The document discusses the concept of consideration in contract law. It defines consideration as something of value exchanged between parties in a contractual agreement. Consideration must be bargained for, such as an act, forbearance from an act, or a promise. There are exceptions where consideration is not required, such as natural love and affection between parties or an agreement to pay a time-barred debt. Consideration is essential to forming a valid, enforceable contract and establishes the mutual obligations between parties.

1. CONSIDERATION
BY-ASHUTOSH CHAUHAN

2. Topics
 Meaning Of Consideration
 According To Section 2(d) - Definition Of Consideration
 Analysis Of Definition Of Consideration
 Types Of Consideration
 A Bargain And An Exchange
 Settlement Of Debts
 Legal Rules Regarding Consideration
 Exception Of The Rule
 Need For Consideration
 Lack Of Consideration
 The Purpose Of Contractual Consideration

3. Meaning Of Consideration
Consideration is an essential element of a valid contract without which no single
promise will be enforceable. The term ‘Consideration’ means something in return,
i.e. quid-pro-quo. Consideration is the Backbone of all promises.
For Example:- A offers to sell his car to B for a sum of Rs.1,00,000. B accepts
the offer. In this contract,
A is the promisor and it is his desire to sell his car for Rs.1,00,000
B is the promisee and on the desire of A he is purchasing the car for Rs.1,00,000
The consideration for A’s promise, is a sum of Rs.1,00,000 while consideration
for B’s promise is the car.

4. Both Give Something And Get Something
What one gets is Consideration
Consideration for Shopkeeper is
Money
Consideration for Customer is
Grocery

5. According To Section 2(d) Of The
Indian Contract Act, 1872,
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
abstain from doing something, such act or abstinence
or promise is called a consideration for the promise.”

6. Analysis Of
Definition Of Consideration
 An act, i.e., doing of something. In this sense consideration is in an affirmative
form.
Example:- A promises B to guarantee payment of price of the goods which B
sells on credit to C. Here selling of goods by B to C is consideration
for A’s promise.
 An abstinence or forbearance, i.e., abstaining or refraining from doing
something. In this sense consideration is in a negative form.
Example:- A promises B not to file a suit against him if he pays him Rs.500.The
abstinence of A is the consideration for B’s payment.

7.  A return promise
Example:- A agrees to sell his horse to B for Rs.1o,ooo. Here B’s
promise to pay the sum of Rs.10,000 is the consideration for A’s
promise to sell the horse, and A’s promise to sell the horse is the
consideration for B’s promise to pay the sum of Rs.10,000.

8. Types Of Consideration
There Are Mainly Three Types Of Consideration:-

9.  Executory or Future Consideration:- When the consideration on both sides is to move at a
future date, it is called ‘future consideration’ or ‘Executory consideration’. It consists of an
exchange of promises and each promise is a consideration for the other.
Example:- A agrees to supply wheat bags to B and B agrees to pay for them on a
future date. This consideration is the future consideration.
 Executed or Present Consideration:- Consideration which moves simultaneously with the
promise is called ‘present consideration’ or ‘executed consideration’.
Example:- A lost his Bicycle, he makes an offer of the reward of Rs. 200 to anyone who
finds his lost Bicycle. B finds the lost Bicycle and delivers to A. Here A is
bound to pay Rs. 200. The consideration, in this case, is the present
consideration.
 Past Consideration:- When something is done or suffered before the date of the agreement,
at the desire of the promisor, it is called ‘past consideration’.
Example:- A teaches the son of B at B’s request in the month of January, and in February B
promises to pay A a sum of Rs. 200 for his services. The services of A will be past
consideration.

10. A Bargain And An Exchange
“Bargaining is obligating yourself in order to introduce the other side to agree”
The thing bargained for can be:-
1. Another promise or action.
2. A benefit to the promisor or a detriment to the promise.
3. A promise to do something or a promise to refrain from doing something.
Adequacy of Consideration:-
1. Courts seldom inquire into the adequacy of consideration.
2. A previously paid benefit is generally not consideration because it was not
meant to induce the other side to agree.

11. Mutuality of Obligations:-
1. Illusory Promise:- If one party’s promise is conditional, the other party is not
bound to the agreement.
2. Sales Law:- Requirements and Output Contracts.
Preexisting Duty:-
A promise to which a promisor is already obligated is not consideration.

12. Settlement Of Debts
Liquidated Debt:-
A liquidated debt is one in which there is no dispute about the amount owed:-
a) In cases of liquidated debts, if the creditor agrees to take less than the full amount as
full payment, her agreement is not binding.
b) If the debtor offers a different performance to settle the debt and the creditor agrees,
the agreement is binding.
Unliquidated Debts:-
1) A debt is unliquidated if:-
a) The parties deputes whether any money is owed.
b) The parties agree that some money is owed but dispute how much.

13. 2) The parties may agree to settle for less than what is owed ; this “accord and
satisfaction” will be enforced if the debtor pays the agreed amount.
Payment By Cheque:-
1) Common Law Ruling:-
If a debtor writes “ Paid in Full” on a cheque, and the creditor cashes it, the payment
is in full whether or not it was the right amount.
2) UCC $3-311:-
Affirms the Common Law ruling, but adds two exceptions:-
 Organizations may notify debtors that any offers to settle debt for less than the
whole amount must be directed to a certain person.
 The creditor can refund the paid amount within 90 days and then demand the full
amount.

14. Legal Rules Regarding Consideration
 It Must Move At The Desire Of The Promisor.
 It May Move From The Promise Or Any Other Person.
 It May Be An Act, Abstinence Or Forbearance Or A Return Promise.
 It May Be Present, Past Or Future.
 Consideration Need Not To Be Adequate.
 It Must Be Real & Not Illusory.
 It Must Be Something Which The Promisor Is Not Already Bound To Do.
 It Must Be Illegal, Immortal Or Opposed To Public Policy.

15.  It Must Move At The Desire Of The Promisor:-
It must be offered by the promisee at the desire or request of the promisor. An act
done at the desire or request of the third party does not form a valid consideration.
 It May Move From The Promise Or Any Other Person:-
Consideration may move from the promisee or any other person i.e. even a stranger.
 It May Be An Act, Abstinence Or Forbearance Or A Return Promise:-
The Following Are Good Consideration For The Contract:-
a) Forbearance To Sue
b) Compromise Of A Disputed Claim
c) Composition With Creditors

16.  It May Be Present, Past Or Future:-
a) Past Consideration
b) Present Or Executed Consideration
c) Future Or Executory Consideration
 Consideration Need Not To Be Adequate:-
Consideration need not to be adequate but it must have some value.
 It Must Be Real & Not Illusory:-
There Is No Consideration In The Following Cases:-
a) Physical impossibility
b) Legal impossibility
c) Uncertain consideration

17.  It Must Be Something Which The Promisor Is Not Already Bound To Do:-
A promise to do what one is bound to do, either by general law or under an
existing contract, is not a good consideration.
 It Must Be Illegal, Immortal Or Opposed To Public Policy:-
Unlawful Consideration Includes Any Activities Which:-
a) Is forbidden by law.
b) Is fraudulent.
c) Is of such nature that, it will defeat a provision of any law.
d) Involves any injury to the person or property of another.
e) The Court regards it as immortal or opposed to public policy.

18. Exception Of The Rule
‘No Consideration No Contract’ U/S 25
 Agreement Made An Account Of Natural Love And Affection [Sec.25[1]]
 Agreement To Compensate For Past Voluntary Service [Sec.25[2]]
 Agreement To Pay A Time-barred Debt [25[3]]
 Completed Gift
 Contract Of Agency
 Guarantee
 Remission By The Promisee, On Performance Of The Promise U/S 63

19.  Agreement Made An Account Of Natural Love And Affection [Sec.25[1]]
An Agreement Made Without Consideration Is Enforceable If It Is:-
1. made on account of natural love and affection;
2. between parties standing in a near relation to each other,
3. expressed in writing, and
4. registered under the law.
 Agreement To Compensate For Past Voluntary Service [Sec.25[2]]
A promise made without consideration is also valid, if it is a promise to compensate,
wholly or in part a person who has already voluntarily done something for the
promisor, or done something which the promisor was legally compellable to do. The
following two situation are covered by this section;
[A]. Voluntary Services
[B]. Leagally Compellable Duty

20.  Agreement To Pay A Time-barred Debt [25[3]]
Where there is an agreement,
[a] made in writing and,
[b] signed by the debtor, or by his authorised agent
[c] to pay wholly or in part a debt barred by the law of limitation, the agreement is valid even through
it is not supported by any consideration.
 Completed Gift
Gift is transfer of property without consideration. In order to be valid a gift does not require
consideration. As per explanation 1 to section 25, gifts given by donor to done are valid. Once a gift
has been actually given, the donor cannot demand it back on the ground that there was no
consideration. Promise for a donation is not a gift. As such a promise for a donation is invalid for
want of consideration.
 Contract Of Agency
Sec.185 of the contract act lays down that no consideration is necessary to create an agency.

21.  Guarantee
Sec.127 of the contract act lays down that under the contract of guarantee, no
consideration is received by the surety, even then the contract of guarantee is
valid.
 Remission By The Promisee, On Performance Of The Promise U/S 63
Sec.63 of the contract act lays down that where a person agrees to receive less
than what is due to him, such an agreement is said to be an agreement of
remission. No consideration is required for a contract of remission.

22. Need For Consideration
Consideration is the very essence of a contract. If there is no
consideration in an agreement, it is not enforceable by law except
in certain cases. As somebody has said, “No Consideration, No
Contract“. As a matter of fact, consideration is the very life and
blood of every contract.

25. Lack Of Consideration
A contract may be deemed invalid by a court if it lacks recognizable
consideration. Although the exchange of certain items or terms may seem like
something valid on which to create a contract, not just anything meets the
definition of consideration. Some of the scenarios where a contract lacks
consideration includes:
The agreement is more of a promise of a gift, rather than a contract
One of the parties involved was already legally obligated to perform as
specified by the contract
The bargained for promise cannot be illusory. This means there cannot be a
contract if the parties are not mutually agreed, or where only one party is
required to perform.

26. The Purpose Of Contractual Consideration
Reciprocity of consideration is fundamental to contract law.
The exchange of consideration creates a benefit and a burden for each party entering into
a contract.
The consideration which is the benefit of the contract for one party (say, receiving money)
is the burden of the other (say, paying money).
Without consideration being given by each party to the contract, the contract can't be
legally binding.
Accordingly, gratuities are not enforceable in law.

27. “The Law Does Not Hold Us
Accountable For Every Promise We
Make. The Doctrine Of
Consideration Determines Which
Promises A Court Must Enforce.”

28. THANK YOU