This Article is written by Sai Vivek Rao Beerelly (currently in 2nd Year of BBA LLB at Symbiosis Law School Hyderabad)
INTRODUCTION
A contract is “a written or spoken agreement, especially one concerning employment, sales, or tenancy, which is intended to be enforceable by law”[1]. Consideration is one of the major aspects of a contract and a contract without consideration is nullified. According to the Legal dictionary consideration means “a vital element in the law of contracts, consideration is a benefit which must be bargained for between the parties and is the essential reason for a party entering into a contract”[2]. For example, the Sale of a house, in this contract sale of the house is a consideration for one party and a price for the other party. Also according to the Indian contract act consideration is also defined 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 to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise”[3]. A contract is one of the most important things in one’s life as everyone enters into a contract in a direct way or indirect way or knowing or unknowing so there are some elements of consideration to be a valid contract.
IMPACT OF ELEMENTS AND IMPORTANCE OF CONSIDERATION IN A CONTRACT
Consideration is one major aspect of the contract as “consideration makes difference between a gift and contract as if there is no consideration then there will be no value for the contract”[4]. Because is consideration is something in return or which is given and taken. For example, if A promises to transfer his property to B without any consideration then no one knows whether it is a contract or gift so here consideration makes note that how they are transferring and a contract without consideration is void. The elements of consideration in a contract is most important because to understand the terms of consideration and to be a valid contract they need to be followed and also help is a detailed understanding of consideration of the contract.
ELEMENTS OF CONSIDERATION IN INDIAN CONTRACT ACT, 1872
The following are the elements of consideration in a contract to be valid.
Consideration must move at the desire of the promisor
It is necessary that the consideration much move at the wish of the promisor, but not at the occasion of the third party. “According to Section 2(d) of the Indian Contract Act, 1872 an act done by the wish of the third party is not considered as valid consideration”[5]. In “Durga Prasad v. Baldeo”[6]caseA person has built shops in the bazaar on the order of town collector with his own expenses. Later the shops came to be occupied by the defendant who is in consideration with the plaintiff stating that he had expensed while construction of the shops and the plaintiff promised to pay the commission earned by selling articles from the shops. Plaintiff’s action to collect the commission has been rejected and the defendant had only option that he expensed while constructing the shops except this there was nothing in the defendant’s way to prove it as valid consideration. The act was the result of not the promise but the order of the collector.
Consideration may move from the promisee to any other person
“A party who wishes to fulfil a contract must be able to show that he himself has provided consideration for the promise of the other party”[7]. In the case of “Dutton v. poole”, a person had a daughter and son whereas daughter is going to marry and his son promised him that he will pay 1000 pounds to his sister if their father doesn’t sell wood and the father refrained but the son didn’t pay money to his sister. Here his sister can sue him because the relationship between the father and daughter are blood tie so the promise and consideration of the father even extend to her.
Consideration must be real not illusory
Consideration must be possible and real. It must not be unsubstantial or illusory. The contract must be factual and must have some values in the eyes of law.
Consideration may be past, present or future
The definition of the Consideration clearly states that the consideration may be past, present or future.
- Past:- “When a present promise consideration done before the date of promise it is called past consideration and it is said be good consideration for sub sequent promises”[9]
- Present: – “When a consideration moves simultaneously with the promise than it is said to be present or executed consideration”[10]. For example, A buys a pen from the store and pays immediately for the same. In this the consideration is moving along with the promise.
- Future: – “When consideration for the promise moves after the contract is formed, it is said to be future consideration”[11]. For Example, A has promised to sell goods and B has promised to pay, until the goods reaches to B the consideration is future.
- Consideration must be lawful
“A consideration which is against the law or public policy is not valid i.e., it will become void and unenforceable. Therefore, it is necessary that consideration should be lawful one”[12]. A person offered a reward to anyone who could save his son alive or dead body from the building which got fire and burning a fireman was eligible to receive the reward as he brought his son’s dead body and he was in danger and severely got hurt. To which the court held that he was legally not bound to the reward as he can’t keep his life at risk to rescue.
It must not be immoral or opposed to public policy
The consideration must not be immoral or against public policy. One of the examples against public policy is trading with the alien enemy without permission from the government; here alien enemy is a citizen of a country with which India is in war. Stifling prosecution means that making money through crime is an abuse of law and such a person can get punishable by the court if charges against him are proved.
ELEMENTS OF CONSIDERATION IN ENGLISH CONTRACT LAW
Consideration must not be past
The promise cannot be made based on the considerations that have been done, said, or given before the promise is made. For Example, If X promises to pay Y for the Act that has been already done in the past here the act done is good consideration but the promise made for already done is bad consideration. In “Re McArdle”[13]Majorie carried out a few repairs and improvements in a bungalow which was owned by her husband’s father and later that was given to her husband and other 4 siblings of him. After the work has been done all his brothers and sisters wrote a document that £480 will be paid by the executors for after the house is sold. However, the court has rejected the case as past consideration is not valid.
There is an expectation in this by request. In “Lampleigh v Braithwait”[14]case the defendant has got the punishment of hanging for the murder he has done earlier. To which the defendant has asked the claimant to do his best for the pardon from the king and the claimant has done his best and managed to get the pardon requested. To which the defendant has promised to pay £100 for his efforts but never paid. Here the consideration is valid as the promise is not made for the murder he made but for the efforts the claimant has put in to get a pardon request so the consideration is valid.
Consideration must be sufficient but need not to be adequate
“There is no requirement that the consideration must be a market value or any such amount is given. For example, £2 given in exchange for a car is valid. The courts are not considered with whether it’s a good or bad bargain”[15].
Consideration must move from the promise
“If a person other than the promisee is to provide consideration, the promisee cannot enforce the agreement”[16]. In A couple were getting married. The father of the Bride entered into the agreement with the father of the Groom that they will pay each pay couple, the sum amount of money each. The father of the bride has died without paying the amount and the father of the groom also died and is unable to sue the agreement. The groom decided to sue the executor for the claim but the court has declined the claim as he was not part of the agreement and consideration moved from him. Therefore the groom is not entitled to enforce the contract.
An existing public duty will not amount to valid consideration
“Where a party has a public duty to act, this cannot be used as a consideration for new promise unless the promisor goes beyond their duty”[17].
For example, A has been ordered to come to court as a witness and made to be for 6 days at the same time he can’t get the salary from the place he is working as he is on public duty and the other promise is not considered. And the example for the working beyond their duty is if someone got death threats and gone to the police for the protection and the police has given protection beyond their capacity then the person from whom they are working need to pay as the police are working as public duty but as they have used beyond their capacity fir them the person need to pay.
An existing contractual duty will not amount to valid consideration
“If a party has an existing contractual duty to do an act, this act cannot be used as a consideration for new promise”[18]. In “Stilk v Myrick”[19] The claimant was a seaman on voyage from London to Baltic and back. He was paid £5 per month during the voyage. The captain promised the remaining crew members that if they worked then the amount will be shared and the claimant agreed and the captain never paid the money. The claimant was under the existing duty of the ship and whatever he need to work and he is part of the voyage so he was not part of the consideration of the promise.
Part payment of the Debt
“Part payment of a debt is not valid consideration for a promise to release the debt in full”[20]. In “pinnel’s CaseThe claimant was owed £8 10 shillings. The defendant has paid only £5 2 shillings and 2p. The claimants sue for the amount outstanding. Here the claimant was entitled to the full amount to accept less and the part payment of a debt is not a valid consideration unless the promisor’s request made part payment either:
- Before the due date
- With a chattel or
- To a different destination”[21].
COMPARATIVE ANALYSIS OF ELEMENTS OF CONSIDERATION IN INDIAN CONTRACT ACT AND ENGLISH CONTRACT LAW
The elements of consideration in the Indian Contract Act and English contract law have very large differences and those are going to be shown here
The elements in Indian Contract Act are considered to be better elements than the English Contract law because in Indian Contract Act there are elements that are much use full and more practical than the elements in English Contract Law. In the Indian Contract act, there is a choice to transfer the consideration on the wish of the promisor and not by the third party and there is no such element available in English laws. The next element is the consideration can move from promisee to any other person but in English laws that are considered a void contract. This element is need to be considered even in English law because the promise wouldn’t go into loss if the promisor is dead. The next element is the consideration must be real and not illusory which means that the contract must be possible to do then only that will be considered as valid but any such thing is not available in the English Laws.
The definition of past consideration in both the laws have different meaning as in Indian Law the past means the done before the date of promise and it can be valid but in English that is different here, the past is considered as void contract as the law states that colonisation before the promise is not valid and also Indian laws after even consideration for present and future also that is not available in the English laws. The next element is consideration must be lawful this is one of the most important things if consideration is not lawful then there are high chances of an increase in crime rate and this is not available in English laws and also they support the crime as explained in 1st element the murder got relaxed from the hung and later he was violating the contract if the rules were against the crime than such contract use not happen as he uses to not got relaxed from the hung. This shows the importance of being for the lawful contract and consideration. The other consideration is the consideration must not be against public decency or immoral in this if a contract is made with an alien enemy than there are chances that some illegals goods being sent and that could be a problem so there is no such consideration in English laws.
Considerations in English laws have some good but not all of them and first consideration has been already discussed so the next consideration is sufficient but not adequate here there are chances of cheating a person and also books of accounts of the company or their own which could be a loss to the government as that could reduce their tax. The next is consideration of existing pubic duty will not be valid as if someone is working for as the public duty than the government is paying for the work they are doing. If they do other than the public duty they will be paid than for the work. There is no requirement to be a consideration for that. The next two considerations are while they are in one contract and they can’t be part of the same consideration for the new contract yes that is acceptable as they can’t do the same work for both the parties. The next is part payment is not a valid consideration for the full debt and how can even be possible that paying the part amount and considering full is not acceptable and everyone knows that is not required to be a consideration.
CONCLUSION
The elements of consideration are most important in a contract as they are going to make the contract valid. In the Indian contract Act there are most important considerations which are useful to the people and which are practical and whereas in English laws there are not the same case they have very unreasonable considerations such as the promise cant cannot be shifted, consideration must be sufficient but need not be adequate and using these laws people can even cheat. Whereas in Indian laws the considerations are very reasonable as the considerations include public decency, the safety of the people and also does transfer the consideration for the third party on the wish of the promisor. The researcher feels that one consideration from English law can be added in the Indian law that is the existing contractual duty will not amount to valid consideration because that is correct as if a person doing an existing consideration and he is not eligible to do promise for the same act. This is not available in Indian Law so these will be helpful if added. The remaining English needs to be a little more practical and reasonable as their considerations must be lawful, possible and real. Without them, the laws can be misused. There are elements in both laws but Indian Law has many reasonable and practical considerations as compared to English laws.
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[1]Definition from Oxford Dictionary
[2]Definition from Legal Dictionary
[3]Indian Contract Act 1872 §2(d)
[4]ELEMENTS OF A CONTRACT, Judicial Education Centre, The University of new Mexico, (January 26, 2021), http://jec.unm.edu/education/online-training/contract-law-tutorial/contract-fundamentals-part-2#:~:text=Consideration%20is%20the%20value%20that,of%20value%20promised%20in%20return.
[5]Indian Contract Act 1872 §2(d)
[6] ILR (1883) 3 All 221, OLDFIELD J at p.228
[7]Consideration: Meaning, Definition and Essential Elements of Consideration, SRD Law Notes, https://www.srdlawnotes.com/2017/06/consideration-meaning-definition-and.html
[8] Court of King’s Bench, (1991) 2 WLR 540
[9]Shikha Singh, Consideration: Meaning, Definition and Essential Elements- Contract Act, www.Ourlegalworld.com, (April, 08, 2020), https://www.ourlegalworld.com/consideration-meaning-definition-and-essential-elements-contract-act/
[10]Ibid 9
[11]Ibid 9
[12]Costigan, Cases on Contract (3rd Edition) 309
[13]Re McArdle (1951) ch 669
[14]Lampleigh v Braithwaite [1615] EWHC KB J17
[15]Contract Consideration, e-lawresources.co.uk, (January 26, 2021), http://www.e-lawresources.co.uk/Consideration.php
[16]Ibid 15
[17]Ibid 15
[18]Ibid 15
[19]Stilk v Myrick [1809] EWHC KB J58 King’s Bench Division
[20]Ibid 15
[21]Pinnel’s Case 1602 5 Rep, 117 Court of Common Pleas
