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Consideration

Consideration :

The expression ‘consideration’ has to be understood as a price paid for an obligation. In Curie Vs Misa (1875) LR 10 Ex 153 is was held (in U K) that consideration is “some right, interest, profit or benefit accruing to one party or forbearance, detriment, loss, or responsibility given, suffered or undertaken by the other”. The judgment thus refers to the position of both the promisor, and the promisee in an agreement.

Section 2 (d) of the Indian Contract Act, 1872 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 an act or abstinence or promise is called consideration for the promise’.

From the above definition it can be inferred that,

Consideration is doing or not doing something, which the promisor desires to be done or not done.

(1) Consideration must be at the desire of the promisor.

(2) Consideration may move from one person to any other person

(3) Consideration may be past, present or future and

(4) Consideration should be real though not adequate

In most cases the promisor for doing an act or not doing an act derives some benefit by way of consideration. Thus consideration is identified as quid pro quo from the promise or performance of the promisor.

But it is also possible that there may not be any identifiable benefit towards consideration. For example ‘A’ promises to carry ‘B’s goods free of charge and B allows ‘A’ to carry the same. Here ‘B’ does not offer any consideration to ‘A’. Is this a valid contract?

The answer to the question is ‘B’ has suffered a detriment or disadvantage while allowing ‘A’ to carry his goods. Here there is sufficient consideration. This illustration is given essentially to prove the point that consideration could be not necessarily a gain or advantage to the promisor but it can even be a loss or detriment to the promisee. That is why ‘consideration’ is referred to as a concept with ‘double aspect’.

Where Y applies for a loan of ` 10,000/- to X, and if ‘X’ insists on a guarantee by ‘S’ and upon ‘S’ guaranteeing the loan, ‘X’ gives the loan to “Y”. In this case ‘S’ will be the promisor and ‘X’ the promisee. The benefit in this transaction conferred on ‘Y’ by ‘X’ at the guarantee of ‘S’, is sufficient consideration for X. In other words ‘X’ has suffered a detriment which is the consideration for the guarantee of ‘S’ to repay the loan which ‘X’ has given to ‘Y’. Detriment to one is benefit to another.

It can often be seen that consideration is mutual. For instance if ‘A’ promises to sell his house to ‘B’ for ` 5 lakhs ,here “A” is the promisor and “B” is the promisee. In the same transaction where ‘B’ agrees to buy the house for ` 5 lakhs, ‘B’ will be the promisor and ‘A’ will be the promisee. Here ‘A’ must part with the house and ‘B’ must part with ` 5 lakhs. This proves the point that consideration is mutual and has two sides.

Thus from above it can be concluded that :

Consideration = Promise / Performance that parties exchange with each other.

Form of consideration= Some benefit, right or profit to one party / some detriment, loss, or forbearance to the other.

Whether gratuitous promise can be enforced?

The word “gratuitous” means ‘free of cost’ or ‘without expecting any return’. It can therefore be inferred that a gratuitous promise will not result in an agreement in the absence of consideration. For instance a promise to subscribe to a charitable cause cannot be enforced.

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