Consideration: Sec.2
(d) – when at the desire of the promisor, the promisee or any other person has
done/abstained from doing or promises to do or abstain from doing something -
such act or abstinence or promise is called consideration for the promise.
It means price for which the promise of the other is bought - a valuable consideration as a price of the
promise – some of value received by the promisee as an inducement of the
promise quid pro quo ( something in
return) – may be of some benefit to the plaintiff or some detriment to the
defendant.
Abdul Aziz Vs. Masum Ali – a promise to subscribe Rs.500 for re-building a mosque – not
fulfilled – secretary of mosque committee filed a suit for enforcement of
promise – Held, the promise no enforceable as no consideration in the sense of
benefit for the promisor – the secretary of the committee suffered no detriment
as nothing has been done to carry out the repairs – no contract.
Durga Prasad Vs. Baldeo - On the order of the
Collector, plaintiff built shops at own expense – defendants occupied the shops
– promised to pay him commission on sales – default by defendents – plaint
rejected - Held, construction by plaintiff
not done at the desire of the defendants so as to constitute consideration.
Kedar Nath Vs. Gauri
Mohamed - Commissioner
of Howrah Municipality started collection of funds by public subscription – to
erect town hall – defendant a subscriber – signed his name in subscription book
for Rs.100 – on the faith of promised subscriptions, plaintiff entered into a
contract with a contractor – defendant did not pay the promised amount – Held,
the act of the plaintiff in entering into contract with contractor was done at
the desire of the defendant so as to constitute consideration – the promise was
“In consideration of your agreeing to enter into a contract to erect, I
undertake to supply money for it.”
Gousmohoddin Vs. Appasahib
- Suit filed
by landlord L against tenant T for possession of premises and arrears of rent –
suit decreed in favour – in execution, attachment order of movable property of
T – In consideration of T agreeing not to appeal against the decree, L allowed
one month’s time to pay – Held, valid consideration – valid agreement.
Essentials features of consideration:
1.
Must move at desire of promisor – if
done at instance of third party or without desire of promisor – not good
consideration.
Durga Prasad Vs. Baldeo - On the order of the Collector, plaintiff
built shops at own expense – defendants occupied the shops – promised to pay
him commission on sales – default by defendents – plaint rejected - Held, construction by plaintiff not done at
the desire of the defendants so as to constitute consideration – it was done at
the orders of the Collector.
2.
May move from promisee or any other person- consideration may move even from a stranger – contract cannot be
enforced by stranger to contract even if made for his benefit - but stranger to
consideration can sue if party to the contract (privity to contract).
Chinnaya Vs. Ramayya – old lady A gifted
landed property to her daughter – gift deed registered – included condition of
payment of annuity of Rs.653 per yer to the plaintiff P (old lady’s sister)
- daughter D executed an Iqrarnama (agreement) with P promising
to pay the annuity – default by D – P sued for recovery – Held, consideration
had moved from A – also concluded that deed of gift and Iqrarnama executed simultaneously – regarded as one transaction –
sufficient consideration for that transaction.
3.
May be an act or abstinence/forbearance or a return promise – act must not be a legal duty to perform – abstaining is
consideration in negative form – may be past, present or future one – may also
be a return promise (executory consideration)
Forbearance to sue, compromise of a
disputed claim, composition with creditors is valid consideration.
Debi Radha Rani Vs. Ram Dass – wife
D ready to sue husband for maintenance –husband agreed to pay monthly allowance
– wife forborne to sue – Held, wife’s forbearance to sue is valid consideration
for husband.
Compromise of pending suit – good
consideration for agreement of compromise – essential that dispute is bona fide.
Fanindra Narain Roy Vs. Kacheman Bibi - agreement to accept a new
mortgage in substitution of earlier executed one – consideration of not
enforcing the earlier mortgage – even though
original executed by one person and substitute by four persons- held to
be valid consideration.
4.
May be past, present or future – may
be voluntary or at request.
Examples: 1. A saves B from drowning – B later promises reward to A –
valid consideration – enforceable.
2.
A finds B’s purse – returns it to him – B promises to give A
Rs.50 – this is contract.
Upton Rural District Council Vs. :Powell - P’s farm did not come
under the free service zone of the fire department - fire at P’s farm – P
called up Upton Fire Brigade which arrived and put out the fire – implied
promise to pay for past act.
Sindha Shri Ganpat Singh Vs. Abraham – services rendered to a minor at his request – continued after
majority at the same request – good consideration for promise to pay.
5.
Need not be adequate– where consent
of the promisor is freely given, inadequacy of consideration does not make the
contract void – adequacy of consideration is for the parties to consider at the
time of making the agreement, and not for the court when it is sought to be
enforced.
Haigh Vs. Brooks - B promised to pay certain bills to H if he hand over a guarantee to him – H handed
over guarantee – later found to be unenforceable – Held, B received what he
asked for – although guarantee for smaller value than expected, valid
consideration.
6.
Must be real and not illusionary - also must be competent and of value
Hall Vs. Cazenove - charter party contract – contained clause
that particular ship to sail on specified date
- that date already expired when contract entered into – Held,
consideration is physically impossible.
A engages B for certain work – promises to
pay ‘reasonable sum’ – promise unenforceable as consideration uncertain.
Stilk Vs. Myrick - Two crew members of ship
deserted mid-way – captain promised to divide salary of deserters among rest of
the crew if they worked the vessel home – Held, they were already under
obligation to bring the vessel home – the consideration was illusionary – no
contract.
7.
Must be something which promisor not already bound to do: should not under pre-existing legal or contractual obligation –
performance of public duty by public servant is not consideration.
Collins Vs. Godefroy - A received summon for appearance before a
trial court – B promised to pay to A compensation for loss of time during
attendance in court – Held, A under a duty imposed by law to appear and give
evidence – B’s promise was without consideration.
Ramchandra Chintaman Vs. Kalu Raju -
promise to pay Vakil an additional sum if
suit successful – Held, Vakil under pre-existing contractual to render the best
of his services – the promise for additional sum is devoid of consideration. Person
undertakes to do more than contractual or legal duty – valid consideration for
promise.
8.
Must not be illegal, immoral or opposed to public policy – must not be unlawful. Napier Vs. National Business Agency Ltd.
– company employed N - weekly wages
of £13 and weekly expense allowance of £6 – Held, the expense allowance a
device to evade tax – agreement unlawful.
Nandlal Vs. Thomas - A licensed under Excise Act
to run liquor shop – Act forbade sale, transfer or sub-lease of licence or
creation of partnership in running of shop – A took B into partnership - Held, agreement void.
Baivijli Vs. Nansa Nagar - money given to married
woman to obtain divorce from her husband – lender intended to marry the woman –
Held, agreement was immoral.
Doctrine of privity of contract – Only
parties to contract can sue and be sued on the contract – stranger to contract
cannot sue even if contract is for his benefit and he provided consideration –
stranger has no right or obligation – cannot enforce it.
Dunlop Pneumatic Tyre Co.
Ltd. Vs. Selfridge & Co. Ltd. – S bought tyres from Dunlop Rubber Co. – sold
them to D, a sub-dealer – D agreed not to sell below Dunlop Rubber’s list price
– to pay Dunlop Rubber £5 for every tyre undersold - D undersold two tyres – Dunlop Rubber sued for
breach – Held, stranger to contract – cannot recover anything.
Exceptions to the rule “stranger to a contract cannot sue”:
1. A trust or charge: Beneficiary of a trust or holder of
other interest in specific immovable property can enforce it.
Gandy Vs. Gandy - husband separated from wife – executed separation deed –
promised to pay to the trustees all expenses for maintenance of wife – Held,
agreement created a trust in favour of wife – can be enforced by her.
Khwaja Mohd. Khan Vs.
Hussaini Begum – A agreed for marriage of his son S
with B’s daughter D – in consideration of marriage A agreed to pay to D an
allowance of Rs.500 per month in perpetuity – created charge on certain
properties for payment – conferred power on D to enforce it – Held, although D
not a party to agreement, is entitled to enforce it for recovery of allowance.
2. Marriage settlement,
partition or other family arrangements :
beneficiary can sue for enforcement.
Daropti Vs. Jaspat Rai – J’s wife deserted him because of ill treatment – J entered into
agreement with his father-in-law to treat her properly or else pay monthly
maintenance – subsequently ill-treated and driven out of house – held, wife
entitled to enforce the promise made by J to her father.
Shuppu Ammal Vs.
Subramaniyam - Partition of joint property – brothers
agreed to invest certain sum of money in equal shares for maintenance of their
mother – Held, mother entitled to require her sons to make the investment.
3. Acknowledgement or estoppels- where by conduct, promisor acknowledges himself as agent of third
party – estopped from denying it later- binding obligation towards third party.
Example:
A receives some money from B to be paid over to C - A admits the receipt to C –
C can recover the amount from A who will be considered as agent of B.
4. Assignment
of contract– assignee
of rights and benefits under contract not involving personal skills can enforce
the contract – subject to equities between original parties – e.g. holder in
due course of a negotiable instrument can recover the amount even though no
contract between him and payer.
5. Contract
entered through agent:
Principal gets rights and obligations under contracts entered through agent – provided
agent acts within authority and on behalf of principal.
6. Covenants
running with land: purchaser
of immovable property with notice of covenants (conditions) created by another
agreement affecting the property – bound by the covenants although not a party
to original agreement.
Smith & Snipes Hall Farm Ltd. Vs.
River Douglas Catchment Board - The Board agreed with certain land-owners
adjoining a stream to improve and maintain the banks – landlords paid
proportionate costs – one landlord sold land to first plaintiff and he to
second plaintiff – negligence on part of Board in maintenance of banks – banks
burst and land flooded – Held, the whole arrangement for the benefit of
land-owners whoever they might be and not merely the parties to the agreement –
plaintiff capable to sue the Board.
Contract without consideration is void –
Exceptions thereto:
Sec.25 – Agreement made without consideration is void,
unless
(1) it is expressed in writing and registered under
the law for the time being in force, and is made on account of natural love and
affection between parties standing in near relation to each other, or unless
(2) it is 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; or unless
(3) It is a promise, made in writing and signed by
the person so charged or his agent, to pay wholly or in part a debt which
cannot be enforced for payment under the law for the limitation of suits.
Explanation: 1.Nothing in this section shall affect the
validity, as between the donor and donee, of any gift actually made.
2. An agreement to which the consent of the
promisor is freely given is not void merely because the consideration is
inadequate; but the inadequacy of the consideration may be taken into account
by the Court in determining the question whether the consent to the promise was
freely given.
1. Love
and affection- agreement
has to be in writing – registered under law – out of natural love and affection
– parties standing in near relation to each other.
Ram Dass Vs. Krishan Dev - a
family settlement between cousin brother and sister – to resolve disputes
regarding family property – on account of natural love and affection – Held,
binding as cousin brother a near relative.
Venkataswamy Vs. Rangaswamy - Out of
natural love and affection for his brother R, V promises to discharge R’s debt
to B – registered agreement – V fails to discharge the debt – R discharges it
and sue V to recover the amount – Held, valid agreement covered under Sec.25.
However, in Rajlukhy Dabee vs. Bhootnath, nearness
of relation does not necessarily mean natural love and affection.
Husband promised
to pay a fixed sum of money to wife every month for her separate residence and
maintenance – registered document – document referred to certain quarrels and
disagreements between the two – Held, no trace of love and affection between
the parties whose quarrels had compelled them to separate – Held, agreement
void for want of consideration.
2. Compensation
for past voluntary service:
a promise to wholly or partly compensate a person – who has already voluntarily
done something for promisor – enforceable
Karam Chand Vs. Basant Kaur - goods
supplied to minor - promise made after attaining majority to pay for the
supplies – Held, enforceable.
3. Promise
to pay a time-barred debt –
must be in writing – signed by the debtor or his specially or generally
authorised agent – for payment of whole or part of the debt – the debt must
have been recoverable but for the law of limitation – not necessary that new
promise should expressly mention the time-barred debt.
Debi Prasad Vs. Bhagwati Prasad – acknowledgement of debt – promise to pay with
interest – Held, agreement with promise to pay within the meaning of Sec.25.
A take over of
the assets and liabilities of a business house does not amount to a promise to
pay a time-barred debt.
4. Completed
gift – Sec. 25 shall not
affect the validity of any gift actually made.
5. Agency- No consideration is necessary to create an
agency.
6.
Charitable subscription – where promisee on the strength of the promise
makes commitments. E.g. Kedar Nath Vs. Gauri
Mohamed
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