Session- 2014-15
LAW OF CONTRACTS
PROJECT
SUBMITTED TO:
SUBMITTED BY:
SANDESH NIRANJAN
Associate Professor
Department of Law
Section - B
Semester- II
ACKNOWLWDGEMENT:
I would like to express my gratitude to all those who helped me in this topic. I extend my
sincere acknowledgements to Dr. Visalakshi Vegesna Maam who gave me the opportunity to
make a project on the topic Consideration may be Sufficient- Analyse with Case Laws. I
am deeply indebted to her whose help and stimulating suggestion helped me in choosing this
topic.
I would also like to thank my friends for their constant help and valuable suggestions.
I further extend my thanks to library staff of DR. RAM MANOHAR LOHIYA NATIONAL
LAW UNIVERSITY who helped me in getting all the materials necessary for the project.
-SANDESH NIRANJAN
Roll No. 115
TABLE OF CONTENTS:
SL. No.
CONTENTS
PAGE NO.
Objective
Introduction
Past Consideration
Present Consideration
Future Consideration
10
Conclusion
11
11
Bibliography
12
OBJECTIVE:
The objective of this project is to give a detailed analysis on the sufficiency of a consideration
in a contract. Here, I have analysed whether a consideration is sufficient to conclude a
contract irrespective of the fact it is adequate or inadequate.
INTRODUCTION:
There are a number of essentials which are required for a valid contract such as there must be
an agreement between the two parties, the parties entering into the contract must be
competent to do so, etc. One of the essentials needed for a valid contract is that there should
be a lawful consideration. Consideration has been variously defined. The simplest definition
is by Blackstone: Consideration is the recompense given by the party contracting to the
other. In other words, it is a price of the promise. In the words of Pollock, Consideration is
the price for which the promise of the other is bought and the promise thus given for value is
enforceable. But the most commonly accepted definition is that which was attempted by
Lush J in Currie v. Misa1: A valuable consideration in the sense of the law may consist
either in some right, interest, profit or benefit accruing to the one party, or some forbearance,
detriment, loss, or responsibility given, suffered or undertaken by the other.
In Section 2(d) of the Indian Contract Act, consideration is defined as follows: 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 of the promise.
The definition requires the following essentials to be satisfied in order that there is valid
consideration:
1
2
3
4
Unlike England, in India, it does not matter whether the Consideration is given by the
promisee or any other third party. As long as consideration is there, the contract will be valid
irrespective of the fact whether the consideration was moved from the promise or a third
person. For example, A promises to give his watch to B and a consideration of Rs 2,000 for
the same is given to A by X and not by B. This will not constitute a valid contract in England
as consideration for As promise in favour of B was not provided by the promise B himself
but by somebody else. Such a contract will be valid in India as Section 2(d) clearly provides
that ....at the desire of the promisor, the promisee or any other person may provide
consideration.
The position in India may be explained by referring to the case of Chinnaya v. Ramaya.2 In
that case A, an old lady, granted an estate to her daughter (the defendant) with a direction that
the daughter should pay the annuity of Rs, 653, to As brothers (the plaintiffs). On the same
day, the defendant made a promise with the plaintiffs that she would pay the annuity as
directed by A. The defendant failed to pay stipulated sum. In an action against her by the
plaintiffs she contended that since the plaintiffs themselves furnished no consideration, they
had no right of action. The Madras High Court held that in this agreement (between the
defendant and the plaintiffs), the consideration has been furnished by the defendants mother
and that is enough consideration to enforce the promise between the plaintiffs and the
defendant.
In the above case, it has been noticed that A has entered into a contract with B, but A
himself has not given any consideration to B, but the consideration has been given by a third
party, C to contract against B. This is because of the rule under Indian Law which permits
consideration to be provided either by the promisee or by any other person.
When, in return for the promise, the promise or any other person:
2 (1882) 4 Mad. 137
1
2
3
Whether the consideration is Past, Executed or Executory, it is essential that it must have
been given at the desire of the promisor.
Past Consideration
As noted above, Indian Contract Act recognises Past consideration. It means that the
consideration for any promise was given earlier and the promise is made thereafter. It is, of
course, necessary that at the time the consideration was given, that must have been done at
the desire of the promisor. For example, A requests to B to find his lost dog and after he
has done the same, if A promise to pay Rs 100 for that, it is a case of past consideration. For
As promise to pay B Rs 100, the consideration is Bs efforts in finding As lost dog and the
same had been done before A promised to pay the amount. In this case, the consideration has
been given at As request, because it is only when A requested B that he found the dog. This
constitutes valid (Past) consideration under section 2(d), and therefore the promise is
enforceable. The word has done or abstained from doing, according to Pollock and Mulla
declare the law to be that an act done by A at Bs request, without any contemporaneous
promise form B, may be consideration for a subsequent promise from B to A.
When one person makes a promise in exchange for the promise by the other side, the
performance of the obligation by each side to be made subsequent to the making of the
contract, the consideration is known as executor. For example, A agrees to supply certain
goods to B and B agrees to pay for them on a future date, this is a case of executor
consideration.
still liable for the debt. In this case, we can see that in consideration, the exchange of the
promise must be tangible. Not stop grumbling or complaining, these are no economic value to
have an exchange with the other parties.
been understood that consideration means something which of some value in the eyes of law.
It must be real and not illusory, whether adequate or not...So long as the consideration is not
unreal it is sufficient if it be of slight value only.
But the courts have been very liberal in this respect and have always tried to find value in
something to which parties attach value. Thus, a transfer of property in consideration that
the transferee shall accept the responsibility and discharge those recurrent services and
ceremonies (Ramacharya v Shiv Nivascharya7), and a promise by a wife to pay off her
husbands debts and to maintain his mother made in consideration of enjoying certain
properties, were held to be for valuable consideration.
not investigate its adequacy and see if the parties have got equal value. It can be summarized
that the limitation to this doctrine as merely doing something to entitle yourself to a gift will
not provide sufficient consideration, and nor will giving something you were not entitle to
give. For example, if I offer to sell you my house for 1, this is valid consideration. If I offer
to give you my house for nothing, there is no consideration and this agreement could not be
enforced.
In the case of Thomas v. Thomas8, the promise to pay 1 per annum rent was irrelevant to the
fact of sufficient to pay for commercial rent. The Courts did not consider the issue of
adequacy to pay. The rule is well established in the case of Chappell v. Nestle Co Ltd
that consideration only needs to be sufficient not adequate. This case, dispute was centred
on whether chocolate wrapper could form part of the consideration. It was held that they
could as they were of value to the person providing them and were therefore
sufficient consideration for the promise made. Whether or not consideration is sufficient, that
shall be a subjective test. So, it justified the Courts approached to the issue of adequacy by
reference
to
freedom
of
contract. The
contracting
parties
could
stipulate
for
what consideration that they had been chosen. The Courts would not interfere just because it
appears that a person had made a bad bargain. The reasoning of Chappell was presumably
that the requirement to send in the worthless wrappers would encourage more people to buy
the company chocolate. It can be summarized the points of law and arguments in the above
for the statement consideration must be sufficient but need not be adequate. When
considering value, the Courts is not interested in adequacy of consideration, i.e. whether
the price is fair, it is only concerned with whether or not the consideration can be expressed
in terms of economic worth. Hence, intangibles such as emotions (respect for a
husbands wishes, love and affection), lack of boredom Thomas v. Thomas and White v.
Bluett are not valuable consideration. Provided, however that the consideration has some
economic value to you, as long as it has some economic purpose Chappell v. Nestle.
This explains White v Bluett (1853) where a sons promise to stop complaining to his father
about the distribution of the fathers property was held to be incapable of amounting to
consideration.
8 (1842) 2 QB 851
The best known English authority is De La Bere v Pearsons,9 the defendants who were
newspaper propreiters, offered to answer inquiries from readers of the paper desiring
financial advice. The plaintiff wrote to them asking for a safe investment and also for the
name of a good stock broker. The editor recommended a person who, unknown to him, was,
in fact, an undischarged bankrupt. The plaintiff, in reliance on the recommendation, sent
sums for investment and they were immediately misappropriated. In an action against the
defendants, the question was whether there was sufficient consideration for the offer of the
advice. It was held by the court that, Such publications might obviously have a tendency to
increase the sale of the defendants paper. This offer when accepted, resulted in a contract for
good consideration.
The principle has been followed in India also. In the case of Devji Shivji v Karsandas
Ramji,10 the transfer of the goodwill and the whole of the assets of a business for a bare Rs
1000 has been upheld.
Although inadequacy of consideration by itself is not a ground for treating the contract as
invalid but it may be a factor which the court may take into consideration to know whether
the consent of a party was free or not. If a party does not take undue advantage in a
transaction and there is no undue influence, the agreement is not affected by the mere fact of
inadequacy of consideration. In Vijaya Minerals Pvt. Ltd. V Bikash Deb,11 the position in this
regard was explained in the following words, It may be noted that short of undue influence
and duress, an agreement between the parties cannot be rendered nugatory on the ground that
the consideration is not adequate.... In fact, the courts do not go into the question of adequacy
of consideration when considering whether an agreement is binding or not.
Conclusion:
There are a number of essentials which are required for a valid contract such as there must be
an agreement between the two parties, the parties entering into the contract must be
competent to do so, etc. One of the essentials needed for a valid contract is that there should
be a lawful consideration. Consideration has been variously defined. The simplest definition
9 (1908) 1 KB 280
10 AIR 1954 Pat 280
11 AIR 1996 Cal. 67
Bibliography:
Indian Contract Act by R.K. Bangia
Law of Contract by Avtar Singh
Law of Contract by Anson
Webliography:
www.ssconline.com
www.manupatra.com
www.lexisnexis.com