, the
law is not concerned with its adequacy.

For instance, if A chooses to sell his car valued at 1,00,000 for 10,000 to B, it signifies A's free
consent, and the agreement will be deemed a contract.

6) Consideration should be real.

Real consideration implies that the consideration should not be physically or legally impossible.
Consideration becomes unreal in cases of physical or legal impossibility or uncertainty.

Physical Impossibility: If a promise involves doing something physically impossible, it is not

considered real. For instance, if A promises to pay B ₹1,00,000 if B can run 200 km in 5
minutes, it is not valid consideration because it is physically impossible.

Legal Impossibility: Promises to do things prohibited by law also render consideration invalid.
For example, if A enters a contract with B to pay ₹5,00,000 if B murders C, the consideration is
illegal and the contract cannot be executed.

Uncertain Consideration: Consideration must be certain for an agreement to be enforceable. For

instance, if a dentist states that he will charge either ₹10,000 or ₹6,000 for his services, it
represents uncertain consideration, making it difficult to carry out due to the uncertainty about
the exact amount.

7) Consideration must be Lawful.

Consideration must adhere to legality and not contradict public policy or be prohibited by law.
This implies that consideration should not involve any illegal or immoral actions and must align
with the prevailing laws.

Section 24 of the Indian Contract Act specifies that the consideration or object of an agreement
must be lawful. If the consideration or object of a contract is unlawful, the contract is void.
Hence, consideration must be legal and not infringe upon any laws or public policies.

For instance, if A promises to pay Rs. 10,000 to B to harm C physically, it would constitute an
illegal consideration. Accepting such consideration would be inappropriate for B because if he
does harm C and A refuses to pay, he cannot seek legal recourse to recover the amount.

 Exceptions to Agreements Without Consideration [Section 25]

According to Section 25 of the Indian Contract Act, 1872, agreements without consideration are
generally considered void. However, specific exceptions exist where such agreements are
deemed valid:

1) Agreements Based on Natural Love and Affection:

As outlined in Section 25(1), agreements lacking consideration are valid if made in writing and
stem from natural love and affection between closely related parties. This implies that
agreements grounded in family bonds, such as gifts between relatives, do not necessitate
consideration for validity and enforceability.

2) Compensation for Past Voluntary Services:

Section 25(2) establishes that agreements without consideration can be valid if they promise to
compensate, wholly or partially, an individual who has voluntarily performed a service for the
promisor. This means that a subsequent promise to compensate for a voluntarily rendered
service, even without consideration, may be legally valid.

3) Time-Barred Debts:
Under Section 25(3), agreements without consideration are recognized as valid if they involve a
promise to settle a time-barred debt. A time-barred debt is one for which the legal remedy to
recover it through court action is barred by the law of limitation. In such cases, a subsequent
promise to pay the time-barred debt, even without consideration, may be considered legally
valid.

2) WHAT ARE THE GENERAL ISSUES INVOLVED WITH STANDARD FORM OF

CONTRACT?

 Introduction

A standard form contract is a pre-written agreement with terms and conditions that are non-
negotiable, typically drafted by one party and presented for the other party's signature. These
contracts are also referred to as adhesion contracts or boilerplate contracts.

In India, the recognition of standard form contracts is found in the Indian Contract Act, 1872.
Although the Act doesn't provide a specific definition for such contracts, it acknowledges their
existence. According to Section 23 of the Act, any contract involving unfairness,
unconscionability, or being against public policy is deemed void. This provision extends to
standard form contracts, and any clause within them that is considered unconscionable or against
public policy can be declared void.

Examples of standard form contracts include agreements with insurance companies, purchasing a
washing machine, signing up for email services, and using websites.

The Indian contract system does not specifically distinguish between Standard Form Contracts
(SFCs) and commonly recognized agreements. SFCs fall under the legal framework established
for prevalent contracts in the Indian Contract Act, 1872. Given the substantial commercial
advancements, these contract types have become commonplace and are now executed in
significant numbers.

 Reasons for use of Standard Form of Contract

1. Convenience: Standard form contracts provide pre-determined terms that can be easily
accepted or rejected without the need for time-consuming negotiations. This is especially
beneficial in routine or standardized transactions, saving time and resources.
2. Familiarity: These contracts are widely used and accepted in specific industries or markets.
Parties may prefer using a standard form contract they are familiar with rather than negotiating
new terms or dealing with an unfamiliar document.

3. Perceived Lack of Bargaining Power: In certain situations, parties may believe the other party
holds a stronger position, leaving them with limited leverage to negotiate more favorable terms.
Accepting a standard form contract might be viewed as the only practical option, even if the
terms are not entirely satisfactory.

4. Lack of Legal Expertise: Some individuals may lack the legal expertise required for effective
contract negotiation or drafting. Using a standard form contract ensures that basic terms and
provisions are covered without the need for legal intricacies.

5. Cost: Negotiating or drafting a customized contract can be expensive, particularly for small
businesses or individuals. Opting for a standard form contract may be a more cost-effective
solution in these cases.

 Issues involved with Standard form of Contract.

1. Lack of Negotiation: Pre-drafted terms: The fixed nature of standard forms limits the weaker
party's ability to influence terms, potentially resulting in clauses favouring the stronger party.

2. Unfair Terms and Conditions: Unconscionable clauses: Standard forms may contain clauses
that unreasonably limit liability, restrict remedies, or impose burdensome obligations on the
weaker party, verging on unconscionability.

3. Lack of Transparency: Dense and complex language: The use of dense legal language makes
it challenging for the weaker party to fully comprehend their rights and obligations.

4. Limited Awareness: Take-it-or-leave-it approach: The "take-it-or-leave-it" stance leaves the

weaker party with little choice, often leading to acceptance without a complete understanding or
informed consent.

5. Difficulty in Challenging Terms: Costly legal battles: Contesting unfair terms can be
expensive and time-consuming, acting as a deterrent for weaker parties seeking legal recourse.

6. Potential for Misrepresentation: Hidden costs or fees: Crucial details, such as concealed costs
or fees, may be obscured within intricate terms, potentially misguiding the weaker party.
7. Ethical Concerns: Exploiting vulnerabilities: The use of standard forms raises ethical concerns
regarding the potential exploitation of vulnerabilities in weaker parties, particularly those lacking
legal knowledge or bargaining power.

Case law: Olley v Marlborough Court Ltd3

Facts: Olley, a guest at the defendant hotel, paid in advance for a week's stay. A notice in her
room disclaimed the hotel's responsibility for lost items unless handed over. After depositing her
key at the reception, it was taken, and her room was subsequently burglarized.

Issues: Olley alleged negligence by the hotel in safeguarding guest keys, implying a duty to care
for her property. She argued that the hotel's failure constituted a breach of an implied contract
term. The hotel countered, citing the visible notice in guest rooms, claiming an effective
exclusion of liability. They also argued contributory negligence on Olley's part.

Judgement: Olley succeeded in her negligence claim, recovering the full cost of stolen items.
The exclusion clause wasn't incorporated into the contract, as it became visible only after the
contract's formation at the reception.

 CONCLUSION

In conclusion, consideration is a vital element in contract law, representing the price paid for the
promises made in a contract. It ensures the enforceability of agreements and distinguishes valid
contracts from mere agreements. The Indian Contract Act, 1872, defines consideration as acts,
abstinence, or promises done at the desire of the promisor.

___________________
3. Olley v Marlborough Court Ltd [1949] 1 KB 532

Consideration can be past, present, or future and may come from the promisee or a third party. It
can take various forms, such as positive actions or refraining from certain actions. The essentials
of valid consideration include its legality, realness, and adherence to the law.

Standard form contracts serve as convenient and cost-effective tools in various transactions.
However, they present significant challenges, including limited negotiation, potentially unfair
terms, lack of transparency, and ethical concerns related to power imbalances.

 SUGGESTIONS
While the existing legal framework is thorough, potential loopholes may emerge. One such
vulnerability is the subjective nature of "natural love and affection" in agreements without
consideration, leading to inconsistent interpretations across cases.

To rectify this issue, lawmakers could establish clearer guidelines or criteria for determining
when natural love and affection constitutes valid consideration. Additionally, a reassessment of
the doctrine of privity of contract may be necessary to ensure equitable treatment of third parties
in specific situations, thus preventing potential injustices. Striking a balance between legal
principles and evolving societal norms is crucial to uphold the integrity of contract law.

Another area of concern in the current legal framework is the ambiguous definition and
application of unconscionable clauses under Section 23 of the Indian Contract Act, 1872. To
address this, policymakers could contemplate refining and specifying criteria for identifying
unconscionable terms. This would not only enhance legal clarity but also empower weaker
parties, fostering a more balanced contractual landscape.

 BIBLIOGRAPHY:
 Law of Contract & Specific Relief Dr. Avtar Singh Latest Edition-2020
 Bare act law of Contract

 WEBLIOGRAPHY:

 https://www.lawteacher.net/cases/olley-v-marlborough-court-hotel.php
 https://indiankanoon.org/doc/247033/
 https://legalvidhiya.com/durga-prasad-v-baldeo-and-others-ilr-1881-3-allahabad-221/
 https://www.lawteacher.net/cases/dutton-v-poole.php
 https://www.legalserviceindia.com/legal/index.html
 http://student.manupatra.com/Academic/Abk/Law-of-Contract-and-Specific-Relief/
Toc.htm