Consideration in Contract Law

Jun 13, 2024

Consideration - Unit 2 Revision

Introduction

  • Consideration means getting something in return in a contract.
  • It is an essential element of a valid contract.
  • Consideration is referred to as "something in return."

Key Points

1. What is Consideration:

  • Essential element under Section 10.
  • Meaning of consideration: Sacrifice and expectation of return.
  • Example: Example of shopkeeper and customer.

2. Legal Rules:

Desire of Promisor

  • Consideration should be according to the promisor's desire.
  • Example: Example of promisor and shopkeeper.

Move from Promisee and Any Other Person

  • Consideration can come from the promisee or any other person.
  • Case law: Chinnayya vs. Ramayya.

3. Executed and Executory Contract

  • Executed: Consideration given (COD).
  • Executory: Consideration promised (online order).

4. Past, Present, and Future Consideration

  • Present and future: Example (analysis of the past).
  • Past consideration: When one party has already done something.
  • Example: Example of life-saving.

5. Legal Rules:

Must Not Be Illusory

  • Consideration should be real and non-illusory.
  • Example: Demand for stars and the moon.

Not Bound to Perform

  • Performance, which is a legal duty, cannot be consideration.
  • Example: Postman, policeman.

6. Sued by Third Party to a Contract

Privity of Contract

  • Only parties in a contract can sue each other.
  • Example: Promisee and promisor.

Exceptions

  • In certain circumstances, third party can sue:
    • Case of trust
    • Case of family settlement
    • Marriage contract
    • Assignment of contract
    • Acknowledgment and estoppel
    • Covenant running with the land

7. Validity of Agreement without Consideration

Exceptions

  • Natural love and affection
    • Example: Case of Vikram and Vikrami.
  • Past volunteer services
    • Example: Example of Bill Gates saving a daughter.
  • Promise to pay time-barred debt
    • Example: Selling goods on credit.
  • Completed gift
    • Example: Gifting to Dhruval.
  • Agency
    • Making someone an agent.
  • Charity
    • Contribution and charity.
  • Bailment
    • Gratuitous and non-gratuitous bailment.

Main Case Laws of Consideration

  1. Chinnayya vs. Ramayya
  2. Durga Prasad vs. Baldeo
  3. Sohanlal vs. Mohanlal

Conclusion

  • Consideration is an important element of a contract.
  • In specific circumstances, the contract can be valid without it.

Homework

  • Write and practice today's revised information.
  • Reread the noted points and try to build a comprehensive understanding.

Upcoming Lectures: Will cover in Unit 3.