Consideration

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Consideration as in Contract Law

In simple words, Consideration means 'something in return'.

Consideration is one of the essential element for an agreement to become a Contract. It is a requisite for all contracts other than those made by deed.

Definition

Consideration is something that moves from the promisee to the promisor, at the implied or express request of the latter, in return for his promise. The item that moves can be a right, interest, profit, loss, responsibility given or suffered, forbearance or a benefit which is of some value in the eyes of law.

Essentials of a valid Consideration

  1. Consideration must move at the desire of the Promisor
  2. Consideration may move from the Promisee or any other person
  3. Consideration may be past, present or future
  4. Consideration must be of value

Law excludes considerations in few exceptions.

  1. Natural love and affection
  2. Compensation for past voluntary service
  3. Agreement to pay time barred debt
  4. Completed gift
  5. Contract of agency
  6. Remission by the promisee after the performance of the promise
  7. Contribution to the charity

Consideration may be past, present or future

In regard to time, considerations may be past, present or future. Those which are present or future will support a contract not void for other reasons.

Types of considerations

  • Concurrent Consideration
  • Continuing Consideration
  • Equitable or Moral Considerations
  • Executed or Executory Considerations
  • Express or Implied Considerations
  • Fair and Valuable Consideration
  • Good / Meritorious Consideration
  • Gratuitous Consideration
  • Illegal Consideration
  • Implied Considerations
  • Impossible Consideration
  • Inadequate Consideration
  • Legal Consideration
  • Nominal Consideration
  • Past Consideration
  • Pecuniary Consideration
  • Sufficient Consideration

Consideration as per Indian Contract Act, 1872

According to section 2(d) of Indian Contract Act, 1872, consideration means
"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 is called a consideration for the promisee."

Related Cases / Recent Cases / Case Law

  • Durga Prasad vs. Baldeo (1880)
  • Chinnayya vs. Ramayya (1882)
  • Collins vs. Godefry (1831)
  • Treitel (1976) 50 ALJ 439: Consideration is a doctrine designed to establish which promises should be legally enforceable.
  • Curie vs Misa (1875) LR 10 Ex. 153 at p. 162: '.. A valuable consideration, in the sense of the law, may consist in some right, interest, profit, or benefit accruing to the other party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other...'
  • Llewellyn (1941) 41 Col. L. Rev. 777, 778,863; Simpson (1975) 9 LQR 247: Consideration reflects a variety of policies and serves a number of functions.
  • Pillans vs Van Mierop (1765) 3 Burr. 1663: Consideration is sometimes seen a requirement which ensures that a promisor has deliberately decided to contract and prevents parties accidentally binding themselves on impulse.

Related Acts

  • Section 10 of Indian Contract Act, 1872: What agreements are contracts
  • Section 8 of Malaysian Contracts Act, 1950: Acceptance by performing conditions, or receiving consideration
  • Section 24 of of Malaysian Contracts Act, 1950: What considerations and object are lawful, and what not
  • Section 25 of of Malaysian Contracts Act, 1950: Agreements void if considerations and objects unlawful in part
  • Section 26 of of Malaysian Contracts Act, 1950: Agreement without consideration, void, unless
  • Section 80 of of Malaysian Contracts Act, 1950: Consideration for guarantee
  • Section 138 of of Malaysian Contracts Act, 1950: Consideration not necessary

Related topics

Consideration as in Legal Practise

  • Consideration is a technical term indicating that a tribunal has heard and judicially determined matters submitted to it. *Meaney v. State Industrial Accident Commission, 113 Or, 371, 232 P. 789, 791.


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