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Understanding Consideration in Contract Law

Consideration is a necessary element of a legally enforceable contract, defined as something exchanged between parties. It must be at the promisor's desire, can come from the promisee or a third party, and can be past, present, or future, but must be lawful and real. Certain exceptions allow agreements without consideration to be valid, and consideration is essential to differentiate contracts from mere promises.

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5 views2 pages

Understanding Consideration in Contract Law

Consideration is a necessary element of a legally enforceable contract, defined as something exchanged between parties. It must be at the promisor's desire, can come from the promisee or a third party, and can be past, present, or future, but must be lawful and real. Certain exceptions allow agreements without consideration to be valid, and consideration is essential to differentiate contracts from mere promises.

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Notes on Consideration (Contract Law)

Meaning of Consideration
Consideration is 'something in return' or a benefit exchanged between parties to make a contract
legally enforceable. As per Section 2(d) of the Indian Contract Act, 1872: '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
consideration for the promise.'

Essential Elements of Consideration


• Must move at the desire of the promisor – An act done voluntarily or at a third party’s request is
not valid consideration. (Case: Durga Prasad v. Baldeo)

• May move from the promisee or any other person – Consideration can be given by the
promisee or even by a third party. (Case: Chinnaya v. Ramayya)

• May be past, present, or future – Past: already done at promisor’s request; Present: done
simultaneously; Future: to be done later.

• Must be real and not illusory – It should have some value in the eyes of law.

• Must be lawful – It should not be illegal, immoral, or against public policy.

• Need not be adequate – Law does not require consideration to be equal in value; however, it
must be sufficient.

Rules Regarding Consideration


• An agreement without consideration is void (Section 25).

• Exceptions where agreement without consideration is valid:

• 1. Agreement made out of natural love and affection.

• 2. Promise to compensate for past voluntary services.

• 3. Promise to pay a time-barred debt.

• 4. Completed gift.

• 5. Agency (no consideration required).

Types of Consideration
• Executed Consideration – when consideration is given at the same time as the promise.

• Executory Consideration – when consideration is to be given in the future.

• Past Consideration – when consideration is already given before the promise is made.

Importance of Consideration
• Consideration is the foundation of a contract.

• It distinguishes contracts from gratuitous promises (mere moral obligations).


• It ensures fairness in agreements.

Flowchart Summary: Contract → Requires Consideration → Must be Lawful & Real → Can be Past,
Present, Future → Exceptions → Still Valid without Consideration (in certain cases)

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