Chapter-4

Consideration
 Definition of Consideration

 Consideration is an essential element in a contract.

 Consideration is often defined as “some right,

interest, profit or benefit accruing to one
party” or the loss, detriment or responsibility
given, suffered or undertaken by the other.”

 P agrees to sell a house to Q for tk 20lac. For P’s

promise, the consideration is tk 20lac. For Q’s
promise, the consideration is the house.
 Definition of Consideration

 Contract Act defines Consideration as follows: “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.”
 Consideration

1) Definition
Consideration is an essential element in every simple
contract. The doctrine of consideration requires that:
(1) there must be an exchange between the parties, involving either a
promise for promise, or promise for performance; and
(2) the promise or performance given in exchange must have value.

 Common types of consideration are:

 A tangible payment (money or property); or
 Performance of an act (e.g., providing legal services).
Why is consideration required?

 Consideration is required for the formation of a valid

contract for the simple reason that it shows the
parties’ intent to be bound.
 Types of Consideration

 Consideration may be classified into 3 types:

1. Past consideration: when the consideration of one party was

given before the date of the promise, it is said to be past.

2. Present consideration: consideration which moves

simultaneously with the promise is called present or Executed
consideration.

3. Future consideration: when the consideration is to move at

a future date, it is called future or Executory consideration.
 Types of Consideration
Types of consideration Examples

Past consideration X does some work for Y in the month

of January (without any expectation).
In February Y promises to pay him
some money.

Future consideration A promise to pay money at a future

date, for goods to be delivered at a
future date, This called _____
Present consideration B buys a chips from a shop & pays the
price immediately. The consideration
moving from B is _______
Differences between English and
Indian law

all contract require consideration.

Past consideration is no consideration
(according to English law)
Consideration may move from the
promisee or any other person.
(according to Indian law)
 Rules or Essential factors of
Consideration

1. Desire or request of the promisor is essential: an act

done or loss suffered by the promisee must have been done
or suffered at the desire of the promisor. An act done
without any request is a voluntary act.
 For e.g. P sees Q’s house on fire & helps in extinguishing it. Q
did not ask for his help. P cannot demand payment for his
service.
 Rules or Essential factors of
Consideration

2. Consideration must be real: the consideration must have

some value is the eye of Law. The impossible acts & illusory
or non-existing goods cannot support a contract.
 A contribution to charity is without consideration. Therefore it is
not real consideration.
 For e.g. X promises to supply Y one tola of gold brought from the
sun. the consideration is sham & illusory and there is no contract.
 Rules or Essential factors of
Consideration

3. Consideration must be sufficient but need not be

adequate: It means consideration must be having some values,
whether it appropriates in order to meet the return of the agreement.
 They would probably not need to have the same value or equal value of
the exchange in an agreement but the law will take it as a consideration
as adequate if the parties are freely agreed to the exchange.
 For e.g. D promises to B to sell land in Ctg at tk 1000per cottah. The
agreement is valid provided the consent of D was freely exchange.
 Rules or Essential factors of
Consideration

4. Consideration must not be illegal, immoral or opposed to

public policy: if either the consideration of the object is
illegal, the agreement cannot be enforced. Similarly if the
consideration is immoral or opposed to public policy.

5. Consideration may be present, past or future.

6. Consideration may move from the promisee or from any
other person
 “No Consideration No Contract”
Exceptions To The Rule

1. Natural love and affection :

An agreement made without consideration is valid if it is
express in writing and registered under the law and it is
made on account of natural love and affection between
parties standing in a near relation to each other.

Example : Toasin for natural love and affection promise to give

his son Babu Tk. 1,oo,ooo. Toasin puts his promise to his son
Babu in writing And it has been registered. Actually there is
no consideration but it is a good contract.
 “No Consideration No Contract”
Exceptions To The Rule

2. Voluntary compensation :
A promise made without consideration is valid if it is a promise
to compensate wholly or in a part, a person who has already
voluntarily done something for the promisor or something
which the promisor was legally bound to do.

Example : Samina finds Arman’s purse and gives it to him Arman

promise to give Samina Tk 1000. There is no consideration but
it’s a good contract.
 “No Consideration No Contract”
Exceptions To The Rule

3. Time barred debt : (Old debts that are beyond the point at which a
creditor or debt collector can sue you to collect.)
A promise to pay wholly or in a part, a debt which is barred by the law
of limitation can be enforced if the promise is in writing and signed by
the debtor or his authorized agent.
Example: D owe B tk 1000 but the debt is barred at the limitation act. D
signs a written promise to pay B tk 500 on account of the debt. This is a
contract.
 4. agency: no consideration is required to create an
agency
 5. completed gift: if a person gives certain properties
to another according to the provisions of the Transfer
of Property Act, he cannot subsequently demand the
property back on the ground that there was no
consideration.
 Check out memory???

 An agreement entered into by a husband with

his wife, during quarrel and disagreement,
whereby the husband promised to give some
property to his wife.
 Is it a contract?!!
 Solution

 The agreement is void because, under the

circumstances ,there is no natural love and affection
between husband and wife.