In contract law, "consideration" is a basic but crucial concept. It means something in return—like a benefit to one party or a loss to another—that forms the basis of a legal agreement. Without it, most contracts can't be enforced. Think of consideration as the price paid for a promise. If one person promises to do something, the law requires that the other party either does something in return or promises to do it. This exchange is what makes the agreement binding.
What Exactly Is Consideration?
According to Section 2(d) of the Indian Contract Act, consideration includes any act done or not done, or a promise made, by the promisee or anyone else at the promisor's request. It doesn’t have to come directly from the person receiving the promise, it can come from a third party as well. In simple terms, it’s the reason why both parties are entering into the contract: one is giving something, and the other is getting something in return.
Blackstone called consideration the "recompense given," while Pollock said it’s the "price for which the promise is bought."
Why Consideration Matters
The phrase “No consideration, no contract” sums it up perfectly. Consideration is like the fuel that powers a contract. Without it, the agreement is just a statement with no legal force except in certain special cases like contracts made out of natural love and affection or under a deed.
Types of Consideration
- Executed Consideration: This happens when one party does something first, and the other party’s promise follows. For example, if A promises a reward for the return of lost property, and B returns it, A must then fulfill the promise.
- Executory Consideration: This is when both parties make promises to be fulfilled in the future. Suppose a shopkeeper promises to get certain goods and a customer promises to buy them; if either backs out before performance, it’s a breach of contract.
- Past Consideration: Although generally not valid, there are exceptions. If someone does something at another’s request and the promise to pay comes later, it may still be considered valid. For example, in Sindha Shri Ganpatsingji v. Abraham, services provided to a minor (which continued even after he became an adult) were held as valid consideration.
Rules for a Valid Consideration
- Must be at the promisor’s request: If a third party asked for the act and not the promisor, the agreement may be void. This was seen in Durga Prasad v. Baldeo, where a market was built at the Collector’s request, not the shopkeepers’.
- Can come from a third party: In Chinnaya v. Ramayya, a daughter’s promise to pay an annuity to her aunt was enforceable, even though the aunt had given nothing in return, because the original contract was made by the grandmother.
- May be Past, Present, or Future:
- Past: Something done earlier at the promisor’s request.
- Present: Both action and promise happen at the same time, like in a cash sale.
- Future: Both parties promise to do something later.
- Must be real and not imaginary: A promise must involve a real value. In White v. Bluett, a son’s promise to stop nagging wasn’t considered valid consideration for cancelling a debt.
- Must be lawful: According to Section 24 of the Indian Contract Act, if the consideration or the object is illegal, the contract becomes void.
- Need not be adequate: The law doesn't demand that the consideration be equal in value to the promise. Even a small amount can be enough if both parties agree.
- Must be beyond legal duty: Doing something you're already legally bound to do doesn’t count as consideration. There has to be something extra or different offered.
Conclusion
In short, consideration is what gives life to a contract. Whether it’s a promise made now, in the future, or even one that acknowledges a past action, the presence of consideration shows that both parties are serious and committed. Without it, most promises remain just that “promises without legal weight”. For anyone studying law, especially contract law, understanding consideration is the first step to grasping how enforceable agreements work.
