Prof.

A D Vasmatkar
Assistant Professor
SLS, Hyderabad
 The section 25 of the Indian Contract Act, 1872 openly
declares that “an agreement made without
consideration is void…”. Unless_
 it is in writing and registered and the promise has been
made due to natural love and affection between the
parties standing in near relation to each other.
 it is a promise to compensate, wholely or in part, a
person who has voluntarily done something for the
promisor or something that the promisor was legally
bound to do.
 it is a promise to pay for a time barred debt.
 Section 2(e) - „Every promise and every set of
promises, forming the consideration for each other, is
an agreement‟
 It is the price for a promise – a quid pro quo. It is the
value received as incentive for the promise.
 Blackstone defined consideration as “the recompense
given by the party contracting to the other”.
 Pollock took consideration to be “the price for which
the promise of the other is bought, and the promise thus
given for value is enforceable”.
 In England too “promises without consideration are not enforced,
because they are gratuitous”.

 The definition given in Curre v Misa (1875) LR 10 Ex 153, 162

by Lush J is widely accepted - “ 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 forbe
arance, determent, loss, or responsibility given, suffered or
undertaken by the other…”

 In Chidambara Iyer v. Renga Iyer, AIR 1966 SC 193… SC

acknowledged this definition being similar to sec. 2(d).
 Illustration: X promises to deliver 10 kgs of basmati rice to Y and
Y promises to pay Rs. 500 upon delivery. In this contract, Y‟s
promise to Rs. 500 upon delivery is the consideration for X‟s
promise. Similarly, X‟s promise to deliver 10 kgs of basmati rice
is the consideration for the promise Y made.
 The Indian Contract Act, 1872 under Section 2 (d) defines
consideration as given under:
 “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 abstain from doing
something, such act or abstinence or promise is called a
consideration for the promise.”
 1) Consideration to be given “at the desire of the promisor”
 2) Consideration to be given “by the promisee or any
other person”
 3) Consideration may be past, present or future, in so far
as definition says that the promisee:
 a) Has done or abstained from doing, or
 b) Does or abstains from doing, or
 c) Promises to do or to abstain from doing, something.
 4) There should be some act, abstinence or promise by the
promisee, which constitutes consideration for the promise.
 Consideration must be given at the desire of the promisor,
rather than merely voluntary or at the instance of some third
party.
 In the case Durga Parsad v Baldeo, (1880) 3 All 228
 The plaintiff, on the order of the Collector of the town, built
at his own expense, certain shops in a bazaar. The shops
came to be occupied by the defendants who,
in consideration of the plaintiff having expended money in
the construction, promised to pay him a commission on his
articles sold through their agency in the bazaar. The
plaintiff‟s action to recover the commission was rejected. It
was held because as the construction had not been done as
per the desire of the defendants, but the order of the
collector. Hence, the consideration was not valid and the
defendants not liable for the same.
 Personal benefits are not necessary.
 To Constitute a good consideration, act or abstinence must
be at the desire of the promisor…and voluntary
contribution, not a good consideration.
 Promise to make charitable contribution… question is
whether the promise is supported by the consideration and
is it binding?
 Kedar Nath v. Gorie Mohamed, ILR (1886) 14 Cal 64…
Construction of a Town Hall at Howrah… defendant was
made liable to pay the agreed amount of Rs. 100… A man
for some reason or other puts his name down for a
subscription to some charitable object, for instance, but the
amount of his subscription cannot be recovered from him
because there is no consideration… but in this case yes it
can be as further to his promise liability was incurred.
 Abdul Aziz v. Mausum Ali, AIR 1914 All 22… No liability
can be imposed on legal heirs.
 Consideration is required to be given at the
desire or request of the promisor, if it is
given at the desire of some other person,
then it is not a good consideration.
 According to the Indian Law, consideration may be
given by „the promisee or any other person‟… But in
English Law the position is different, there the
consideration must move from the promisee himself.
 For example, A promises to give his watch to B and a
consideration of Rs.5000 for the same is given to A by
C and not B himself. This will not be a valid contract in
England but in India it will be valid as the section 2(d)
clearly states that “…at the desire of the promisor, the
promisee or any other person” may
provide consideration.
 In Dutton v. Poole, (1677) 2 Lev. 210… a view
contrary to the English law was taken… son promised
father not to cut family tree for the marriage of his
sister for which he agreed to pay £1000… on refusal
case was filed by both father and sister… although
sister was not a part of the contract still was entitled to
recover the agreed amount.
 The rule is not followed in subsequent cases in Twiddle
v. Atkinson, (1861) 1 BS 393… Arrangement during
marriage to pay the plaintiff a particular sum which
was made by father of both the parties getting
married… when sued it was stated that he is a
beneficiary… can not recover the amount.
 This principle enunciated in Twiddle v. Atkinson was affirmed by
the House of Lords in Dunlop Pneumatic Tyre Co. v. Selfiridge
and Co. Ltd. (1915) AC 847... It was held that plaintiff is not
entitled to recover.

 In Chinnaya v Ramaya , (1882) 4 Mad 137

 In this case A, an old lady granted her estate to her daughter (the
defendant) with a direction that the daughter should pay an
annuity of Rs.653, to A‟s brothers (the plaintiffs).
 On the same day, the defendants made a promise with
the plaintiffs that she would pay the annuity as directed by A.
The defendant failed… In an action against her by the plaintiffs
she contended that since the plaintiffs themselves had furnished
no consideration, they had no right of action.
 The Madras High Court held that in this agreement the
consideration had been furnished by the defendant‟s mother and
that it was enough consideration to enforce the promise between
the plaintiff and the defendant.
 General rule of English law… Contract can not confer
any right on one who is not a party to the contract, even
though the very object of the contract may have been to
benefit him.
 A stranger to the contract can not sue.
 Doctrine of „Privity of Contract‟ has been criticized and
recommended by many committees to abolish this
principle… the beneficiary shall be able to sue.
 In Cases like Beswik v. Beswik, (1967) 2 All ER
1197…business was transferred by uncle to nephew
against a contract to pay £ 6 per week to him and after
his death £5 to his wife… when refused… widow
sued… claim was said to be maintainable.
 In UK several exceptions to this doctrine are found under
the Contracts (Rights of Third Parties) Act, 1999 and
made significant changes to this doctrine…However the
doctrine has not been abolished.
 Under Indian law there is no provision for privity of
contract. However, Judicial decisions have established
that stranger to the contract can not enforce the contract.
 Jamuna Das v. Ram Avtar, (1911) 30 IA 7… A person
mortgaged his property to another person… then after
sold his property to third person with an understanding
that he would pay-off mortgage debt to the mortgage…
mortgagee brought an action for recovery of money…
court held that mortgagee was not a party to a contract…
not entitled to enforce the contract.
 In M. C. Chako v. State Bank of Travancore, AIR 1970
SC 540… SC reaffirmed this principle in this case.
 This doctrine of privity of Contract is subject to certain
exceptions.
1. Trust:
 If by the contract trust is created in favour of a third
person in respect of certain property, he can enforce the
contract even if he is not a party to the contract.
 Rana Umanath Bakshi Singh v. Jung Bahadur, AIR 1938
PC 245… a son was appointed by his father as his
successor…property was given to him with a
consideration that some money and a village will be
given to illegitimate son of the father… held that the
illegitimate son can enforce the contract because trust was
created in his favour.
 Clause v. East India Hotels Ltd., AIR 1997 Del 201… one of
the exceptions to the doctrine of privity of contract is even
beneficiary can sue even if he is not a party to a contract.
 If a parcel is lost in the transit… the person who was to
receive it can file a case even if he is not a party to a contract.
 Khwaja Mohammad Khan v. Hussaini Begam, (1910) 37 I A
152… (Kharch-i-Pandan Case) Khwaja Mhd. Khan enter into
an agreement with father of the Hussaini Begam to pay her
500 rupees per month in perpetuity if she marries with his son.
He also charged his immovable property for the payment…
later on refual.. Court held that she is entitled to get payment
even after separation…because the property was charged…
and being a beneficiary can sue.
2. Marriage Settlement, Partition or other family
settlement:
 The person for whose benefit it has been made can
enforce it…even though he is not a party to it.
 On partition of joint family, male members have
entered into a contract to contribute equally towards
marriage expenses of unmarried daughters or to
maintain elderly members of the family is also
enforceable…even though they are not party to the
contract.
 Sundararaja Ayengar v. Lakshmiammal, (1915) 38 Mad
788… Agreement for marriage.
 Rose Fernandes v. Joseph Conslaves, AIR 1995 Bom
97.
3. Acknowledgement and Estoppel:
 If a party to a contract has some liability towards a
third person under a contract and he acknowledges this
liability, the third person can enforce the contract,
although he is not a party.

4. Contract by Agents:
 Where a contract is entered into by an agent in the
name of his principle and acting within the scope of his
authority, the principal can enforce a contract.
 Past consideration means consideration given before making
of promise by the promisor.
 Eg. A rendered certain services to B and after sometime B
agrees to pay 500 rupees.
 In India past consideration is valid considerations if it has
been provided at the desire of the promisor… even if services
are provided not at the desire of the promisor then also it is
covered under Section 25(2) voluntary services rendered.
 Whereas under English law past consideration is no
consideration. However, past consideration made at the desire
of the promisor is a good consideration even under English
Law.
 Present consideration is a consideration which is given in
response to the promise.
 One of the party does all that he is bound to do under the
contract and only the performance of the promise by the
other party remains to be done.
 In this case promise of the promisor remains in existence
at the time when the consideration is given.
 Eg. X makes an offer of reward of 500 rupees to any one
who finds out his lost watch and brings it to him. Y finds
it and gives it to X. X giving watch to Y is acceptance of
offer and also consideration thereof and consequently.
 It is a promise for a promise and the performance of the
promise remains outstanding on both parties.
 Contract is concluded as soon as promises are
exchanged.
 Consideration need not be adequate but it must be real
and not illusory.
 Impossibility makes the consideration unreal.
 Performance of the legal duty cannot be a good
consideration for a promise. It is notable that doing
something more that which one has to do under law may
be a good consideration for a promise.
 Forbearance to sue is a good consideration… Devi Radha
Rani v. Ramdas, AIR 1941 Pat 282… husband agreed to
pay monthly maintenance… and asked wife not to sue…
when refused… Held… forbearance is also a good
consideration.
 Raju and Viju are two good friends. They are staying in
Mamidipalli village of Mahaboobnagar district. Raju comes from a
very rich family and has access to every amity of the world but
was whimsical person. He used to take Viju along whenever he
goes to college on his own brand new scooter „Chetak‟. After
passing 12th examination Raju got admitted to Engineering colleger
in Vizag and Viju joined a degree collage in Shadnagar. Viju had to
walk for 4 km one side to attend college. After completion of one
semester when Raju came to meet his friend, he was very upset by
seeing Viju‟s condition. He was into tears and wanted to gift his
scooter to his friend. Viju refused to take the scooter and said that
“Dosti Ke Beechme Kabhi Gadi Nahi Aani Chahiye”. Seeing
Viju‟s self esteem Raju proposed that he can purchase Raju‟s
scooter by paying him Rs. 2000 to which viju agreed.
 When Raju was about to leave for Vizag, viju came with Rs. 2000
and requested Raju to hand over scooter to him. Raju being a
whimsical person refused. Viju filed a case against Raju for
fulfillment of his part of the promise under the contract. Will he
Succeed?
 Mr. Sachin was murdered by some unknown person late night
when he was returning alone from railway station to his home.
He was a deputy collector of Nanded District and started a war
against „Sand Mafia‟. No one is coming forward to give
evidence. Mr. Nitin, brother of Sachin, announced that
whosoever drives the investigation by providing evidence would
entitled to a cash price of Rs. 5 Lac. Mr. Popatlal, a Police
Constable, heard this and after his duty hours started
investigation. He got a clue and did further investigation. He
submitted all collected evidences to Mr. Nitin and claimed the
award money. Nitin refused to pay by taking a defence that it was
part of his official duty. Mr. Popatlal being a poor person and
wanted to collect money for dowry to be paid during daughters
marriage sued Nitin. Will he succeed?
Thank you…