The consideration is not a part of contract without it the contract cannot perform-illustrate & explain

Introduction

The consideration creates a lawful commitment in a contract. Because the consideration is not a part of contract without it the contract cannot perform. There cannot be an agreement if there is no consideration. Section 25 [1]of the act says the same thing in precise terms and also gives three exceptions when an agreement without consideration is a valid contract.

Contracts come on different shapes and size. Some involves of large sum of money and other trivial sum. Some are long duration and some are short duration. Doctrines such as consideration, illegality, frustration, and duress cannot be ascribed to the will of the parties, nor can statutes such as the unfair contract terms Act1977[2].

According to section 10, “All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object and not here by specifically declared to be void” According to section 2(a) of Indian contract act, 1872, defines offer as “when one person signifies to another from doing anything with a view to obtaining the assent of that other to, such act (or) abstinence, he his said to make a proposal”.[3]

The general rule of law is “no consideration, no contract”, i.e., in the absence of consideration there will be no contract. However, the law recognizes the following exceptions to the rule of consideration. The exceptions have been given in Sec. 25 of the Indian Contract Act[4]. In these cases, agreements are enforceable even if these have been made without consideration.

Consideration                                                                                  

Consideration is something of value given by a promissor to a promisee in exchange for something of value given by a promisee to a promissor. Typically, the thing of value is a payment, although it may be an act, or forbearance to act, when one is privileged to do so, such as an adult refraining from smoking[5].

Consideration may be defined as a benefit falling due to a promisor or a detriment, Incurred by promises. It is the most essential element of the contract. As a general rule, agreement without consideration is void. The promise for a promise in return is consideration[6]. Meaning of Consideration has been distinct in many ways. Consideration for a particular promise exists where some right, interest, profit or benefit accrues (or will accrue) to the promisor as a direct result of some forbearance, detriment, loss or responsibility that has been given, suffered or undertaken by the promisee.[7]

Consideration consists of a legal detriment and a bargain. A legal detriment is a promise to do something or refrain from doing something that you have the legal right to do, or voluntarily doing or refraining from doing something, in the context of an agreement. A bargain is something the promisor (the party making promise or offer) wants, usually being one of the legal detriments. The legal detriment and bargain principles come together in consideration and create an exchange relationship, where both parties agree to exchange something that the other wishes to have.

The consideration must be executed

The consideration must be executory or executed, but not past. Consideration is executor Consideration can be anything of value (such as an item or service), 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, 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 (quid pro quo) something must be given or promised in exchange or return for the promise.[8]

Good consideration

Consideration is what induces parties to a contract to enter into an agreement.  Valuable consideration is a type of promised payment upon which a promisee can enforce a claim against an unwilling promisor.  There is a difference between valuable consideration and good consideration.  Good consideration may be the feeling of love and affection towards a relative.

  For example: A promises to give B a piece of land on the condition that A marries B’s daughter C.  This is not a valuable consideration because the promise of giving land cannot be enforced for lack of valuable consideration.  The consideration here, ie; A marrying C, is only good consideration.

Contracts

A contract is an exchange of promises between two or more  parties to do or refrain from doing an act which is enforceable in a court of law. It is where an unqualified offer meets a qualified acceptance and the parties reach compromise In Idem. The parties must have the necessary capacity to contract and the contract must not be trifling, indeterminate, impossible or illegal.

The Indian Act says that “an agreement enforceable by law is a contract [9]“so it show that there must be an agreement and it must enforceable by law. So it proves that the contract of law deal with the agreement which is enforceable by the law. So the contact is the exchange of the promises between two or more parties.

Hence by study both definitions you can understand that contract required benefit for both parties[10], if there is no consideration for one party it means that party is not getting any benefit. If there is no benefit for both party it means why they will make contract. And if benefit is only for one party then that is no contract because it is not full feeling contract first essential of switch of promises, goods, services or something worth full for both parties

Exceptions to no consideration no contract

Every agreement to be enforceable at law must be supported by valid consideration. An agreement made without consideration is void and is unenforceable except in certain cases[11]. Section 25 specifies the cases where an agreement though made without consideration will be valid. These are as follow:

1.   Natural love and affection[12]

   An agreement though made without consideration will be valid if it is in writing and     registered and is made on account of natural love and affection between parties standing in a near relation to each other. An agreement without consideration will be

   valid provided-
(a) it is expressed in writing;
(b) it  is registered under the law for the time being in force;
(c) it is made on account of natural love and affection;
(d) it is between parties standing in a near relation to each other

2.  Compensation for services rendered [13]
An agreement made without consideration will be valid if it is a promise to

      Compensate     wholly or in a part a person who has already voluntarily done

      something for the promisor or something which the promisor was legally

      Compellable to do.To apply this rule, the following essentials must exist:
(a) The act must have been done voluntarily;
(b) for the promisor or it must be something which was the legal obligation of the

        promiser;
(c)  the promisor must be in existence at the time when the act was done;
(d)  the promisor must agree now to compensate the promisee.

3.  Time-barred debt [14]
A promise to pay a time-barred debt is also enforceable. But the promise must be in writing and be signed by the promisor or his agent authorized in that behalf. The   promise may be to pay the whole or part of the debt. An oral promise to pay a time- barred debt is unenforceable

4.  Completed gifts [15]
Explanation 1 to section 25 provides that the rule ‘No consideration, No contract’   shall not affect validity of any gifts actually made between the donor and the don if a person gives certain properties to another according to the provision of the. Transfer of Property Act, he cannot subsequently demand the property back on   the ground that  there was no consideration.

5.  Agency[16]
There is one more exception to the rule. IT is given in section 185 which says that no

       Consideration is needed to create an agency.

6.   Guarantee
A contract of guarantee is made without consideration.

7.   Remission
       No consideration is required for an agreement to receive less then what is due. This is              called remission in the law.

 8.   Contracts of gratuitous bailment

       If no consideration is involved in bailment it is said gratuitous bailments, it is valid and enforceable.

 9.   Doctrine of ‘Privacy of Contract’

         No other person except the contracting parties has the right to enforce the contract.

10.  Acknowledgement

         If a person acknowledges to another as his agent then he can be held liable by the party.

11.  Assignment of a contract

         It means transfer of rights and obligations arising under a contract in favour of a third person

12.  Conditions running with the land

        If certain covenants run with the land then these shall be applicable even on subsequent parties who acquire interest on this land even though they are not originally party to the contract under which covenants were set up

13.  Contracts made for minor’s marriage

        Such contracts created by the guardians treat minor as a beneficiary to the contract

   All these essentials must be present to enforce an agreement made without consideration.

Competence

Consideration must be enough, but courts will not weigh the adequacy of consideration. For instance, agreeing to sell a car for a penny may constitute a binding contract. All that must be shown is that the seller actually wanted the penny. This is known as the peppercorn rule. Otherwise, the penny would constitute nominal consideration, which is insufficient. Parties may do this for tax purposes, attempting to disguise gift transactions as contracts[17].

Transfer of money is typically recognized as an example of s Consideration is something of value given by a promissor to a promisee in exchange for something of value given by a promisee to a promissor. Typically, the thing of value is a payment, although it may be an act, or forbearance to act, when one is privileged to do so, such as an adult refraining from smoking.

Consideration consists of a legal detriment and a bargain. A legal detriment is a promise to do something or refrain from doing something that you have the legal right to do, or voluntarily doing or refraining from doing something, in the context of an agreement. A bargain is something the promisor (the party making promise or offer) wants, usually being one of the legal detriments. The legal detriment and bargain principles come together in consideration and create an exchange relationship, where both parties agree to exchange something that the other wishes to have. The purpose of consideration is to ensure that there is a present bargain, that the promises of the parties are reciprocally induced. The classic theory of consideration required that a promise be of detriment to the promissory or benefit to the promisee. This is no longer the case in the USA; typically, courts will look to a bargained-for exchange, rather than making inquiries into whether an individual was subject to a detriment or not. The emphasis is on the bargaining process, not an inquiry into the relative value of consideration. This principle was articulated in Hamer v. Sidway[18]. Yet in cases of ambiguity, courts will occasionally turn to the common law benefit/detriment analysis to aid in the determination of the enforceability of a contract.

Comparative Assessment

 The value of any given consideration is usually insignificant. So long as the promise gives the consideration demanded by the promisor, the courts are satisfied. Although the act requested is of little value, and the promise given is relatively of much greater value, the courts seldom give any attention to that fact, except as it may be some evidence of fraud. Nevertheless, it should be borne in mind that a promise unsupported by any consideration and which exacts no action or promise by the promisee is unenforceable. Some consideration must exist. A promise in the nature of a privilege is unenforceable. The mere fact that the beneficiary of the proposed reward must take certain steps to place him in a position to receive it cannot be substituted for consideration. If, however, the promisee is requested to act in a certain manner, and the action is considered to be the price paid for the promise, the taking of such action as is requested will function as consideration. A gift, once it has been executed, cannot be set aside by the donor because of the lack of consideration.[19]Once a gift has been completed, the property involved belongs to the done.

Consideration must be given at the time of agreement, but it does not include previous acts[20]. For example, in the case of Re McArdle (1951), previous work was not seen as consideration in that particular contract for a future arrangement. However, if there is an agreement between parties that previous work is to be included, then that consideration would be seen as valid, this was apparent in Lampleigh v Braithwaite (1615) an in Re Casey’s Patents (1892).[21]

Consideration in a contract must not be illegal, in the case of Foster v Driscoll (1929), this is where goods were smuggled into the USA, and therefore the consideration became illegal.[22]

Consideration should not be a duty which exists currently. For instance, in the case of Collins v Godefroy (1831), a lawyer who attended court as a witness, could not also agree to appear in court. Another case is Stilk v Myrick (1809), this is where sailors had a duty to sail the ship short-handed, therefore, when they promised the captain they would do this, this was not a consideration because it was their duty to do this anyway.”[23]

Conclusion

From the above discussion we have seen that Consideration is the most important basics of a valid contract. Without Consideration no contract can be formed. Consideration must be absolute and unqualified[24]. There should not be any modification of the terms of a Consideration to have a valid Contract as avowed higher than. So we can ensure that without consideration contract is impossible,

Actually, Consideration for a particular promise exists where some right, interest, profit or benefit accrues (or will accrue) to the promisor as a direct result of some forbearance, detriment, loss or responsibility that has been given, suffered or undertaken by the promisee. The consideration must be executory or executed, but not past. Consideration is executor Consideration can be anything of value (such as an item or service), 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, 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 (quid pro quo): something must be given or promised in substitute or return for the promise.

A contract is an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law. It is where an unqualified offer meets a qualified acceptance and the parties reach Consensus in Idem. The parties must have the necessary capacity to contract and the contract must not be trifling, indeterminate, impossible or illegal.

According to contract act every promise or every set of promise forming the consideration for each other is an agreement. So, there can’t be an agreement without consideration and there can’t be a contract without agreement. Section “10” of the contract act say’s that all agreement is contract if they are made with the free consent of the parties competent to contract for a lawful consideration and with lawful objects. Therefore (sec:25)[25]

Hence by watching both definitions you can understand that contract required benefit for both parties. if there is no consideration for one party it means that party is not getting any benefit so, If there is no benefit for both party it means why they will make contract. And if  benefits only for one party then that is no contract because it is not full feeling contract first essential of substitute of promises, goods, services or something worth full for both parties

References

  • Business  Law , Commercial Law, Got. Law [Tex Book], Books and Notes Articles & Internet  Library .Book  Sources  [ Wikipedia.org/special Book  Sources]
  • Ewan McKendrick, Contract Law – Text, Cases and Materials (2005) Oxford University Press ISBN 0-19-9274800
  • P.S. Atiyah, The Rise and Fall of Freedom of Contract (1979) Clarendon Press ISBN 0-19-825342-7
  • Randy E. Barnett, Contracts (2003) Aspen Publishers ISBN 0-7355-6525-2
  • Scott Fruehwald, “Reciprocal Altruism as the Basis for Contract,” 47 University of Louisville Law Review 489 (2009).
  • AL Corbin, ‘The Effect of Options on Consideration’ (1925)                                       34(6) Yale Law Journal 571-590
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[1] . Section 25, The consideration creates a lawful commitment in a contract,

[2] . unfair contract terms Act1977

[3] . According to section 10, 2(a)

[4] . The general rule of law,  in Sec. 25 of the Indian Contract Act, The general rule of law is “no consideration, no contract

[5]. Main article is Consideration,

[6]. Consideration

[7]. Fdrs, From Business Law text Book

[8].  In its traditional form. Consideration expressed

[9] . The Indian Act says

[10] .ucrbb= understand that contract required benefit for both parties

[11] . Section 25, Every agreement to be enforceable at law must be supported by valid consideration,

[12] NLA= Natural love and affection [Sec. 25(1)]

[13] Compensation for services rendered[Sec. 25(2)]

 [14] Time-barred debt [Sec. 25(3)  ( Law Firm in Bangladesh)

 [15] . Completed gifts [Exp. 1 to Sec. 25], Explanation 1 to section 25 provides that the rule

  [16] . Agency (Sec. 185) . IT is given in section 185 which says that no consideration is needed to create an agency.

*   Guarantee (Sec 127),   Remission (Sec 63) , Law Offices Ira S. Newman

[17] ,This is known as the peppercorn rule. Otherwise, the penny would constitute nominal consideration, which is insufficient ,

Consideration must be enough, but courts will not weigh the adequacy of consideration[According to B. L.]

[18], . This principle was articulated in   Hamer v. Sidway, This is no longer the case in the USA [Category contract Law ,  United States law]

[19] , A gift, once it has been executed, cannot be set aside by the donor because of the lack of  consideration.[Business Law

[20], in the case of Re McArdle (1951), Consideration must be given at the time of agreement

[21] , Lampleigh v Braithwaite (1615) an in Re Casey’s Patents (1892).

[22] , in the case of Foster v Driscoll (1929),[USA] Consideration in a contract must not be illegal,

[23] ,  in the case of Collins v Godefroy (1831), Another casei s Stilk v Myrick (1809)

[24], Unqualified Without Consideration no contract can be formed. Consideration must be absolute and , Without Consideration no contract can be formed. Consideration must be absolute and unqualified[24]. There should not be any modification of the terms of a Consideration to have a valid Contract as avowed higher than. So we can ensure that without consideration contract is impossible,

[25], section “10” of the contract act say’s that all agreement are contract, the free consent of the parties competent to contract for a lawful consideration and with lawful objects.therefore(sec:25)[25]

 

 

 

 

 

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