28289259525000left9525000 Consideration of ContractAn assignmnet for the courseLegal Aspect of Infrastructure Business.Submitted to:Submitted by:Dr. R.K. Singh Meet SukhadiyaAdani Institute of Infrastructure Management PGDM (2018-20), Roll no: 40 Introduction to Consideration.The section 25 of the Indian Contract Act, 1872 openly declares that an agreement made without consideration is voidIn other words the presence of consideration is an essential for a contract to be valid. In England too promises without consideration are not enforced, because they are gratuitous.In England the contracts are divided into two categories:1.
Contracts under seal, or contracts in the form of a deed. Such contracts are valid even without consideration.2. Simple contracts or parole contracts. For validity of such contracts the presence of consideration is needed. 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.
Definitions of Consideration.According to BlackstoneConsideration is the recompense given by a party contracting to the other. Or the price of the promise. Sir Fredrik Pollock summarized the position of words adopted by the House of Lords in1915: An act of 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.The definition given in Curre v Misa by Lush J is widely accepted and stated on the next page: A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to the one party, or some forbearance, determent, loss, or responsibility given, suffered or undertaken by the otherDefinitions of Consideration under Section 2(d).Section 2 (d), The Indian Contract Act, 1872 defines consideration as given under: When, at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing or promises to do or abstain from doing something, such act or abstinence or promise is called a consideration for the promise. Essentials of Consideration.The definition of consideration highlights the following essentials to be fulfilled for the presence of a valid consideration:1)Consideration to be given at the desire of the promisor2)Consideration to be given by the promise or another person3)Consideration may be past, present or future, in so far as definition says that the promisee:a)Has done or abstained from doing, b)Does or abstains from doing, or c)Promises to do or to abstain from doing, something.4)There should be some act, abstinence or promise by the promise, which constitutes consideration for the promisee. These essentials have been discussed in detail in the project.Consideration at the Desire of the Promisor.The definition of consideration under section 2(d) clearly emphasizes that the consideration must be given at the desire of the promisor, rather than merely voluntary or at the instance of some third party. In the case Durga Parsad v Baldeo The plaintiff, on the order of the Collector of the town, built at his own expense, certain shops in a bazaar. The shops came to be occupied by the defendants who, in consideration of the plaintiff having expended money in the construction, promised to pay him a commission on his articles sold through their agency in the bazaar. The plaintiff’s action to recover the commission was rejected. It was held because as the construction had not been done as per the desire of the defendants, but the order of the collector. Hence, the consideration was not valid and the defendants not liable for the same.Consideration by Promisee or any other Person (Privity of Consideration).According to the Indian Law,consideration may be given by the promisee or any other person’. It means that as long as there is a consideration for a promise, it is immaterial who has furnished it. It may move from the promisee, or, if the promisor has no objection, from any other person. But in English Law the position is different, here the consideration must move from the promisee himself.For example, A promises to give his watch to B and a consideration of Rs.5000 for the same is given to A by C and not Himself. This will not be a valid contract in England but in India it will be valid as the section 2(h) clearly states that at the desire of the promisor, the promisee or any other person may provide consideration. This can be further understood in the case of Chinnaya v Ramaya. In this case A, an old lady granted her estate to her daughter (the defendant) with a direction that the daughter should pay an annuity of Rs.653, to A’s brothers (the plaintiffs). On the same day, the defendants made a promise with the plaintiffs that she would pay the annuity as directed by A. The defendant failed to pay the stipulated sum. In an action against her by the plaintiffs she contended that since the plaintiffs themselves had furnished no consideration, they had no right of action. The Madras High Court held that in this agreement the consideration had been furnished by the defendant’s mother and that it was enough consideration to enforce the promise between the plaintiff and the defendant. In the above case it can be seen that A enters in a contract with B, but A himself has not given any consideration to B, but the consideration has been provided by third party i.e. Cot B. Although A is a stranger to consideration, he can still enforce the contract against Bone has to remember that this is only true under Indian Law and the situation is different under English Law where the consideration can only move from the promisee and stranger to the consideration in no condition can maintain any action.Privity to Contract.The Doctrine of Privity of Contract in simple words means that only those persons who are parties to the contract can enforce the same. A stranger to the contract cannot enforce contract even though the contract may have been for his benefit. To explain it with an example, if there is a contract between A and B whose benefit has been conferred upon C, C cannot file a suit to enforce the contract because only A and B are the parties to the contract and C is a stranger to the same. This rule has to be differentiated from the rule stated earlier according to which in India a person who is a stranger to the consideration can sue. This does not affect the rule of Privity of Contract.English Law.In Tweedle v Atkinson the plaintiff was to be married o the daughter of one X and inconsideration of this intended marriage X and the plaintiff’s father entered into a written agreement by which it was agreed that each would pay the plaintiff a sum of money. Failed to do so and the plaintiff sued his executors. Whitman J considered it to be anestablished principle that no stranger to the consideration can take advantage of acontract, although made for his benefit. Thus, although the sole object of the contract was to secure a benefit to the plaintiff, he was not allowed to sue as the contract was made with his father and not with him.Indian Law.The rule of Privity of Contract is applicable in India as it is applicable in England. Even though under the Indian Contract Act, 1872 the definition of consideration is wider than the English law, yet the common law principle of Privity of contract is generally applicable in India, with the effect that only a party to the contract is entitled to enforce the same.Consideration may be Past, Present or Future (Executory).Section 2(d) of the Indian Contract Act, 1872, recognizes three types of consideration, namely, Past, Executed and Executory. It says that when at the desire of the promisor, the promisee or any other person:1.Has done or abstained from doing, (the consideration is Past.)2.Does or abstains from doing, (the consideration is Executed or present.)3.Promises to do or abstain from doing, (the consideration is Executory or future.)Past Consideration.Past consideration means that the consideration for the promise had been given earlier and the promise has been made afterwards. It is, of course, necessary that at the time the act constituting consideration was done, must have been done at the desire of the promisor. For example in lost or found cases if A looses his watch and puts out a notice that whoever finds it will get Rs.500 as reward. The person who finds it has already done the consideration. This amounts to valid (past) consideration under Section 2(d), and the promise is enforceable. The words has done and abstained from doing, in Section 2(d)of the Indian Contract Act, 1872, according to Pollock and Mulladeclare the law to be that an act done by A at B’s request, without any contemporaneous promise from B, may be consideration for a subsequent promise from B to A.Executed or Present Consideration.When one of the parties to the contract performs his part of the promise which constitutes the consideration for the promise by the other side is called executed consideration and the performance of the promise by the other side is the only thing now to be done. For example, A makes an offer to reward Rs. 100 to anyone who his lost phone and brings the same back to him. B finds the lost item and delivers it to A. When B does so It amounts to acceptance of the offer which results into a binding contract under which A will have to pay Rs.100 to B, and also simultaneously giving consideration for the contract (i.e. the lost object).The consideration in this case is executed. Executed consideration is different from past consideration as executed consideration is provided simultaneously along with the making of the contract while past consideration is provided prior to the making of the contract.Executory or Future Consideration.When a person makes a promise in exchange of the promise made from the other side, the performance of this promise is to be done after making the contract. This is called Executory consideration. For example, A agrees to sell and B to buy a quantity of goods at a stated price. In other words, A has promised to sell and B has promised to buy. Some Act, Abstinence or Promise by the Promisee Constitutes Consideration According to Section 2(d), when at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises not to do or abstain from doing something, such act or abstinence or promise is called consideration for promise. It means that if nothing is done in exchange for the promise, i.e., where there is no act, abstinence or promise, there is no consideration.Consideration must be real.It is necessary for consideration to be real and should not be unsubstantial. InWhite v Bluett a son used to complain to his father that his brothers had been given more property then him. The father promised that he would release the son from his debt if he stopped complaining. After the death of the father an action was brought by the executors to recover the debt. It was held that the promise of not facing the father with the complaints in future was not a good consideration for the father’s promise to release him from the debt. Therefore the son continued to be liable for the debt.