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DR.

RAM MANOHAR LOHIYA NATIONAL LAW


UNIVERSITY, LUCKNOW (U.P.)

Session- 2014-15

LAW OF CONTRACTS

CONSIDERATION MAY BE SUFFICIENT


ANALYSE WITH CASE LAWS

PROJECT

SUBMITTED TO:
Dr. Visalakshi Vegesna

SUBMITTED BY:
Anjali Rajput

Associate Professor

Roll no. - 27

Department of Law

Section - A
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.
-Anjali Rajput
Roll No. 27

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TABLE OF CONTENTS:
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CONTENTS
Objective
Introduction
Consideration by promise or any other person (privity of
contract)
Consideration may be past, present(executed) or
future(executory)
Past consideration
Executed or present consideration
Executory or future consideration
Consideration may be sufficient it need not to be adequate
Consideration may be of some value
Value need not be adequate(adequacy of consideration)
Conclusion
Bibliography

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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.

Consideration to be given at the desire of the promisor.


Consideration to be given by the promise or any other person.
Consideration may be Past, Present or Future.
There should be some Act, abstinence or promise by the promise, which constitutes
consideration of the promise.

1 (1875) 10 Ex 153,162
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Consideration by Promisee or any other person (Privity of Consideration):


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.

Consideration may be Past, Present (Executed) or Future (Executory):


In India, it also does not make any difference whether the consideration was furnished in the
Past or it is furnished in the Present or it is promised to be given in the Future. The fact that
legal consideration is furnished is sufficient and there is need to ponder over the fact that at
which time consideration was, is or will be given.

2 (1882) 4 Mad. 137


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When, in return for the promise, the promise or any other person:
1. Has done or abstained from doing, the consideration is Past.
2. Does or abstains from doing, the consideration is Executed or Present.
3. Promise to do or to abstain from doing, the consideration is Executory or Future.
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.

Executed or Present Consideration:


When one of the parties to the contract has performed his part of the promise, which
constitutes the consideration for the promise by the other side, it is known as executed
consideration. Performance of the promise by the other side is the only thing now to be done.
For example, A makes an offer of reward of Rs 100 to anyone who finds his lost dog and
brings the same to him. B finds the lost dog and delivers the same to A. When B does so, that
amounts to both the acceptance of the offer, which results in a binding contract under which
A is bound to pay Rs 100 to B, and also simultaneously giving consideration for the contract.
The consideration in this case is executed.

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Executory or Future Consideration:


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.

Consideration May be Sufficient, it need not to be Adequate:


Consideration is one of the important elements that must be present with the purpose of
making a contract binding. Consideration can be defined as payment or money and it is also a
fundamental element into a contract. The principle of consideration is to ensure that promises
are enforced to the parties that promised to exchange something of value in the viewpoint of
the law. Consideration is only present when the parties mean to have an exchange.
However, consideration must be sufficient but need not be adequate. It means consideration
must be having some values, whether it appropriates in order to meet the return of the
agreement. The things that they agree to make an agreement are not just simply in oral
promises but also in exchange of some value of the exchange. They would probably not need
to have the same value or equal value of the exchange in an agreement but the law will take it
as a consideration as adequate if the parties are agreed to the exchange. The conditions of a
legally consideration is simply that the parties agree into an exchange and respect to each
other, the subjects exchanged or promised in exchange.
In White v Bluett3, Bluett sued his fathers will for an outstanding debt to his father and he
claimed that his father had promised him to return it for him. But his father asked him to stop
complaining in return for him. The court held that the promise does not counted as real
consideration, because to stop complaining was not have any economic value. So Bluett was
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.
3 (1853) 23 LJ Ex 36
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Consideration may be of some value:


Consideration as defined in the Indian Contracts Act means some act, abstinence or promise
on the part of the promise or any other person which has been done at the desire of the
promisor. Does it, therefore, mean that even a worthless act will suffice to make a good
consideration if its only done at the promisors desire? For example, A promises to give his
new Rolls-Royce car to B provided he will fetch it from the garage. The act of fetching the
car cannot by any stretch of imagination be called a consideration of the promise. Yet it is the
only act the promisor desired the promise to do. Such an act no doubt satisfies the words of
the definition, but it does not catch its spirit. It is for this reason that the English common law
has always insisted that consideration must be of some value in the eyes of the law. White v.
Bluett may be cited as an illustration in point.
The defendant owned a sum of money under a promissory note to his father. The defendant
perpetually, day and night, complained to his father that he had not been treated equally with
other children in the distribution of his property. Thereupon the father promised to discharge
him from all liability in respect of the loan and the note, provided he would stop complaining,
which the defendant accordingly did. The question was whether the defendants promise to
his complaints was a sufficient consideration to sustain his fathers promise. Pollock CB said:
It would be ridiculous to suppose that such promises could be binding. In reality there was
no consideration whatever.
In India also it has been laid down by Subba Rao J of the Supreme Court in Chidambara v.
P.S. Renga4 that consideration shall be something which not only the parties regard but the
law can also regard as having some value. Similarly, it has been observed by the Madras
High Court in Kulasekaraperumal v Pathakutty5 Though the Indian Contract Act does not in
terms provide that consideration must be good or valuable to sustain a contract it has always
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.
4 AIR 1965 SC 193, 197
5 AIR 1961 Mad 405
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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 Nivascharya6), 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.

Value need not be Adequate (adequacy of consideration)


The statement consideration must be sufficient but need not be adequate means that
consideration must be sufficient in law [however need not be adequate but sufficient]. There
must the possibility of some value capable of expression in economic term to the
original promise but need not be adequate (far) as matter of commercial exchange. Thus, a
gratuitous promise or agreement cannot enforceable as a contract. Natural love and affection
is also not sufficient consideration, likewise sentimental motive. Therefore, the Court will
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
enforceable.
In the case of Thomas v. Thomas, 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

6 (1918) 20 Bom LR 441: 46 IC 19


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that the requirement to send in the worthless wrappers would encourage more people to buy
the company chocolate.
The adequacy of the consideration is for the parties to consider at the time of making the
agreement, not for the court when it is sought to be enforced. This is the English rule and is
applicable in India also, for Explanation 2 attached to Section 25 lays it down so clearly that
an agreement to which the consent of the promisor is freely given is not void merely because
the consideration is inadequate. This is further fortified by illustration (f) which is as
follows:
A agrees to sell a horse worth Rs 1000 for Rs 10. As consent to the agreement was freely
given. The agreement is a contract notwithstanding the inadequacy of the consideration.
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.
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, 7 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.
7 AIR 1996 Cal. 67
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Conclusion
Adequacy of consideration refers to the fairness of the bargain. In general, a court will not
question the adequacy of consideration if the consideration is legally sufficient. Under the
doctrine of freedom of contract, parties are normally free to bargain as they wish. If people
could sue merely because they had entered into an unwise contract, the courts would be
overloaded with frivolous suits. In extreme cases, a court of law may consider the adequacy
of consideration in terms of its amount or worth because inadequate consideration may
indicate fraud, duress, undue influence, or a lack of bargained-for exchange. It may also
reflect a partys incompetence (for example, an individual might have been too intoxicated or
simply too young to make a contract). Suppose Dylan has a house worth $100,000 and he
sells it for $50,000. A $50,000 sale could indicate that the buyer unduly pressured Dylan into
selling or that Dylan was defrauded into selling the house at far below market value.
Whether consideration is valid can be summarised by the phrase: consideration need not be
adequate, but must be sufficient. Consideration does not have to reflect the value of the
promise (need not be adequate). For example, a promise to buy an item for less than its actual
value may be acceptable. However, the promise must be legally sufficient, which means it
must be something that the law regards as being capable of amounting to valid consideration.

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BIBLIOGRAPHY
Primary source

Contract and specific relief- Avtar singh

Secondary source

www.e-lawresource.com
www.lawteacher.net

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