B.A. LL.B. (Five Years) Sem 4 Contract I 2014 Jun Question Paper with Solutions

For full marks, cover: the rule that consideration is needed (sections 10 and 25); the definition in section 2(d) read phrase by phrase: at the desire of the promisor (Durga Prasad v. Baldeo), the promisee or any other person (Chinnaya v. Ramayya, with Tweddle v. Atkinson as the English contrast), act, abstinence or promise, past, present or future, real but not necessarily adequate (Explanation 2 to section 25); then the exceptions where an agreement without consideration still binds: section 25(1), with Rajlukhy Dabee on its limit; section 25(2); section 25(3); completed gifts (Explanation 1); agency (section 185); remission of performance (section 63); and the related rules on guarantees (section 127) and charitable subscriptions (Masum Ali v. Abdul Aziz); a table; a conclusion.

Durga Prasad v. Baldeo, (1880) ILR 3 All 221. At the request of the Collector, the plaintiff built shops in a market. The defendants later occupied a shop and promised him a commission on goods sold there. The Allahabad High Court held that the promise was without consideration. The building was done at the desire of the Collector, not of the defendants. So it could not support their promise.

2. "The promisee or any other person". Consideration need not come from the promisee himself. A third person may provide it.

Chinnaya v. Ramayya, (1882) ILR 4 Mad 137. An old woman gave her land to her daughter by a deed. The deed required the daughter to pay a yearly sum to the old woman's siblings, and the daughter agreed with them to pay it. When she stopped, the siblings sued. The Madras High Court held that they could sue. The consideration, the gift of land, came from the mother, and section 2(d) allows it to move from "any other person".

The exceptions: agreements without consideration that still bind

Section 25 itself lists three, and its Explanation 1 a fourth. The Act adds others elsewhere.

1. Natural love and affection, section 25(1). The agreement must be "expressed in writing and registered", and made "on account of natural love and affection between parties standing in a near relation to each other". In illustration (b), a father's written and registered promise to give his son Rs 1,000 for natural love and affection "is a contract". All four conditions are needed.

Rajlukhy Dabee v. Bhootnath Mookerjee, Calcutta High Court, decided 25 January 1900. After quarrels, a husband executed a written and registered agreement to pay his wife a monthly sum for her separate residence and maintenance. The court held that she had given no consideration and that the agreement was not made on account of natural love and affection. The exception did not apply, and her suit was dismissed.

6. Remission of performance, section 63. A promisee may "dispense with or remit, wholly or in part, the performance of the promise made to him", or accept any satisfaction he thinks fit. In illustration (b), a creditor is owed Rs 5,000. He accepts Rs 2,000 in full satisfaction at the due time and place, and the whole debt is discharged. No fresh consideration is needed for the remission.

Two related rules.

• Guarantee, section 127. "Anything done, or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee". The surety receives nothing himself, yet the guarantee binds.
• Charitable subscriptions. A bare promise to subscribe to a charity has no consideration. Masum Ali v. Abdul Aziz, (1914) ILR 36 All 268. A promise to subscribe money for the repair of a mosque was sued on. No work had begun and no liability had been incurred on the faith of the promise. The Allahabad High Court held that there was no consideration and the promise could not be enforced. It would be different where the promisee had undertaken work relying on the promise.

Conclusion. Consideration, under section 2(d), is an act, abstinence or promise done at the promisor's desire by the promisee or any other person. It may be past, present or future, and it must be real but need not be adequate. Durga Prasad v. Baldeo shows that the desire of the promisor is essential, and Chinnaya v. Ramayya that consideration may move from a third person. The rule "no consideration, no contract" yields to the exceptions in section 25, Explanation 1, section 185 and section 63, each with its own conditions. Rajlukhy Dabee and Masum Ali show that courts hold the parties strictly to those conditions.