Consideration - salient features

In one minute

Consideration is the price of a promise. It is something done, not done, or promised at the desire of the promisor. A promise made for nothing is usually not enforceable.

Indian law is wider than English law. Consideration may come from the promisee or from any other person, and it may be past, present or future. It need not be adequate, but it must be real and lawful.

This is a favourite long-answer topic. In real life, it explains why a gift promise cannot be enforced but a sale can.

Exam focus

Frequency: Frequently asked
Usually asked as: Both (long answer and short answer)

Legal provision

Section 2(d): "When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise."
Section 10: a valid contract needs a lawful consideration.
Section 23: consideration is unlawful if the law forbids it, it would defeat the law, it is fraudulent, it harms a person or property, or the court sees it as immoral or against public policy.
Section 25: an agreement made without consideration is void, with exceptions explained in the note on exceptions to consideration.
Section 25, Explanation 2: an agreement is not void merely because the consideration is inadequate. The court may take inadequacy into account in deciding whether consent was free.

Meaning and definition

Consideration is what each side gives or promises in exchange for the other's promise. In Latin terms, it is the quid pro quo (something for something). Without it, a promise is a nudum pactum (bare promise), and the maxim ex nudo pacto non oritur actio says no action arises from it.

The law demands consideration for a reason. It separates a bargain from a gift. The law enforces bargains because each side has given or risked something. A bare promise to give a gift has nothing behind it.

When the consideration is givenHow to read this: the boxes follow time from left to right on a wide screen, or from top to bottom on a phone. The promise is the middle point.

Before the promise: pastThe act was done earlier, at the promisor's desire. Valid in India (section 2(d): "has done").
At the time of the promise: presentThe act is done as the promise is made. Called executed consideration (section 2(d): "does").
After the promise: futureA promise for a promise, to be performed later. Called executory consideration (section 2(d): "promises to do").

Detailed explanation

The salient features of valid consideration are explained below. Each has an example.

1. It must move at the desire of the promisor

The act must be done because the promisor wished it. An act done voluntarily, or at a stranger's request, is not consideration for the promisor's promise. In Durga Prasad v. Baldeo (1880), Durga Prasad built shops in a market at a Collector's request. The shopkeepers later promised him a commission. He lost, because he built the shops at the Collector's desire, not theirs.

Example. A mason repairs Ravi's wall because the Sarpanch asked him to. Ravi later promises him Rs 2,000. The repair was not at Ravi's desire, so Ravi's promise has no consideration.

2. It may move from the promisee or any other person

Section 2(d) says "the promisee or any other person". So the person who sues need not have given the consideration personally. In Chinnaya v. Ramayya (1882), a woman gave property to her daughter on condition that the daughter pay an annual sum to the woman's sister. The sister could enforce the promise although she gave nothing herself.

Example. Hari pays Rs 1 lakh to Gita to promise her friend Uma a monthly allowance. Uma gave nothing but is the person to whom the promise was made. She can enforce it.

3. It may be past, present or future

The figure above shows the three forms. Past consideration is valid in India if it was given at the promisor's desire. In Sindha Shri Ganpatsingji v. Abraham (1895), services rendered at a person's own request were held good consideration for his later promise to pay.

Example. At Sita's request, Lata looks after Sita's shop for a month. Afterwards Sita promises Lata Rs 5,000 for it. The past service was at Sita's desire, so the promise is enforceable.

4. It need not be adequate

The law asks whether something of value was exchanged, not whether the bargain was fair. Section 25, Explanation 2 says an agreement is not void merely because the consideration is inadequate. Gross inadequacy can be evidence that consent was not free. In Thomas v. Thomas (1842), a widow was allowed to live in her late husband's house for a nominal rent of one pound a year. The court held that the rent was valid consideration.

Example. Ramesh sells his old bicycle worth Rs 1,000 to his cousin for Rs 10. Both agreed freely. The price is small, but it is still consideration.

5. It must be real, not illusory

It must have some value in the eyes of the law. A promise to do something impossible is not real consideration. Nor is a promise to do what the promisor is already bound by law or contract to do. Lalman Shukla v. Gauri Dutt held that performing a duty one already owes gives no fresh consideration.

Example. A police constable promises a shopkeeper to patrol his street, which is already his duty. The shopkeeper's promise to pay him for it has no consideration behind it.

6. It must be lawful

Consideration that is illegal, immoral or against public policy makes the agreement void (section 23).

Example. Kiran promises Dev Rs 50,000 for helping to bribe an official. The consideration is unlawful, and the agreement is void.

Don't confuse: Indian law and English law on consideration

Students often copy English rules into Indian answers. The Act's wording in section 2(d) makes Indian law wider on two points.

Point	Indian law	English law
Who may give consideration	The promisee or any other person	Only the promisee
Past consideration	Valid, if given at the promisor's desire	Stricter. Generally not enough
Source	Section 2(d): "has done" and "any other person"	Common law

Inside the concept. Under Indian law, a daughter's promise to pay her aunt can be enforced by the aunt, although the aunt gave nothing. This follows Chinnaya v. Ramayya.

Just outside the concept. A stranger who is not a party to the promise cannot enforce it, even though someone else gave consideration. The rules on strangers are in the note on the doctrine of privity of contract.

Common mistakes

Writing that consideration must be adequate. It must be real, not adequate.
Saying past consideration is invalid in India. It is valid when given at the promisor's desire.
Saying the consideration must come from the promisee. Section 2(d) says "or any other person".
Forgetting the "desire of the promisor" requirement.

Apply it

Problem

At the Sarpanch's request, Mohan repairs a village well. The villagers, who never asked him, later promise to pay him Rs 3,000. They do not pay. Can Mohan sue?

Issue. Did Mohan give consideration at the desire of the villagers?

Rule. Consideration must move at the desire of the promisor (section 2(d)). The leading authority is Durga Prasad v. Baldeo (1880).

Application. Mohan acted at the Sarpanch's request, not the villagers' desire. His repair is not consideration for their promise.

Conclusion. Mohan cannot enforce the promise.

Leading case laws

Durga Prasad v. Baldeo (1880)
Facts. Durga Prasad built shops in a market at a Collector's request. The shopkeepers who later occupied them promised him a commission. He sued when they refused to pay.

Principle. The shops were built at the Collector's desire, not the shopkeepers'. There was no consideration for their promise.

Why it matters. It is the leading case on the "desire of the promisor" requirement.
Chinnaya v. Ramayya (1882)
Facts. A woman gave property to her daughter on condition that the daughter pay an annual sum to the woman's sister. The daughter refused to pay.

Principle. Consideration can move from a third party. The sister could enforce the promise.

Why it matters. It shows how Indian law differs from English law.
Sindha Shri Ganpatsingji v. Abraham (1895)
Facts. A person rendered services at another's request. The other later promised to pay for them.

Principle. Past services at the promisor's request were good consideration for the later promise.

Why it matters. It confirms that past consideration is valid in India.
Thomas v. Thomas (1842)
Facts. A widow was allowed to live in her late husband's house for a nominal rent of one pound a year. The executors argued that the sum was far too small.

Principle. Consideration need not be adequate. The nominal sum was valid consideration.

Why it matters. It is the standard authority that the court does not weigh the fairness of the bargain.
Lalman Shukla v. Gauri Dutt (1913)
Facts. A servant found his master's missing nephew while already employed to search for him. He later claimed a reward announced after he had left.

Principle. Performing a duty already owed to the promisor is not fresh consideration.

Why it matters. It applies the rule on pre-existing duties.

How to write this answer in the exam

5-mark answer

Quote section 2(d).
List the features: desire of the promisor, from any person, past or present or future, real, lawful.
Cite Durga Prasad v. Baldeo (1880) and one example.

10-mark answer

Section 2(d) and why the law requires consideration.
Each feature with an example.
Past consideration: Sindha Shri Ganpatsingji v. Abraham (1895).
Inadequacy: Thomas v. Thomas (1842) and section 25, Explanation 2.
Third-party consideration: Chinnaya v. Ramayya (1882).
A table of Indian law against English law.

Key points to remember

Consideration must move at the desire of the promisor (section 2(d)).
It may move from the promisee or any other person.
It may be past, present or future.
It need not be adequate, but it must be real and lawful.
A duty already owed is not fresh consideration.
A bare promise without consideration is void (section 25), except as the Act provides.

Quick self-test

1. Which words of section 2(d) allow a third party to give consideration?

"The promisee or any other person".

2. Is past consideration valid in India?

Yes, if it was given at the promisor's desire (section 2(d): "has done").

3. Must consideration be adequate?

No. It must be real and lawful. Gross inadequacy may show that consent was not free (section 25, Explanation 2).