Consideration

Contracts result only when one promise is made in exchange for something in return. This ‘something in return’ is “consideration”.

                            

Sir Frederick Pollock has defined consideration as “the price for which a promise is bought”.

The Indian Contract Act defines consideration u/s 2(d) 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 act or abstinence or promise is called consideration”.  The wording shows that consideration can be in the past, present or future. Indian law also stipulates that consideration shall be at the desire of the Promisor.  In insurance, premium is “consideration”.

Under English law a consideration must not be past, it can be present or future.

Words and terms and conditions of a contract shall be clear and plain. There shall not be any ambiguity. To cite an example “a contract to contract in future is not a contract”. “An agreement to pay a salary to be mutually agreed upon” is not a contract.

According to Section 23, the consideration or object of an agreement is lawful unless (i) it is forbidden by law or (ii) is of such nature that, if permitted, it would defeat the provisions of any law; or (iii) is fraudulent; or (iv) involves or implies injury to the person or property of another; or (v) the Court regards it as immoral or opposed to public policy.

Section 25 of the Indian Contract Act provides that contracts are enforceable even when made without consideration, if they are in writing, registered and made out of natural love and affection. That is, natural love and affection may be a valid consideration in our country.

 To conclude, to make a valid contract, the essentials are: (i) Offer, (ii) Acceptance (iii) Free consent (iv)  Consideration (v) Legality of objective and (vi) not going against public policy.

Key words:

Contract
Consideration
Natural love and affection
Public policy