Requirement of Consideration in the Indian Contract Act, 1872: A Legal Analysis, Papers of Contract Law

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GD GOENKA UNIVERSITY

LAW OF CONTRACTS

RESEARCH TOPIC

Requirement of Consideration in the Indian Contract

Act, 1872

SUBMITTED BY

PARUL CHAUDHARY

SUBMITTED TO

DR. PRITI RAMANI NAYYAR MAM

ABSTRACT The requirement of consideration has been a subject of intense scrutiny by contract law scholars, judges, and practitioners alike. The requirement of consideration is one of the essential requirements of a valid contract. This paper examines the concept of consideration as defined in the Act, its importance, types, and exceptions and its implications in contract law. INTRODUCTION The Indian Contract Act, 1872 is a cornerstone of contract law in India, establishing the framework for the creation and enforcement of contracts. One of the essential requirements for the validity of a contract, as per Section 10 of the Act, is the presence of consideration. Consideration refers to something of value that is exchanged between the parties to a contract. Without consideration, a contract typically lacks enforceability under the Act. This paper will delve into the definition of consideration, examine its legal requirements, explore various types of consideration, and discuss the exceptions where consideration may not necessary. DEFINITION AND LEGAL FRAMEWORK  Definition: - Section 2(d) of the Indian Contract Act,1872(ICA) defines the term ‘ consideration’. 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.

promises or gifts. It requires both parties to provide something of value, preventing one-sided obligations that lack mutuality.  Exchange of Benefits and Detriments: Consideration ensures a fair exchange of benefits and detriments between the parties. It helps prevent one party from taking advantage of the other by ensuring that each party gives and receives something in return.  Enforceability: Consideration is a crucial element for a contract to be enforceable. Without valid consideration, a promise may not be legally binding, and the contract may be deemed void or unenforceable. TYPES OF CONSIDERATION  Past Consideration: o In case of past consideration, the promisor had received the consideration before the date of promise, such consideration is called Past Consideration. o Section 2(d) of the Contract Act uses the word ‘has done or abstained from doing,’ which signifies that such considerations were made in the past. In English Law past consideration is no consideration. o Example: A's Bike on his way to the office is stopped due to lack of petrol. A requested B who was petrol seller, B gave petrol to him. Later A promised B to pay Rs. 500/- in consideration of his past consideration.  Present Consideration: o Present consideration is one in which one of the parties to the contract has performed his part of the promise, which constitutes the consideration for the promise by the other side it is known as present consideration. o In Present consideration both parties promise to perform their part of the promise simultaneously. It is also known as executed consideration.

o Example : You buy fruit from a vendor and immediately pay him the price. This payment is taken as executed or present consideration.  Future Consideration: o Future consideration is a type of consideration in which one party performs his part of the promise immediately, and the other party promises to perform his part of the promise on a future date. It is also known as executory consideration. o Example : A agrees to supply wheat bags to B and B agrees to pay for them on a future date. This consideration is the future consideration. EXCEPTIONS TO CONSIDERATION While consideration is a fundamental principle of contract law, there are some notable exceptions where agreements may be enforceable without consideration:  Written Promises under Seal: As outlined in Section 25(1), a promise made in writing and signed by the promisor, which is expressed to be in consideration of a natural love and affection, is enforceable.  Agency Relationships: Agreement between agent and principal may exist without consideration, as the agency itself constitutes a binding commitment.  Promissory Estoppel: Promissory estoppel is a doctrine that prevents a party from retracting a promise when the other party has relied on that promise to their detriment, hence creating a situation where consideration is arguably irrelevant. CONCLUSION Consideration is an important element to fulfil the entire requirements of a legitimate contract. The failure of consideration would cause the cancellation of the whole agreement. But the statutory exceptions also cannot be ignored.