“Emphasize the mechanism of contract and consideration activities”


 Consideration in law is one of the three main building blocks of a contract. The term consideration is given to the subject that is exchanged in a contract. The most common and obvious exchange is money for goods or service. Consideration means making an agreement to pay for goods or services. Consideration is always important in contract, because we never know how your actions will affect the other person.

 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. If an agreement is made to pay for goods or services upon receiving them, than the contract becomes binding at the point of agreement, not at the point of making payment, the consideration then referred to as being executor. Also it shows we are a thoughtful person and always thinking of other.

 Definition of Contract:

 Section 2(h) of the Indian Contract Act provides that, “An Agreement enforced by law is a contract. Therefore in a contract there must be (1) an agreement (2) the agreement must be enforceable by law.[1]

Sec2 (e) some agreement cannot be enforce through the courts of law, e.g. an agreement to play cards or go to a cinema. An agreement which can be enforced through the courts of law is called a contract.[2]

 Definition of Consideration:

 Consideration is an essential element in a contract. Subject to certain exceptions an agreement is not enforceable unless each party to the agreement gets something. This something is called consideration.

Section2 (d) of the contract Act defines consideration as follows “When at the desire of the promisor, the promise or any other person has done or abstained from doing or does or abstains such act or abstinence or promise is called a consideration for the promise.”

 Example: P agrees to sell a house to Q for Rs. 70000. For Ps promise the consideration is Rs 70000. For Qs promise the consideration is the house.

 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.[3]

 Types of consideration:

 Consideration may be classified into three types as follows:

  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 consideration.
  3. Future consideration: When the consideration is to move at a future date is called future consideration or Executor consideration.

Rules (or Essential Factors) of Consideration:

1. Desire of the promisor is essential: The act done or loss suffered by the promise must have done or suffered at the desire of the promisor.

Example: P sees Qs house on fire and helps in extinguishing it. Q did not ask his help. P cannot demand payment for his services.

2. The consideration must be real: The consideration must have some value in the eye of law. It must not be sham or illusory. A contribution on to charity is without consideration.

Example: G promises for no consideration to give H Rs 1000. This is a void agreement. No consideration, no contract.

3. Public duty: Where the promise is already under an existing public duty an express promise to perform or performance of that duty will not amount to consideration. Example: A contract to pay money to a witness who has received a subpoena to appear at a    trial.

4. The consideration must not be illegal, immoral or opposed to public policy: If either the consideration of the object of the agreement is illegal the agreement cannot be enforced.

5.Present, Past and Future: In the consideration present, past, future consideration must have to be available, without this three it will not be a consideration.

No consideration no contract:

Consideration is essential for the validity of a contract. A promise without consideration is a gift one made for a consideration is a bargain.

1. Natural love and affection: 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 on account of natural love and affection between parties standing in a near relation to each other. Sec 25 (1).[4]

Example: A for natural love and affection, promises to give his son B, Rs 1000. A puts his promise to B in writing and registers it. This is a contract.

2. Voluntary Compensation: 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 promisor or something which the promisor was legally compellable to do. Sec 25 (2).[5]

Example: D finds Bs purse and gives it to him. B promises to give D Rs 50. This is a contract

3. Time-barred debt: A promise to pay, wholly or in part, a debt which is barred by the law of limitation can be unforced if the promise is in writing and is signed by the debtor or his authorized agent.

Example: D woes B Rs 1000 but the debt is barred by the limitation act. D sings a writing promise to pay S Rs 500 on account of the debt. This is a contract.

4. Agency: No consideration is required to create an agency. Sec 185

5. Completed gift: The rule no consideration no contract does not apply to completed gifts. Explanation to sec 25 states that “Nothing in this section shall affect the validity as between the donor and the donee, of any gift actually made.


Promissory maintain requires the following elements are, The promise was clear and definite, justifiable relied on the promise, substantial and of a definite character and will serve the best interests of justice. When a promisor makes a clear and definite promise on which the promise justifiable relies, the promisor is bound by the promise, even if it was insufficient to form the basis of a valid, legally binding contract.

Promises enforceable, despite the lack of consideration are, to pay a debt otherwise discharged by limitations, in rare cases and to charitable institutions. These situations are effect one contract and consideration.

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.


Web Sites:

  1. Webaddress:www.legal–dictionary.thefreedictionary.com/consideration, collected on February 29, 2012 at 7.30 pm to 8.00 pm.
  2. Web address: www.investorworks.com/1040/consideration.html, collected on February 29, 2012 at 7.30 pm to 8.00 pm.
  3. Web address: www.lawteacher.net, /contract law/lecture notes, collected on February 29, 2012 at 7.30 pm to 8.00 pm.
  4. Web address: www.e-lawresources.co.uk/consideration.php, collected on February 29, 2012 at 8.30 pm to 9.00 pm.
  5. Web address: www.nolo.com.legal…/consideration-every-contract -needs-33361.ht, collected on February 29, 2012 at 8.30 pm to 9.00 pm.
  6. Web address: www.4lawsschool.com/contracts101/consideration.htm, collected on February 29, 2012 at 8.30 pm to 9.00 pm.
  7. Web address: www.blurtit.com/q2587899.html, collected on February 29, 2012 at 10.00 pm to 10.30 pm.
  8. Web address: www.in.asswers.yohoo.com, collected on March 01, 2012 at 10.00 am to 10.30 pm.

9. Web address: www.lawteacher.net/contract-law, Retrieved on February 26, 2012 at 11.30 pm to 12.30 am.

Report & Book:

  1. Commercial Law” Writer is M. Ahammed, publist by NationalUniversity.

[1]Section 2(h) of the Indian Contract Act

[2] Sec2 (e) Indian Law

[3] Consilateral and bilateral contract The neglected ion in European private Law, International and Comparative Law Quarterly, 2010.

[4] . Sec 25 (1) Commercial Law

[5] . Sec 25(2) Commercial Law