Consideration- The Indian Contract Act 1872

What is Consideration?
Section 2(d) of the Indian Contract Act, 1872 defines consideration as-
"When at the desire of the promisor, 
the Promisee or any other person
  • has done or abstained from doing something, or 
  • does or abstains from doing, or 
  • promises to do or promises to abstain from doing something,           Such an act or abstinence or      promise is called a consideration for the promise. 
Essential elements of Consideration
1. Consideration must move at the desire of the promisor: Consideration must be offered by the promisee or the third party at the desire or request of the promisor.

2. Consideration may move from promisee or any other person: When at the desire of the promisor, the Promisee or any other person does something such an act is consideration. 

3. Executed and Executory Consideration: 
A consideration which consists in the performance of an act is said to be executed. When it consists in a promise , it is said be executory. 

4. Consideration may not be adequate: 
Consideration may not be equal to value with promise for which it is exchanged but it must be something which the law would regard as having having some value. 

5. Consideration must be real not illusory:
Consideration must be real and must not be illusory. It must be something to which the law attaches some value. 
Example - a man promises to discover treasure by magic. This is a void transaction as it is illusory. 

6. Consideration must be lawful:
Only presence of consideration is not sufficient it must be lawful. Anything which is immoral or opposed to public policy also cannot be valued as valid consideration.


Exceptions to the Rule the No Consideration No Contract:-
1. Natural love and affection: 
Agreements without consideration is valid if-
(I) it is expressed in writing and registered under the law
(II) it is made on account of love and affection
(III) parties must stand in near relationship to each other.

2. Past Voluntary Services: 
A promise to pay for past Voluntary Services is binding. The following conditions must be satisfied before applicability of said exception:-
The Services should have been rendered voluntarily.
The Services should have been done for the promisor.

3. Promise to pay Time barred debt: 
When a promise in writing signed by the person making it or by his authorized agent, is made to pay a debt barred by limitation it is valid without consideration. 

4. Agency:
No consideration is necessary to create an agency.

5. Complimentary gifts:
The gifts actually made by a donor and accepted by the donee are valid even without consideration. 

6. Charity:
If a promisee undertakes the liability on the promise of the person to contribute to charity, there the contract shall be valid. 


Doctrine of Privity of Contract:-
A person who is stranger or who is not a party to the contract, cannot sue the parties to the contract in case the refused to Carry out their promises. 
Exception to the Rule of Privity of Contract-
1. In case of Trust:
Where a benefit is given to a person by creating a trust or charge in some property in his favour, such beneficiary may enforce the contract even though he is not a part to it. 

2. In case of a family settlement/marriage contract: 
A provision may be made in favour or for the benefit of a person, he may file the suit though he is not a party to the agreement.

3. In case of assignment of a contract: 
When the benefit under a contract has been assigned, the assignee can enforce the contract. 

4. Acknowledgment or estoppel:
Where the promisor by his conduct acknowledges himself as an agent of the third party, it would result into a binding obligation towards third party. 

5. Contracts entered into through an agent: 
The principal can enforce the contract entered by his agent, he has acted in scope of his authority and name of principal.

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