Meaning:- Consideration is a technical term used in the sense of quid-pro-quo (i.e.., some thing in return). When a party to an agreement promises to do something, he must get something in return. This “something” is defined as consideration.
Definition:- According to section 2(d) of the Indian contract Act, 1872, defines consideration as “when at the desire of the promisor, the promise (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”. Example: Abdul Aziz (vs) Masum Ali (1914) Facts: The secretary of a mosque committee filed a suit to enforce a promise which the promisor had made to subscribe Rs.500/- for rebuilding a mosque. Judgment:‘The promise was not enforceable because there was no consideration in the sense of benefit’, as ‘the person who promised gained nothing in return for the promise made’, and the secretary of the committee to whom the promise was made, suffered no detriment (liability) as nothing had been done to carry out the repairs. Hence the suit was dismissed.
Validity of an agreement without consideration: The general rule is that an agreement made without consideration is void. In the following cases, the agreement though made without consideration, will be valid and enforceable according to section 25 and 185 are as follows:- 1. Nature love and affection: An agreement made without consideration is valid if it is made out of love, nature and affection such agreements are enforceable if The agreement is made in writing and registered.
- The agreement must be made between the parties standing in near relations to each other and
- There must be nature, love and affection between the parties.
Example: Venkatswamy (vs) Rangaswamy (1903):
Facts: By a registered agreement, ‘V’, on account of nature, love and affection for his brother, ‘R’, promises to discharge debt to ‘B’. If ‘V’ does not discharge the debt.
Judgment: ‘R’ may discharge it and then sue ‘V’ to recover the amount. Therefore it is a valid agreement.
2. Compensation for past voluntary services: A promise made without consideration is valid if, it is a person who has already done voluntarily done something for the promisor, is enforceable, even though without consideration. In simple words, a promise to pay for a past voluntary service is binding.
3. Promise to pay Time-Bared debt: An agreement to pay a time-bared debt is enforceable if the following conditions are satisfied.
- The debt is a time bared debt
- The debtor promises to pay the time barred debt.
- The promise is made in writing.
- The promise is signed by the debtor.
4. Completed gifts: The rule “No consideration – No contract” does not apply to completed gifts. According to section 1 to 25 states “nothing in section 25 shall affect the validity, as between the donor and donee, of any gift actually made”
5. Agency: According to section 185, no consideration is necessary to create an agency.
6. Charitable subscription: Where the promisee on the strength of promise makes commitments (i.e.., changes his position to his liability/detriment). Example: Kedernath (vs) Ghouri Mohammed (1886).
Facts: ‘G’ had agreed to subscribe Rs.100/- towards the construction of a town hall at Howrah. The secretary, ‘K’, on the faith of the promise, called fro plans and entrusted the work to contractors and undertook the liability to pay them.
Judgment: The amount could be recovered, as the promise resulted in a sufficient detriment to the secretary. However, be enforceable only to the extent of the liability incurred by the secretary. In this case, the promise, even though it was gratuitous, became, enforceable because on the faith of promise the secretary had incurred a detriment.