5. Consideration — Salient Features and Exceptions
This post covers Consideration in full — Post 1 gave only the bare Section 2(d) definition and deferred depth to here. Read Definition and Nature of Contract first if you haven't.
The Problem This Topic Solves
A promise, by itself, is usually not enforceable — the law generally won't step in just because someone said they'd do something. What makes a promise legally binding is that the other side gave something in return. That "something in return" is consideration, and it's the price the law demands before it will enforce a promise.
The Definition, Recapped
Section 2(d): when, at the desire of the promisor, the promisee (or anyone else) has done, does, or promises to do something, that act or promise is consideration.
Salient Features of Valid Consideration
1. Must move at the desire of the promisor. An act done voluntarily, or at someone else's request, is not consideration. Durga Prasad v. Baldeo (1879) is the leading case: Durga Prasad built shops in a market at a Collector's request. The shopkeepers who later occupied them promised him a commission. When they refused to pay, he sued — and lost. His original effort was done at the Collector's desire, not the shopkeepers', so it was not valid consideration for their promise.
2. May move from the promisee or any other person. As covered in an earlier topic, Indian law allows consideration to come from a third party (Chinnaya v. Ramayya) — a genuine departure from English law.
3. May be past, present, or future. Past consideration — something already done before the promise was made (valid in India, unlike English law, provided it was done at the promisor's desire). Sindha Shri Ganpatsingji v. Abraham (1895) confirms this: services rendered to a minor at his own request, continued even after he came of age at the same request, were held good consideration for his later promise to pay — the key fact was that the request came from the promisor himself throughout. Present (executed) consideration — given at the same time as the promise. Future (executory) consideration — a promise for a promise, to be performed later.
4. Need not be adequate. The law doesn't ask whether the exchange was a fair deal — only that something of value was exchanged. Selling a ₹1,000 watch for ₹10 is still valid consideration; adequacy is irrelevant to validity, though gross inadequacy can be evidence of coercion or undue influence when consent is challenged. Thomas v. Thomas (1842) is the classic illustration: a widow was allowed to live in her late husband's house for life, in exchange for paying a nominal £1 a year and maintaining the property. The executors argued £1 was nowhere near a fair rent, but the court held her promise was still real, valid consideration — the law only checks that something of legal value was given, not whether the bargain was a good one.
5. Must be real, not illusory. It must have some value in the eyes of the law — a promise to do something physically impossible, or already legally required, generally isn't good consideration.
6. Must not be unlawful. Consideration that is illegal, immoral, or opposed to public policy makes the agreement void (Sections 23, 24).
Section 25 — "No Consideration, No Contract" and Its Exceptions
The general rule, Section 25: an agreement made without consideration is void. But the same section carves out specific exceptions where a promise is enforceable even with no consideration at all:
1. Natural Love and Affection — a written and registered agreement, made between parties standing in a near relation to each other, out of natural love and affection, is valid without consideration. Example: a father registers a gift deed transferring property to his son purely out of affection.
2. Compensation for a Past Voluntary Act — a promise to compensate someone who has already voluntarily done something for the promisor (or something the promisor was legally bound to do) is enforceable. Example: A finds B's lost wallet and returns it; B later promises A ₹500 as thanks — enforceable, even though A acted before any promise existed.
3. A Promise to Pay a Time-Barred Debt — if a debt is no longer legally recoverable because the limitation period has expired, a fresh written and signed promise by the debtor to pay it is enforceable, even without new consideration.
Beyond Section 25 itself, two more recognised exceptions:
4. Completed Gifts — the "no consideration, no contract" rule doesn't apply to gifts already made and accepted; once completed, a gift doesn't need to be unwound for lack of consideration.
5. Agency — under Section 185, no consideration is required to create a contract of agency.
Subscription Promises — A Frequently Tested Pair
Two companion cases test exactly where the line falls between an unenforceable bare promise and an enforceable one, in the specific context of promising money to a public/charitable cause.
Kedar Nath Bhattacharji v. Gorie Mohammad (1886): Gorie Mohammad subscribed ₹100 towards building a Howrah town hall. Relying on the subscription list, Kedar Nath (a trustee of the fund) went ahead and signed a binding contract with a builder. When Gorie Mohammad refused to pay, the Calcutta High Court held his promise was enforceable — Kedar Nath's reliance, and the liability he incurred because of it, was itself the consideration. Personal benefit to the subscriber is irrelevant; what matters is that something was done at his desire.
Abdul Aziz v. Masum Ali (1914): contrast this with a mosque-repair fund where a subscriber promised ₹500 but the committee never began any work or incurred any liability on the strength of it. The Allahabad High Court held this promise was not enforceable — a bare, un-acted-upon promise to subscribe is just a gratuitous promise, since nothing has actually changed on either side.
The rule these two cases teach together: a subscription promise becomes binding only once the promisee has genuinely relied on it.
- Section 2(d) — definition of consideration
- Consideration must move at the desire of the promisor — Durga Prasad v. Baldeo
- Consideration may move from the promisee or any other person — Chinnaya v. Ramayya
- Consideration need not be adequate, only real — Thomas v. Thomas
- Section 25 — agreement without consideration is void, subject to 3 exceptions: natural love and affection (written + registered, near relation), compensation for a past voluntary act, promise to pay a time-barred debt
- Section 185 — no consideration needed for a contract of agency
- Kedar Nath v. Gorie Mohammad — a subscription promise becomes enforceable once the promisee relies on it
- Abdul Aziz v. Masum Ali — a bare, un-acted-upon subscription promise stays unenforceable
- Completed gifts are valid without consideration, even though not listed as a Section 25 exception in the main text
- Consideration can be past, present, or future — India allows past consideration as valid, unlike English law's stricter position — Sindha Shri Ganpatsingji v. Abraham
Section 25 Exceptions — At a Glance
| Exception | Requirement | Example |
|---|---|---|
| Natural love and affection | Written, registered, near relation | Father gifts property to son by registered deed |
| Compensation for past voluntary act | Act was voluntary, promisor later agrees to compensate | B promises to pay A for returning his lost wallet |
| Time-barred debt | Fresh promise must be in writing and signed | Debtor signs a new promise to pay an old, unenforceable debt |
A Practical Example
Arjun's aunt, out of affection, executes a registered gift deed transferring her flat to him — no money or service changes hands. This is valid under Section 25(1) despite having no consideration, because it's written, registered, and between near relatives, done out of natural love and affection.
Separately, Arjun once helped his neighbour Kavita repair her roof during a storm, without being asked and without any promise of payment. Weeks later, grateful, Kavita promises to pay him ₹2,000. Even though Arjun's help came before any promise was made, this is enforceable under Section 25(2) — compensation for a past voluntary act.
Quick Revision Points
- Section 2(d): consideration = something done at the promisor's desire
- Must move at promisor's desire (Durga Prasad v. Baldeo) — not just anyone's
- Can move from promisee or a third party in India (Chinnaya v. Ramayya)
- Can be past, present, or future
- Need not be adequate, only real and lawful
- Section 25: no consideration = void agreement, EXCEPT — natural love & affection (written+registered+near relation), past voluntary act compensation, time-barred debt promise
- Completed gifts and agency (Section 185) are additional exceptions outside Section 25's own text
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