Consideration: What It Is, and the Rules It Obeys

(b) It may move from the promisee OR ANY OTHER PERSON

The words are express and they are the Indian rule. It is enough that consideration was given; it need not have been given by the person to whom the promise was made. This produces the doctrine of constructive consideration and it is the reason a stranger to the consideration may sue in India.

(c) It may be past, present or future

The definition uses three tenses deliberately, and they are examined by name.

• Past consideration: "has done or abstained from doing". Something already done before the promise was made. Past consideration is good consideration in India, and this is a clean difference from English law, where it generally is not.
• Present or executed consideration: "does or abstains from doing". The act is performed at the time the contract is made. Paying cash across a counter is the standard example.
• Future or executory consideration: "promises to do or to abstain from doing". Each party's promise is the consideration for the other's, to be performed later.

(d) It must be "something", and that something must be of some value

Consideration must be real and not illusory, and it must be something the law regards as having value, though the law does not ask how much. Three sub rules follow.

It need not be adequate. Explanation 2 to section 25 provides that "An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given." Illustration (f) to section 25 has a horse worth a thousand rupees sold for ten, and it is a contract. Illustration (g) shows the other side: where free consent is denied, the inadequacy becomes evidence.

It must be real, not illusory. A promise to do something physically impossible, or a promise that binds the promisor to nothing at all, is no consideration.

It must be lawful. Section 10 requires a lawful consideration, and section 23 says when a consideration is unlawful. See [Unlawful Consideration and Object].

What is NOT consideration

Three standard categories, and they recur in problem questions.

• Performance of an existing public duty. A police officer who guards a factory as part of his duty gives nothing extra.
• Performance of an existing contractual duty owed to the same promisor. Doing what you were already bound to do for that person is not fresh consideration.
• A promise to perform an impossible act, which is also void under the first paragraph of section 56.

A worked example

Rehana promises her neighbour Sameer twenty thousand rupees. Consider six versions and the outcome in each.

• Nothing in return. No consideration at all. The agreement is void under section 25, unless one of its three exceptions applies.
• In return for Sameer's promise to paint her house next month. Executory consideration on both sides. A good contract.
• In return for Sameer painting her house today, as he does. Executed consideration. A good contract.
• Because Sameer painted her house last year, at her request. Past consideration, and in India that is good consideration under section 2(d), because the definition includes "has done". A good contract.
• Because Sameer painted her house last year of his own accord, without being asked. Not at her desire, so not consideration. But look at section 25(2): a promise to compensate a person who has already voluntarily done something for the promisor is enforceable without consideration. So the promise is good, on that exception rather than on section 2(d).
• In return for Sameer's promise to hand over a rupee. Consideration, and the contract is good. Adequacy is not required, by Explanation 2 to section 25. If Rehana later says she never freely consented, the gross inadequacy becomes evidence on that question, but it does not by itself avoid the contract.

Indian and English law compared

Worth learning as a table, because MU sets this comparison directly.

The last two rows are the pair students most often merge, and they are separate. See [Privity of Contract and Privity of Consideration].

What it does NOT mean

"Consideration must be money." It may be an act, an abstinence from acting, or a promise. Forbearing to sue, where there is a genuine claim, is a classic consideration.

"Consideration must be adequate." It must be real and lawful, not adequate. Explanation 2 to section 25 is express, and illustration (f) has a thousand rupee horse sold for ten.

"Past consideration is no consideration." True in England, false in India. Section 2(d)'s words "has done or abstained from doing" put it beyond doubt.

"Consideration must move from the promisee." True in England, false in India. Section 2(d) says "the promisee or any other person".

"A one sided promise is binding if it was seriously meant." Section 25 makes an agreement without consideration void, subject to its own exceptions, and seriousness alone is not one of them.

Quick revision

• s.2(d): at the desire of the promisor, the promisee or any other person has done, does, or promises to do or abstain from doing something; that act, abstinence or promise is the consideration.
• Four elements: at the promisor's desire; from the promisee or any other person; past, present or future; and something real, valuable and lawful.
• Past consideration is GOOD in India. So is consideration moving from a third person. Both differ from English law.
• Adequacy is not required (Explanation 2 to s.25), but inadequacy is evidence on whether consent was free. Illustrations (f) and (g).
• Not consideration: performance of an existing public duty, performance of a duty already owed to the same promisor, and an impossible act.
• s.10 requires the consideration to be lawful; s.23 says when it is not; s.25 makes an agreement without consideration void save in three cases.

Test yourself

1. Define consideration under section 2(d) and identify its four elements. 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. The elements are that it move at the desire of the promisor; that it may come from the promisee or any other person; that it may be past, present or future; and that it be something real, of some value, and lawful.

2. Is past consideration good consideration in India? Yes. Section 2(d) includes the words "has done or abstained from doing", so an act already performed at the promisor's desire supports a later promise. English law takes the opposite view, and the difference is a standard comparison in this paper.

3. Must consideration be adequate? No. Explanation 2 to section 25 provides that an agreement to which the promisor's consent is freely given is not void merely because the consideration is inadequate, though the inadequacy may be taken into account in deciding whether consent was freely given. Illustration (f), a horse worth one thousand rupees sold for ten, is a contract.

4. A saves B's goods from a fire without being asked, and B afterwards promises him five thousand rupees. Is the promise enforceable? Not on section 2(d), because the act was not done at B's desire and so is not consideration. But it is enforceable under section 25(2), which validates a promise to compensate wholly or in part a person who has already voluntarily done something for the promisor. Section 70 may also give A a quasi contractual claim independently of any promise.

5. Give three things that are not consideration. Performance of a duty the promisee already owes to the public, such as a police officer doing his job; performance of a duty the promisee already owes under an existing contract to the same promisor; and a promise to do something impossible, which is in any event void under the first paragraph of section 56.