Consideration
Indian Law of Contract - By Dr. P.P. Ramayya, M.A., LL.M, Ph.D. (Law)
Best definition of consideration was given by Lush J in the case of Currie vs Misa, 1875: “A valuable consideration is in the sense of law may consist either in some right, interest, profit or benefit accruing to the one party or some forbearance, detriment, loss or responsibility given, suffered, or undertaken to the other.”
In this case, Lizardi & Co. sold a number of bills of exchange to Mr. Misa, drawn on a banking firm owned by Mr. Currie. The bills were sold on 11th Feb. Brokers were to be paid post day following the day of sale. The first day was 14th Feb. Lizardi & Co. was much in debt to his banking firm. On 14th Feb Misa gave a cheque for the amount of order, Lizardi & Co. failed. It was held that pre-existing debt did not form any consideration. So, there was absence of consideration for payment of the cheque to Misa.
Consideration is necessary for formation of every contract. An informal promise made without consideration is not actionable.
Eastwood vs. Kenyan
After the death of John Sutcliffe, his infant daughter Sarah, became sold heiress to his property. The plaintiff is the guardian to the girl. He spent money on her education and for benefit of the estate. When the girl became major, she promised to reimburse him. She married defendant. The plaintiff sued for the promise made by Sarah. Lord Denman dismissed the action as there was no consideration. He said moral obligation cannot be a consideration.
Consideration must not be past
A promise given for a promise, the consideration is executory. It may be executed, as an act or forbearance given for a promise. But it must not be past, because in that case it is a sentiment of gratitude. An honour prompting a return for benefit received is no consideration at all.
Roscorla vs. Thomas
Plaintiff purchased a horse from the defendant. After some days of the sale, the defendant warranted that the horse was sound. But it was vicious. Court held that at the time of the sale no warranty was given that the horse was sound. After some days after the sole defendant only said that the horse was sound. The consideration was past and not enforceable. It was held that the warrant was independent of the sale.
Consideration need not be adequate
Consideration need not be adequate, but it must be some value in the eyes of law. When two persons enter into a contract, it is not for the courts to enquire whether it was equivalent for the promise.
The consideration may be benefit to the promisor or to a third party, it may not be any benefit to any person, it may be merely a determinant to the promise. It is for the parties to consider adequacy of consideration but not for courts.
Bainbridge Vs. Firmstone
Two boilers were owned by Bainbridge. The defendant wanted to weigh them. They cannot be weighed unless dismantled. The plaintiff allowed the defendant to dismantle them and weigh on the condition that after weighing they would be brought to their original working condition. The defendant dismantled the boilers and weighed them but he could not restore them. The plaintiff sued the defendant. It was held that the defendant was liable. The court held that the defendant might thought that there was some benefit to him by weighing. Similarly there is detriment to the plaintiff by parting his boilers for some time.
Consideration must move from the Promisee
It is said that he who enters into a contract has to show that he himself has furnished consideration for the promise of the other party. The consideration need not benefit the other party.
If two persons enter into a contract to benefit a third person, that third person who is not a party to the contract, cannot get any rights under the contract.
Tweddle Vs. Atkinson
M and V married. Afterwards their respective fathers entered into a contract each agreeing to pay certain sum of money to M. After the death of the fathers of bride and bridegroom, M sued for the executors of bride for money promised. It was held that no action would like because no consideration moved from M.
Consideration must be real
Consideration must have some value in the eyes of law, even though it need not be adequate. It must not be illusory.
Thomas vs. Thomas
A widow sued the executors of her husband property to allow her to occupy his house, because during his lifetime her husband wished that after his death, she should occupy his house. He did not execute any will to that effect. The widow contended that executors of her husband's property shall carry out the wishes of her late husband. The court held that desire to carry out wishes of the deceased would not amount to consideration. Motive is not the same as consideration.
Consideration must be lawful
Section 10 of Indian Contract Act says, “All agreements are contracts if they are made by the free consent of the parties, competent to contract, for a lawful consideration, with lawful object and are not hereby expressly declared void.”
Section 23 of Contract Act describes what consideration and objects are lawful and what are not.
The consideration and object of an agreement is lawful unless:
It is forbidden by law; or
If it is of such nature that if permitted, it would defeat the provisions of any other law; or
Involves or implies injury to the person or property of another; or
The courts regard it as immoral or opposed to public policy.