Table of Contents:

• Introduction

• Definition of Consideration

• Essentials of Consideration

• Types of Consideration

➢ 4(a) Past Consideration

➢ 4(b) Present Consideration

➢ 4(c) Future Consideration

• Exceptions to Consideration

➢ 5(a) Gratuitous Contracts

➢ 5(b) Natural Love and Affection

➢ 5(c) Past Voluntary Services

➢ 5(d) Bailment
➢ 5(e) Charity

• Privity of Consideration

• Conclusion

• References
1. Introduction:

The Indian Contract Act, 1872, is the legally binding document that governs
contract related laws in India. One of the fundamental principles of contract
law under this act is the concept of consideration. Consideration is an vital
element in forming a valid contract, and it plays an important role in
determining the enforceability of contracts in India. We will explore and
analyze the concept of consideration in the light of the Indian Contract Act.

2. Definition of Consideration:

Consideration is defined in Section 2(d) of the Indian Contract Act, 1872, as

follow:

"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."

In simpler terms, consideration is something of value exchanged between the

parties to a contract. It can be a promise, an act, or an abstention from doing
something provided it is done at the request or desire of the promisor.

In short, the term consideration means ‘something in return’

i.e. ‘QUID PRO QUO’.

In Currie v. Misa, Lush J. define the term consideration as follows-

“A valuable consideration, in the sense of the law, may consist either in some
right, interest, profit or benefit accruing to the party, or some forbearance,
detriment, loss or responsibility given, suffered or undertaken by other”.
3. Essentials of Consideration:

To be valid and enforceable, consideration must possess the following

essentials:

a. Two Parties: There must be at least two parties involved - the promisor
and the promisee.

b. Something of Value: Consideration must involve something that has value

in the eyes of the law. It can be an act, a promise, or an abstention.

c. At the Desire of the Promisor: The act or promise must be done at the
request or desire of the promisor. Consideration is essentially a quid pro quo.

d. Legal: The consideration must be legal and not against public policy or
law.

4. Types of Consideration:

Consideration in contracts can be categorized into three types:

4(a) Past Consideration: Consideration that has been provided before the
formation of the contract is called past consideration. Generally, past
consideration is not valid except in certain exceptional cases.

For example: A lost his dog and B found the dog and returned it to A, then A
promised to pay Rs.1000 and in that case, it will be a past consideration as the
act of finding the dog happened before any agreement.

4(b) Present Consideration: Present consideration is consideration that is

given at the time of making the contract. It is the most common form of
consideration in contracts.
For example: A offers B his car in 1.5 lakhs. B accepts the offer and handovers the
amount to A and takes away the car.

4(c) Future Consideration: Future consideration is when something is

promised to be done in the future in exchange for a promise in the present. It
is contingent on the occurrence of a future event.

For example: A, said to B, a shopkeeper that if he delivers the grocery within 1 hours
after the order given he will pay him the price of grocery along with 100 Rs bonus.

5. Exceptions to Consideration:

While consideration is a fundamental aspect of contract law, there are

exceptions where a contract can be valid even without consideration. These
exceptions include:

5(a) Gratuitous Contracts: Contracts without consideration may be valid if

they are made out of love and affection or a sense of moral duty. These are
often referred to as "gift" contracts.

For example: A’s mother gave him a watch without any reciprocal promise or
consideration. This was due to affection and hence termed as “GIFT”

5(b) Natural Love and Affection: Contracts based on natural love and
affection between parties can be valid even without consideration, provided
they meet certain conditions.

For example: A and B, who are brothers. In their father’s will, their father
names A as the sole owner of his entire property after his death. B challenges
this and takes A to Court, seeking his rightful share of the property.
However, B loses the case. Later, A and B reach a mutual understanding where A
agrees to give half of the property to his brother, and they register a document to
formalise this agreement.

5(c) Past Voluntary Services: Suppose someone has voluntarily provided a

service in the past, and the recipient of the service promises to pay at a later
date. In that case, the contract is considered legally binding.

For example: A finding B’s wallet on the road and returning it to him. A is grateful
to have his lost wallet back and promises to pay B Rs 2,000 as a gesture of
appreciation.

Here B’s action and A rewarding him makes this arrangement a legally binding
contract.

5(d) Bailment: Section 148 of the Indian Contract Act, 1872 defines bailment as the
delivery of goods from one person (the bailor) to another (the bailee) for the bailor’s
own benefit. This delivery is made under a contract, where it is agreed that after the
purpose is fulfilled, the goods will either be returned to the bailor or disposed of as
per the bailor’s instructions. A contract of bailment does not require any consideration
to be valid and enforceable.

For example: A gives his valuables to his relative B for safekeeping at no charge.
This is a bailment for the exclusive benefit of bailor 'A'.

5(e) Charity: the term "charity" is not explicitly defined. However, charity in the
context of contract law typically refers to agreements or transactions that involve the
act of giving or donating for a charitable purpose or cause.
For example:
 6. Privity of Consideration: The principle of privity of consideration
means that only the parties who have provided consideration have
enforceable rights and obligations under the contract. Third parties who have
not provided consideration generally do not have legal standing to enforce
the contract.

7. Conclusion: Consideration is a cornerstone of contract law under the

Indian Contract Act, 1872. It ensures that contracts are legally enforceable by
establishing a quid pro quo relationship between the parties. Understanding
the concept of consideration is essential for anyone involved in contract
formation and execution in India.

8. References:

• Indian Contract Act, 1872 (Act 09 of 1872)

• Avtar Singh , Law of Contract and Specific Relief (EBC Publication , 2000)

• Abhay Kumar Pandey, Student, K.S. Saket P.G College, Ayodhya and Anindita
Deb from Symbiosis Law School, NOIDA , “What is consideration of a
contract in contract law and its essentials”
• [Link]
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