View With Charts And Images
Consideration must be sufficient but need not be Adequate-illustrate and explain
Consideration is always important in contract, because we never know how your actions will affect the other person. Also it shows we are a thoughtful person and always thinking of other
Consideration is one of the essential elements of a contract together with consent of the parties and object of the contract. It consideration is absent; there is no contract just like the absence of any of the other two elements. Offer and acceptance is subscribed within consideration, and when consideration is established, intention to create legal relation would ordinary be present.
Consideration in law is one of the three main building blocks of a contract. It can be anything of value, which each party to a legally binding contract must agree to exchange if the contract is to be valid. If only one party offers consideration in contract, the agreement is not legally a binding contract. In its traditional form, consideration is expressed as the requirement that in order for parties to be able to enforce a promise, they must have given something for it. Something must be given or promised in exchange or return for the promise. A contract must be met with or supported by consideration to be enforceable, also, only a person who has provides consideration can enforce a contract.
Contract word come from the “Latin work Constructs”. The terms of the contract, meaning, who, what where, when and how of the agreement, define the binding promises of each party to the contract.<href=”#_ftn1″ name=”_ftnref1″ title=””> Contract is one type of agreement between two or more competent parties in which an offer is made and accepted, and each party benefits. The contract can be formal, informal, written, oral or just plain understood. A contract is an agreement creating and defining obligations between the parties.<href=”#_ftn2″ name=”_ftnref2″ title=””> A contract is an agreement enforceable at law made between two or more persons, by which rights are required by one or more by to acts or forbearances on the part of the other or others.<href=”#_ftn3″ name=”_ftnref3″ title=””> Every agreement and promise enforceable at law is a contract. Contract is an agreement between two or more persons to do or to refrain from doing, a particular thing in exchange for something of value. Contracts can generally be written using formal or informal or informal terms, or they can be entirely verbal.
Agreement: It sort of promise. To some extent, every set of promises, forming the consideration for each other, is an agreement. Most importantly, without consideration cannot make an agreement.
According to Sir Wlliam Anson
“A contract is an agreement enforceable at law made between tow pr more parties , by which rights are acquired by one or more to acts or forbearance on the part the other or others”
1.3 The Essential Elements of a Contract
An agreement becomes enforceable by law when it fulfils certain conditions. These conditions, which may be called the Essential Elements of a Contract, are explained below.
1.3.1 Offer and Acceptance: There must be a lawful offer by one part and a lawful acceptance of the offer by the other and acceptance must conform to the rules laid down in the Indian Contract Act regarding offer and acceptance.
1.3.2 Intentions to create Legal Relationship: There must be an intention (among parties) that the agreement shall result in or create legal relations. An agreement to dine at a friend’s house is not an agreement intended to create legal relations and is not a contract. But an agreement to buy and sell goods or an agreement to marry, are agreements intended to create some legal relationship and are therefore contracts, provided the other essential elements are present.
1.3.3 Lawful Consideration: Subject to certain exceptions, an agreement is legally enforceable only when each of the parties to it gives something and gets something. An agreement to do something for nothing is usually not enforceable by law. The something given or obtained is called consideration. The consideration may be an act (doing something) or forbearance (not doing something) or a promise to do or not to do something. Consideration may be past (something already done or not done). It may also be present or future. But only those considerations are valid which are “lawful”.
1.3.4 Capacity of Parties: The parties to an agreement must be legally capable of entering into an agreement; otherwise it cannot be enforced by a court of law. Want of capacity arises from minority, lunacy, idiocy, drunkenness, and similar other factors. If any of the parties to the agreement suffers from any such disability, the agreement is not enforceable by law, except in some special cases.
1.3.5 Free Consent: In order to be enforceable, an agreement must be based on the free consent of all the parties. There is absence of genuine consent if the agreement is induced by coercion, undue influence, mistake, misrepresentation, and fraud. A person guilty of coercion, undue influence etc. cannot enforce the agreement. The other party (the aggrieved party) can enforce it, subject to rules laid down in the Act. ]
1.3.6 Legality of the Object: The object for which the agreement has been entered into must not be illegal or immortal or opposed to public policy.
1.3.7 Certainty: The agreement must not be vague. It must be possible to ascertain the meaning of the agreement, for otherwise it cannot be enforced.
1.3.8 Possibility of Performance: The agreement must be capable of being performed. A promise to do an impossible thing cannot be enforced. <href=”#_ftn4″ name=”_ftnref4″ title=””>
1.3.9 Void Agreements:An agreement so made must not have been expressly declared to be void. Under Indian Contract Act there are five categories of agreements which are expressly declared to be void They are:
- Agreement in restraint to marriage.
- Agreement in restraint of trade.
- Agreement in restraint of proceedings.
- Agreements having uncertain meaning.
- Wagering agreement.
22.214.171.124 Writing Registration and Legal Formalities: An oral contract is a perfectly good contract, except in those cases where writing and/or registration is required by some statute. In India writing and/or registration is required by some statute. In India writing is required in cases of lease, gift, sale and mortgage of immovable property: negotiable instruments; memorandum and articles of association of a company etc. Registration is compulsory in cases of documents coming within the purview of Section 17 of the Registration Act, e.g., mortgage deeds covering immovable property. The terms of an oral contract are sometimes difficult to prove. Therefore important agreements are usually entered into writing even in cases where wiring is not compulsory.
“All agreements are not contracts, but all contracts are agreements”. Discuss the statement explaining essential elements of a valid contract.<href=”#_ftn5″ name=”_ftnref5″ title=””>
Consideration is one of them. Consideration means, an agreement is legally enforced only when each other parties (gives something and gets something in return is called Consideration.)Consideration is an essential element for the formation of a contract. It may consist of a promise to perform a desired act or a promise to refrain from doing an act that one is legally entitled to do. In a bilateral contract—an agreement by which both parties exchange mutual promises—each promise is regarded as sufficient consideration for the other. In a unilateral contract, an agreement by which one party makes a promise in exchange for the other’s performance, the performance is consideration for the promise, while the promise is consideration for the performance.
For example, if someone offered to drive you to work on Mondays and Tuesdays in exchange for your promise to return the favour on Wednesdays and Thursdays, a Bilateral Contract would be formed binding both of you once you provided consideration by accepting those terms. But if that same person offered to pay you $10 each day you drove him to work, a unilateral contract would be formed, binding only upon the promisor until you provided consideration by driving him to work on a particular day.<href=”#_ftn6″ name=”_ftnref6″ title=””>
The essentials elements of considerations: the following rules may be laid down regarding consideration
Desire of the promisor is essential: the Act done are lass offered by the promise must have beer done or suffered at the desire of the promisor An act done without any request is voluntary act and does not come within the definition of consideration.
Considerations must be legal: the consideration must have some values in the eye of law. It must not be same or illusory. The impossible acts and illusory or non-existing goods cannot support a contract.
Example: X promise to supply Y one tola of gold brought from the sun. The consideration is sham and illusory and there is no contract.
Public duty: Where the promise is already under an existing public duty, an express promise to perform, of performance of that duty will not contract to consideration. There will be no detriment to the promise of benefit to the promissor over and above there existing rights and liabilities.
Promise to a stranger: when a promise made to a stranger to perform an existing contract, is enforce able because the promisor undertaken a new obligations upon himself which can be enforce by the stranger.
Consideration need not to be adequate: an agreement to which the consent of the party is freely given is not void morly because the considerations are inadequate but the inadequate of the consideration may be taken into a court in determining was freely give s.
The consideration must not be legal immoral or opposed to public policy: if either the consideration of the object of the agreement is illegal, the agreement can not be enforced. The some principle applies if the consideration is immoral or opposite to public policy.
Consideration may moves from promise or from any other person: A person granted some properties to his wife C directing her at the same time to pay an allowance to his brother B .C also interest into an agreement with B. Promising to pay the allowance to B. this agreement can be enforce by B even though no part of the consideration received by C moved from B.
Case reference chinnaya vs Ramaya 1881.
No consideration no contract: consideration is essential for the validity of a contract. But there are exceptional cases, where a contract is enforceable even though there is no consideration. These are as follows…
- Natural love and affection: According to section 256 of the contract act 1872, an agreement made without consideration is valid if it is expressed in writing and registered under the law for the time being in force for the registration of documents and is made an account of natural love and affection between parties standing in a near relation to each other.
An agreement without consideration is valid under this section only if the following requirements are fulfil.
- An agreement is made by a written document
- the document is registered according to the law relating to consideration is force at the time.
- the agreement is made on account of natural love and affection.
- the parties to the agreement stand is a near relation to each other.
Case reference: Rajlukhy debe vs bhootnath 1900. an agreement centred into by a husband promised to give some properly to the wife, the agreement is void because, under the circumstance there is no natural love and affection between the parties.
1Voluntary compensation: According to section 25(2) of the contract act 1872. A promise made without any consideration is valid if it is a promise to compensate wholly or in part a person who has already voluntarily done something for the promise or something which the promisor was legally compellable to do.
- Time –barred debt: According to section 25 (3) of the contract act 1872. A promise to pay wholly or in part a debt which is barred by the law of limitation can be enforced , if the promise is writing and is signed by debtor or his authorized agent
- Completed gift: the rules no consideration no contract. does not apply to completed gift . Explanation 1. to section 25 states that . Nothing is this section shall affect the validity as between the boner and the donee any gift actually made.
1.6 considerations in contract and in unjust enrichment:
Failure of condition is an unjust factor, more commonly known as failure of consideration. It is not suggested that it is the only possible unjust factor that applies in anticipated contract cases. However, failure of condition can explain most (perhaps all) the decided cases in this field, and there is no objection to overlapping unjust factors. Further, it is the only unjust factor we need to explain the use of risk in cases on anticipated contracts. Two preliminary points must be made on its breadth. First, while it has been suggested that failure of condition is limited to those cases where there has at some stage been a valid contract between the parties, as Lord Goff said, the doctrine “need not be so narrowly confined”. Secondly, it was once controversial to claim failure of condition could be an unjust factor in *L.Q.R. 618 cases of restitution for the value of services. While there was undoubted historical support for this view, the contrary arguments of principle are stronger. Either way, the matter is now settled authoritatively: in Cobbe v Yeoman’s Row the House of Lords recognised a claim for a failure of condition for services rendered (extra-contractually).The seminal case on failure of condition is Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd. The claimants made an advance payment of £1,000 towards the purchase of £4,800 worth of machinery from the defendants. When war broke out between England and Germany, the contract was frustrated and the claimants sought restitution of their money for a “total failure of consideration”. Their Lordships drew a clear distinction between the consideration in contract and in unjust enrichment, the conflation of which had greatly undermined the doctrine. Viscount Simon L.C. said the latter “is, generally speaking, not the promise but the performance of the promis.
1.8 Consideration in contract:
In English consideration, a potential purchaser of land under an option might very well be seen as having provided consideration for the option by, for instance, instructing a survey to assess the suitability of the land for an intended purpose. In the absence of some type of consideration however, no matter how strained or convoluted it may be, a gratis option (such as that in the example) is clearly invalid. Where options are validly created in English law, they are conceived of a species of so-called ‘unilateral contract’, as they create binding duties on only one party. As unilateral contracts they are said to transform into bilateral or synallagmatic contracts once the option is exercised.19 So English law, in trying to describe a unilateral obligation, has to give it the clothing of contract in order for it to be accommodated within the Common Law obligation model.<href=”#_ftn7″ name=”_ftnref7″ title=””>
1.9 Valid consideration for a renunciation of the debt:
English Law faces the problem with renunciation of rights that, since the 16th century onwards, the courts have taken the view that informal agreements to vary a contract are not valid, including variations in terms of which a creditor undertakes to renounce some or all of its rights. The position adopted was a consequence of the doctrine of consideration: some consideration requires to have been received by the party undertaking the renunciation in order to make the act valid. This view was upheld by 18th and 19th century courts, with the development that the courts were willing to treat even a slight benefit in the creditor’s favour as valid consideration. Despite this development, the courts maintained the view that the alleged ‘practical benefit’ of a creditor receiving the part performance of a debt, rather than the alternative possibility of no performance at all from a financially distressed debtor, did not count as valid consideration for a renunciation of the debt. The harsh results stemming from the requirement of mutual consideration for a valid renunciation of rights has been somewhat mitigated by the development of the doctrine of promissory estoppel, a promissory based defence which fulfils some of the functions th<href=”#_ftn8″ name=”_ftnref8″ title=””>at would be met by a properly recognized obligation of unilateral promise, but only where reliance has been placed on the promise.<href=”#_ftn9″ name=”_ftnref9″ title=””>
1.10 Consideration about contracts at abnormal price:
The importance of planning and the relation between shifts in purchasing power and planning explain why courts should be concerned about contracts at abnormal prices. But these considerations do not apply equally to all contracts at abnormal prices. First, not all abnormal price contracts *L.Q.R. 152 upset planning. In particular, contracts where either (1) the losing party was making a gift, (2) the losing party did not care about price, or (3) the losing party was mistaken as to the nature and hence value of the good he or she was selling (for example, not realising that the painting offered was a Rembrandt)do not upset the losing party’s ability to plan. In the first and third situation the losing party’s expectations were not upset and in the second case the losing party had no expectations. Such contracts should therefore be enforced.<href=”#_edn1″ name=”_ednref1″ title=””>[i]
The harm to planning of an enforcement rule is avoided insofar as potential losing parties are able to ensure that they contract at normal price. *L.Q.R. 153 The harm to planning of a non-enforcement rule, on the other hand, is avoided insofar as potential gaining parties are able to ensure that they contract at normal price. Which parties are in the better position to protect them and to prevent harm to others? The potential gainers from abnormal price contracts are nearly always better able to avoid having their plans upset than are the potential losers. Leaving aside contracts that are invalid for independent reasons (for example, contracts made under duress) and contracts that we have already eliminated from consideration (gift contracts and so on), contracts at abnormal prices are most likely to arise in two types of situations. The first is where the reason a party agrees to pay more than the normal price is that he has made a mistake, for example not understanding the terms of the contract or being mistaken about the normal price for the good. Such mistakes can arise because of the complexity of the contract or the relevant market and/or because the mistaken party has reduced cognitive abilities. The other situation where contracts at abnormal prices are likely is where the losing party has contracted with a standard or situational monopolist. Standard and situational monopolists are in a strong position to charge more than normal prices (whether the normal price is set by the monopolist itself, as happens with standard monopolists, or set by the market, as happens with situational monopolists), should they wish to do so.<href=”#_ftn10″ name=”_ftnref10″ title=””>
1.11 Types of Consideration
There are three types of Consideration…as follows
1. Present Consideration : Consideration which moves simultaneously with the promise is called present consideration
2. Past consideration: When the consideration of the one party was given before the date of the promise, it is said to be past \consideration.
3. Future Consideration: This consideration is also called “executor” where there is an exchange of promises to perform acts in the future, e.g. a bilateral contract for the supply of goods whereby a promises to deliver goods to B at a future date and B promises to pay on delivery. If A does not deliver them, this is a breach of contract and B can sue. If A delivers the goods his consideration then becomes executed.<href=”#_ftn11″ name=”_ftnref11″ title=””>
1.12 A good consideration:
The rules of the necessary factors for consideration can be submitted up as follows
· There must be desire of the promisor;
· It must be real
· It should be reasonable
· It cannot be illegal immoral, or opposed to public policy
· Present , Past, and Future and
· Promisee can move from the promise or any person <href=”#_ftn12″ name=”_ftnref12″ title=””>
.13.1 Consideration must not be Past
If one party voluntarily performs an act, and the other party then makes a promise, the consideration for the promise is said to be in the past. The rule is that past consideration is no consideration, so it is not valid and cannot be used to sue on a contract.
1.13.2 Consideration must be sufficient but need not be Adequate<href=”#_edn2″ name=”_ednref2″ title=””>[ii]
Providing consideration has some value, the courts will not investigate its adequacy. Where consideration is recognized by the law as having some value, it is described as “real” or “sufficient” consideration. The courts will not investigate contracts to see if the parties have got equal value.
1.13.3 Consideration must move from the promisee
The person who wishes to enforce the contract must show that they provided consideration; it is not enough to show that someone else provided consideration. The promisee must show that consideration “moved from” (ie, was provided by) him. The consideration does not have to move to the promisor. If there are three parties involved, problems may arise. See:
- Price v Easton (1833) 4 B & Ad 433
1.13.4. Forbearance to sue
If one person has a valid claim against another (in contract or tort) but promises to forbear from enforcing it, that will constitute valid consideration if made in return for a promise by the other to settle the claim. See:
- Alliance Bank v Broom (1864) 2 Dr & Sm 289.
1.13.5. Existing Public
If someone is under a public duty to do a particular task, then agreeing to do that task is not sufficient consideration for a contract. See:
- Collins v Godefroy (1831) 1 B & Ad 950.
If someone exceeds their public duty, then this may be valid consideration. See:
- Glassbrooke Bros v Glamorgan County Council  AC 270.
1.13.6. Existing Contractual Duty
If someone promises to do something they are already bound to do under a contract, that is not valid consideration. Contrast:
- Stilk v Myrick (1809) 2 Camp 317.
- Hartley v Ponsonby (1857) 7 E & B 872.
The principle set out in Stilk v Myrick was amended by the following case. Now, if the performance of an existing contractual duty confers a practical benefit on the other party this can constitute valid consideration.
1.13.7. Existing Contractual duty owed to a third party
If a party promises to do something for a second party, but is already bound by a contract to do this for a third party, this is good consideration. See:
- Scotson v Pegg (1861) 6 H & N 295.
1.13.8. The Consideration must not illegal, immoral, or opposed to public policy
If the consideration of the object of the agreement is illegal, the agreement cannot be enforced.
126.96.36.199. Exceptions to this Rule:
(A) Previous Request
If the promisor has previously asked the other party to provide goods or services, then a promise made after they are provided will be treated as binding. See:
- Lampleigh v Braithwait (1615) Hob 105.
(B) Business Situations
If something is done in a business context and it is clearly understood by both sides that it will be paid for, then past consideration will be valid. See:
- Re Casey’s Patents  1 Ch 104.
Note: The principles in Lampleigh v Braithwait as interpreted in Re Casey’s Patents were applied by the Privy Council in:
- Pao On v Lau Yiu Long  AC 614
(C) The bills of Exchanges Act 1882
Under section 27 (1), it is provided that any antecedent debt or liability is valid consideration for a bill of exchange. For example, A mows B’s lawn and a week later B gives A a cheque for £10. A’s work is valid consideration in exchange for the cheque.<href=”#_ftn13″ name=”_ftnref13″ title=””>
According to section 23 of the contract Act 1872 the consideration and object of an agreement are unlawful in the following area.
- If it is forbidden by law: An Act or an under taking is forbidden by law when it is punishable by the criminal law of the country or when it is prohibited by special legistion regulation made by a competent authority under powers derived from the legislature. If the object of an agreement of or the consideration is the doing of an act forbidden by law, the agreement is void.
- If it is of such at nature that, if permitted, it would defect the provision of any law: if the object or the consideration of an agreement is such a nature that it would be directly lead to a violation of the law, the agreement is void.
Case reference : Napier vs. national business agency ltd.(1951)2 all E.R 264 In the case the plaintiff entered into a contract of service with the defendant by which it was agreed that he should be paid the sum of $13 a week as salary and future $6 per week for expenses . It expenses were very lower then therefore this provision was nearly a device to defraud the income tax authority. The provision of a contract can not be served and the whole contract was void.
- If it is fraudulent: An agreement whose object is to defraud other is void. For the example; A, B and C enter into an agreement for the division among them of gains acquire or to be acquired by them by fraud. The agreement is void.
- I f the involbes or implies injury to the person or property of another: If the object of an agreement is to injure the person or property of another , it is void
Case Reference: W.H Smith and sons vs Clinton (1908)26 T.L.R.24 an agreement by the proprietors of a news paper to identify the printers against calaims arising from libels printed in the newspaper is void.
Opinion : Consideration is an essential element is a contract .it has some certain exceptions. Otherwise , an agreement is not enforceable unless each party to the agreement is not enforceable agreement gets consideration . under Roman law an agreement without consideration was called a nutum pactum and was unenforceable . under Indian law the presence of consideration is as a rule , essentialto the validity of contract . if the consideration must be lawful otherwise the agreement is void
The objective of Law is order, and the result of order is that men are enabled to look ahead with some sort of security as to the future. More importantly, the objective of law is I have made this report about consideration which is most imp regarding the future. In addition I mention this report full Law of contract but especially contract. Without consideration cannot make a contract. Moreover, Law of Contract is to introduce certainly in commercial and other transaction. Anson observes that the law of contract is indented to ensure that what a man has been led to expect shall come to pass, and what has been promised to him shall be performed. Last but not the least, Law, Law of Contract and the part of consideration all things are most important to us. As a Citizen of a country we have right to live with peach and to use a pa proper law.
<href=”#_ftnref1″ name=”_ftn1″ title=””> Written by, http://law.freeadvice.com/general_practice/contract_law.
<href=”#_ftnref2″ name=”_ftn2″ title=””> See Salmond, Jurisprudence (1872), Business law book by Khaliduljaman.
<href=”#_ftnref3″ name=”_ftn3″ title=””> See Sir Willium Anson, Law of contract (1920).
<href=”#_ftnref4″ name=”_ftn4″ title=””> Essential elements of contract from internet and books.
<href=”#_ftnref5″ name=”_ftn5″ title=””>
<href=”#_ftnref6″ name=”_ftn6″ title=””> Definition of Consideration with example from books and internet sources.
<href=”#_ftnref7″ name=”_ftn7″ title=””> Consilateral and bilateral contract The neglected ion in European private Law, International and Comparative Law Quarterly, 2010.
<href=”#_ftnref8″ name=”_ftn8″ title=””>
<href=”#_ftnref9″ name=”_ftn9″ title=””>
<href=”#_ftnref10″ name=”_ftn10″ title=””> Consideration about contracts at abnormal price from online library.-Stephen A. Smith, In defence of substantive fairness, Law Quarterly Review, 1996
<href=”#_ftnref11″ name=”_ftn11″ title=””>.
<href=”#_ftnref12″ name=”_ftn12″ title=””>
<href=”#_ftnref13″ name=”_ftn13″ title=””> Rules of governing consideration from the internet sources.
<href=”#_ednref1″ name=”_edn1″ title=””>
<href=”#_ednref2″ name=”_edn2″ title=””>Book Recommendation :
- Commercial law – Arun Kumar Sen and jitendra Kumar Mitra.
- law of contract – Avtar Sing
- Law of contract – D.f Mulla
- Mercrntile Law – M.C Shukla
- Elements of mercantile Law – N.D Kapoor