ConsiderationConsideration

Section 10 – Essentials of a valid contractSection 10 – Essentials of a valid contractSection 23 – What considerations and objects are lawful Section 23 – What considerations and objects are lawful and what and what notnotSection 24 – Agreements void if consideration and object Section 24 – Agreements void if consideration and object are are lawful in part lawful in partSection 25 – Agreement without considerationSection 25 – Agreement without considerationSection 2 (d) – DefinitionSection 2 (d) – Definition

Consideration – English LawConsideration – English Law

Quid pro quoQuid pro quo

Speciality contracts Speciality contracts

Parol contractsParol contracts

Consideration – Indian LawConsideration – Indian Law

Ex nudo pacto non oritur actio.Ex nudo pacto non oritur actio. No action arises from a nude No action arises from a nude

agreement.agreement. Nudum Pactum.Nudum Pactum. Agreement without consideration.Agreement without consideration. Nudum pactum ex quo non oritur actioNudum pactum ex quo non oritur actio A bare agreement from which no action A bare agreement from which no action

arises.arises.

Mere writing not sufficientMere writing not sufficient

Pillans v. Van Mierop (1765)Pillans v. Van Mierop (1765)

Rann v. Hughes (1778)Rann v. Hughes (1778)

High Trees House Case (1947) High Trees House Case (1947)

Equitable estoppelEquitable estoppel

Moral obligation is not Moral obligation is not sufficientsufficient

Lee v. Muggeridge (1813)Lee v. Muggeridge (1813)

Eastwood v Kenyon (1840)Eastwood v Kenyon (1840)

Kinds of ConsiderationKinds of Consideration

Executory – promise for a promiseExecutory – promise for a promise

Executed – an act for a promiseExecuted – an act for a promise

Past – promise independent and Past – promise independent and unconnected with an act already unconnected with an act already done.done.

DefinitionsDefinitions

PollockPollock – consideration is the price for which – consideration is the price for which the promise of the other is bought, and the the promise of the other is bought, and the promise thus given for value is enforceable.promise thus given for value is enforceable.

PattersonPatterson – consideration means something – consideration means something which is of some value in the eyes of the which is of some value in the eyes of the law… it may be some benefit to the plaintiff law… it may be some benefit to the plaintiff or some detriment to the defendant. or some detriment to the defendant.

Currie v. MisaCurrie v. Misa

““A valuable consideration in the sense of A valuable consideration in the sense of law, may consist either in some right, law, may consist either in some right, interest, profit or benefit to the one interest, profit or benefit to the one party, or some forbearance, detriment, party, or some forbearance, detriment, loss or responsibility given, suffered or loss or responsibility given, suffered or undertaken by the other.” undertaken by the other.”

Consideration Under ICAConsideration Under ICA

Sec. 10 of ICA lays down essential of valid contract. Sec. 10 of ICA lays down essential of valid contract. One of which is consideration.One of which is consideration.

Sec. 23 lays down that the agreements considerations Sec. 23 lays down that the agreements considerations and objects of which are unlawful are void. and objects of which are unlawful are void.

Sec. 24 lays down that the agreements are void if Sec. 24 lays down that the agreements are void if consideration and object are unlawful in part.consideration and object are unlawful in part.

Sec. 25 opens with the wordings; ‘ An agreement Sec. 25 opens with the wordings; ‘ An agreement without consideration is void ab initio.’without consideration is void ab initio.’

Privity of ConsiderationPrivity of Consideration

A stranger to a consideration cannot sue.A stranger to a consideration cannot sue. Dutton v. Poole (constructive Dutton v. Poole (constructive

consideration).consideration). Tweedle v. Atkinson.Tweedle v. Atkinson. Under ICA a consideration may move Under ICA a consideration may move

from the promisee or any other person.from the promisee or any other person. Chinnayya v. Ramayya.Chinnayya v. Ramayya.

Privity of ContractPrivity of Contract

A stranger to a contract cannot sue.A stranger to a contract cannot sue. No jus quaesitum tertio (rights No jus quaesitum tertio (rights

acquired for a third party)acquired for a third party) Dunlop Pneumatic Tire co. V. Dunlop Pneumatic Tire co. V.

Selfridge & Co.Selfridge & Co. Beswick v. BeswickBeswick v. Beswick

Privity of ContractPrivity of Contract

Joint promisees and the Joint promisees and the consideration doctrine.consideration doctrine.

Coulls v. Bagot’s Executor and Coulls v. Bagot’s Executor and Trustee Ltd.Trustee Ltd.

Promisees, liability joint and several,Promisees, liability joint and several, McEvoy v. Belfast Banking Co.McEvoy v. Belfast Banking Co.

Exceptions to privity ruleExceptions to privity rule

Beneficiary to contract can sue for its Beneficiary to contract can sue for its enforcement (i.E. Beneficiary under enforcement (i.E. Beneficiary under trust or a charge on property).trust or a charge on property).

Khwaja Muhamad v. Husaini begum.Khwaja Muhamad v. Husaini begum. Acknowledgment or estoppel.Acknowledgment or estoppel. Devaraja Urs v. Ram KrishnaiahDevaraja Urs v. Ram Krishnaiah

Privity of ContractPrivity of Contract

Family arrangements, marriage Family arrangements, marriage settlements etc.settlements etc.

Rose Fernandez v. Joseph Gonsalves.Rose Fernandez v. Joseph Gonsalves. Daropti v. Jaspat Rai.Daropti v. Jaspat Rai. Covenants running with land.Covenants running with land.

Definition Definition

Sec. 2 (d) when, at the desire of the Sec. 2 (d) when, at the desire of the promisor, the promisee or any other promisor, the promisee or any other person has done or abstained from person has done or abstained from doing, or does or abstains from doing, or does or abstains from doing, or promises to do or to doing, or promises to do or to abstain from doing, something, such abstain from doing, something, such act or abstinence or promise is called act or abstinence or promise is called a consideration for the promise.a consideration for the promise.

Promissory EstoppelPromissory Estoppel

Acts done at the request of the Acts done at the request of the promisorpromisor

Kedarnath v. Gorie MohamedKedarnath v. Gorie Mohamed

Doraswami Iyer v. Arunachala IyerDoraswami Iyer v. Arunachala Iyer

Exceptions to Past Exceptions to Past Consideration.Consideration.

Act done at the request of the promisorAct done at the request of the promisor Lampleigh v. Brathwait (1615)Lampleigh v. Brathwait (1615) Kennedy v. Brown (1863)*Kennedy v. Brown (1863)* Three kinds of services can be there:Three kinds of services can be there: Services rendered with a promise to pay,Services rendered with a promise to pay, Services rendered not intending them to Services rendered not intending them to

be gratuitous and accepted,*be gratuitous and accepted,* Services rendered gratuitously. Services rendered gratuitously.

Interpreting Lampleigh v. Interpreting Lampleigh v. Brathwait (1615)Brathwait (1615)

The act must have been done at the The act must have been done at the request of the promisor,request of the promisor,

It must have been understood when It must have been understood when the act was done that payment was the act was done that payment was to be made thereof,to be made thereof,

The payment, had it been made in The payment, had it been made in advance should have been advance should have been recoverable.recoverable.

Precedent moral obligation, now only Precedent moral obligation, now only a debt barred by law of Limitation.a debt barred by law of Limitation.

Eastwood v. KenyonEastwood v. Kenyon Negotiable instrument Negotiable instrument

Past Consideration Under Past Consideration Under Indian Law Indian Law

S. 2(d) clearly lays down the words ‘ has S. 2(d) clearly lays down the words ‘ has done’ which suggest that past act done by done’ which suggest that past act done by the promisee at the desire of the promisor the promisee at the desire of the promisor is valid and enforceable.is valid and enforceable.

S. 25 (2) lays down that if a person has S. 25 (2) lays down that if a person has done something for another voluntarily done something for another voluntarily and that other has promised to pay him an and that other has promised to pay him an amount for the same, the promise is amount for the same, the promise is enforceable against such a promisor.enforceable against such a promisor.

Agreements Without Agreements Without Consideration S. 10 & S. 25Consideration S. 10 & S. 25

Ex nudo pacto non oritur actio.Ex nudo pacto non oritur actio.

Out of a bare pact no action arises.Out of a bare pact no action arises.

Promise to contribute money to a Promise to contribute money to a charitable purpose.charitable purpose.

Exceptions Under S. 25Exceptions Under S. 25

Agreement without consideration is valid Agreement without consideration is valid and enforceable if – and enforceable if –

It is in writing and registered, It is in writing and registered, It is out of natural love and affection of It is out of natural love and affection of

parties,parties, Parties are in near relationship. Parties are in near relationship. For example, a promise by a person in For example, a promise by a person in

writing and registered to pay all the debts writing and registered to pay all the debts of his brother.of his brother.

Promise to compensatePromise to compensate

Promise to compensate wholly or in Promise to compensate wholly or in part to a person who has already part to a person who has already done something – done something –

Voluntarily for the promisor, orVoluntarily for the promisor, or Something which the promisor was Something which the promisor was

legally bound to do. e.g. to pay taxes.legally bound to do. e.g. to pay taxes.

Promise to pay a time Promise to pay a time barred debtbarred debt

A promise to pay a time barred debt A promise to pay a time barred debt is enforceable by law.is enforceable by law.

Such a promise is an Such a promise is an acknowledgment of the debt from acknowledgment of the debt from the date of which the period of the date of which the period of limitation will start again.limitation will start again.

Adequacy of considerationAdequacy of consideration

Laesio enormisLaesio enormis – price to be fair and – price to be fair and serious.serious.

Bailment – no consideration is required.Bailment – no consideration is required. Adequacy may be used to determine Adequacy may be used to determine

the free consent of the parties.the free consent of the parties. Consideration to be real and not Consideration to be real and not

illusory or mere moral obligation.illusory or mere moral obligation. Consideration to be certain and lawful.Consideration to be certain and lawful.

Forbearance to sue and Forbearance to sue and compromisecompromise

A forbearance to sue for a time period A forbearance to sue for a time period is a good consideration. As it is a is a good consideration. As it is a detriment to the creditor and a benefit detriment to the creditor and a benefit to the debtor.to the debtor.

Alliance Bank v. Broom (1864)Alliance Bank v. Broom (1864) A compromise of a doubtful claim is A compromise of a doubtful claim is

similar to the forbearance to sue and similar to the forbearance to sue and therefore is a good consideration.therefore is a good consideration.

Callisher v. Bischoffsheim (1870)Callisher v. Bischoffsheim (1870)

Pre existing obligationsPre existing obligations

Duty imposed by law not a good Duty imposed by law not a good consideration.consideration.

Collins v. Godefroy (1831).Collins v. Godefroy (1831). Duty owed to the promisor not a Duty owed to the promisor not a

good consideration.good consideration. Stilk v. Myrick (1809).Stilk v. Myrick (1809). Contractual duty to third party.Contractual duty to third party. Shadwell v. Shadwell (1860).Shadwell v. Shadwell (1860).

Accord and SatisfactionAccord and Satisfaction

If the party bound performed something If the party bound performed something other than that which was required by the other than that which was required by the original promise and the promisee original promise and the promisee consented to that, that will act as a valid consented to that, that will act as a valid discharge for the promisor’s obligation. discharge for the promisor’s obligation.

No executory consideration was allowed No executory consideration was allowed but now it is.but now it is.

Pinnel’s case rule that a part payment of a Pinnel’s case rule that a part payment of a debt cannot operate as a satisfaction of debt cannot operate as a satisfaction of the whole debt (1602).the whole debt (1602).

Modern TrendModern Trend

London Property Trusts Ltd. v. High Trees London Property Trusts Ltd. v. High Trees House Ltd.House Ltd.

Principle of accord and satisfaction applies Principle of accord and satisfaction applies only where the – only where the –

Promise is intended to create legal Promise is intended to create legal relations;relations;

Promise is intended to be acted upon by Promise is intended to be acted upon by promisee;promisee;

Promise is in fact acted upon.Promise is in fact acted upon.

Accord and Satisfaction Accord and Satisfaction

Under English law to remit the Under English law to remit the performance in the original contract performance in the original contract a satisfaction (consideration) must a satisfaction (consideration) must be given.be given.

S. 63 of ICA does not accept the rule S. 63 of ICA does not accept the rule and it requires no consideration for and it requires no consideration for remitting the performance by the remitting the performance by the promisee. promisee.

Exceptions to Pinnel’s CaseExceptions to Pinnel’s Case

Composition with the creditors.Composition with the creditors.

Part payment by a third party.Part payment by a third party.

Welby v. DrekWelby v. Drek

CapacityCapacity

S. 10 parties must be competent to enter into S. 10 parties must be competent to enter into a contract.a contract.

S. 11 competent means – S. 11 competent means – Major according to the law to which he is Major according to the law to which he is

subjected;subjected; Who is sound mind;Who is sound mind; Not disqualified from entering into a contract.Not disqualified from entering into a contract. S. 12 what amounts to unsoundness of mind.S. 12 what amounts to unsoundness of mind.

MinorityMinority

Infants’ Relief Act, 1874.Infants’ Relief Act, 1874. Family Reforms Act, 1969.Family Reforms Act, 1969. Minor’s Contracts Act, 1987. Minor’s Contracts Act, 1987. Contract with a minor cannot be Contract with a minor cannot be

enforced against him.enforced against him.

ExceptionsExceptions

Contracts of continuing liability. Contracts of continuing liability. For example, partnership For example, partnership

agreements.agreements. Contracts for necessaries.Contracts for necessaries. Nash v. InmanNash v. Inman S. 68 of ICA.S. 68 of ICA. Beneficial contracts of service.Beneficial contracts of service.

Contracts With MinorContracts With Minor

Under Infant’s Relief Act, contracts Under Infant’s Relief Act, contracts with minor are void ab initio.with minor are void ab initio.

Contract for loan or repayment of Contract for loan or repayment of money.money.

Contract for goods supplied other Contract for goods supplied other than necessaries.than necessaries.

All accounts stated with minor are All accounts stated with minor are void.void.

Indian Law on MinorsIndian Law on Minors

Indian Majority Act, 1875.Indian Majority Act, 1875. Mohoribibi v. Dharmodas Ghosh, (1903)Mohoribibi v. Dharmodas Ghosh, (1903) Raj Rani v. Prem AdibRaj Rani v. Prem Adib S. 68 contracts for necessaries.S. 68 contracts for necessaries. Specific performance of contract.Specific performance of contract. No estoppel can be pleaded against the No estoppel can be pleaded against the

minor, i.e. against the statute.minor, i.e. against the statute.

RestitutionRestitution

‘‘Infants are no more entitled than Infants are no more entitled than adults to gain benefits to themselves adults to gain benefits to themselves by fraud’.by fraud’.

Leslie v. Sheill, Leslie v. Sheill, Restitution stops where repayment Restitution stops where repayment

begins.begins.

Indian LawIndian Law

S. 31 to S. 33 of Specific Relief Act.S. 31 to S. 33 of Specific Relief Act. Khan Gul v. Lakha Singh(1928 Khan Gul v. Lakha Singh(1928

Lahore)Lahore) Ajudhia Prasad v. Chandan Lal (1937 Ajudhia Prasad v. Chandan Lal (1937

All.)All.)