Ans.Meaning
of Consideration: Consideration
is one of the essential elements of a valid contract. It means 'something in
return'. When a party to an agreement promises something, he should also get
'something' in return. This 'something' is known as consideration. Thus,
consideration is a price for which a promise is bought. Promises made for
nothing are unenforceable under the Indian Contract Act 1872. The Act enforces
only those promises which are made for consideration. Therefore, consideration
is said to be the foundation of every contract. It is the sign and symbol of
every contract.
Example:
X agrees
to sell his car to Y for Rs. 1,40,000. In this case, Y's promise to pay the sum of Rs. 1,40,000 is the consideration
for X's promise to sell the
car. And X's promise to sell
the car is the consideration for Y's promise
to pay the sum of Rs. 1,40,000.
Definition:
Sec.
2(d) of the Indian
Contract Act defines consideration as, “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".
Exceptions:
The
general rule is that an agreement made without consideration is void. Sec. 25
deals with the exception to this rule and mentions the following cases in which
contract without consideration is valid, viz.
1) Love
and affection [Sec. 25(1)]:
Where an agreement is expressed in
writing and registered under the law for the time being in force for the
registration of the documents and is made on account of natural love and
affection between the parties standing in near relation to each other. Such a
contract is enforceable, even if there is no consideration.
Example: X,
an elder brother promised to pay the debts of his younger brother Y, on account
of natural love and affection. The agreement was put to writing and registered.
Held, the agreement though
without consideration was valid. (Venkatswamy
\/s. Rangswamy)
2) Compensation
for voluntary services [Sec. 25(2)]:
A
promise to compensate wholly or in part, a person who has already voluntarily
done something for the promisor is enforceable, even though there would be no
consideration in such a promise. In other words, a promise to pay for past
voluntary services is binding.
Example : X finds Y’s necklace and gives it to her. Y
promises to give X Rs. 200. This is a valid contract.
3) Promise
to pay time-barred debt [Sec. 25(3)]:
A promise by a debtor to pay a
time-barred debt is enforceable that it is made in writing and is signed by the
debtor or his agent generally or specifically authorised in that behalf. The
promise may be to pay whole or a part of the debt.
Example: X owes Y Rs. 1,00,000 but the debt is barred by
Limitation Act. X signs a written promise to pay Y Rs. 95,000 on account of
debt. This is a valid contract.
4) Completed
gifts [Explanation 1 to Sec. 25]:
The
rule, 'No consideration, no contract' also does not apply to gifts made and
accepted (i.e., completed gifts). Gift, therefore, made without consideration
is valid. Thus, consideration is not needed between donor and donee.
5) Agency
[Sec. 185]:
No
consideration is required between the principal and agent to create an agency.
6) Contract
under seal:
Under
the law, a contract made in the form of a deed under seal is valid even though it
is made without consideration.
