CONSIDERATION AND CONTRACT

INTRODUCTION

Section 25 of the Indian Contract Act 1872, specify that “an agreement that has been made without any kind of consideration is void subject to certain exceptions[1]. Consideration means something in an exchange between two parties for the promise. Consideration is a must for the validation of any agreement to become a contract. Consideration can be either some kind of benefit given to one party or it can be even some kind of harm suffered by the other party. Therefore, it is the price of the promise for each party.

CONSIDERATION UNDER SECTION 2(d) OF ICA, 1872

Section 2(d) of the Indian Contract Act 1872 also defines and illustrate the term ‘consideration’ and gives a very practical and pragmatic definition of it in the form of an act to do something, abstinence or even can be any other promise. It states that “when at the desire of the promisor, the promisee or any other person has done or abstained from doing or does or abstain from doing, or promises to do or abstain from doing something, such act or abstinence or promise is called promise for the consideration”[2]. This given definition under section 2(d) requires some of the following essentials to be fulfilled to show that there has been a valid consideration. These derived essentials from the section are; Consideration must be every time in a contract should be given at the desire of the promisor meanings it cannot be voluntarily or on one’s whims and fancy, consideration should always be given by promisee or any other person chosen by the promisee, consideration maybe sometimes past, sometimes present, or sometimes future and these are also known as three types of consideration. And lastly, there should be always some act, abstinence or promise by the promisee.

According to the Indian Contract Act 1872, consideration can either be given by the promisee to the promisor or even can be given by any third person (who is not a party to the contract) except for the promisee and such consideration will be valid. According to Indian laws, one can receive consideration from the promisee and also from any other person, who is not related to that particular contract. Thus, consideration is a must for any valid contract and it is not needed to the fact who has given it. It may move from the promisee himself or any other third person. Whereas the scenario is different in English Contract Law and consideration must be given by the promisee only not any third party. Any consideration furnished by any other party who is not the party to the contract will be considered invalid in England.[3]

CONSIDERATION AT THE DESIRE OF THE PROMISOR

Any kind of consideration must be given at the desire of the promisor only every time, and it can never be any voluntarily act. For instance: if X saves Y’s house and other related stuffs from a fire without being asked to do so by Y. In that case X neither can ask for the payment for such service nor file any suit to claim the amount. In the case Durga Prasad v. Baldeo, the plaintiff here had planned and accordingly constructed few shops in a market at the instance of the police officer of that place. Defendant has later lawfully taken one of the shops in that market for his service. The plaintiff spent large amount of money for the construction of the market, the defendant thereafter in consideration made a promise to give the amount to the plaintiff through articles that will be sold in the market. But later on, the defendant failed to pay the promised commission. The court, in this case, held that “consideration for the promise to pay the commission for the construction of the market was not at the desire of the defendant but on the order of collector. Therefore, held that since the consideration did not move at the desire of the defendant they were not liable in respect of the promise made by them”.[4]

The following two cases demarcated the difference in liabilities and situations where at one instance the work will be started from its inception and at other instance, the work had been already started and is now in progress.

Kedarnath v. Gorie Mohammed

In Kedarnath v. Gorie Mohammed, the town planners of a place, Howrah wanted to erect a town hall for public use at Howrah for facilitating smoothness in the life of the masses. But they declared that this can happen provided sufficient subscriptions can be collected from general people. To start the work soon, the commissioner of Howrah municipality started to raise money and necessary funds for the erection of the town hall by public the subscription. One of the people among other subscribers, the defendant, promised to pay an amount of Rs. 100  and so he signed his name and was displayed on the subscription list for the same amount. In good faith of the amount promised to be given by the defendant and other subscribers, the plaintiff who was the commissioner of the Howrah municipality further agreed to form a contract with a contractor for starting the construction of that town hall. Later the defendant, the subscriber who promised the amount of Rs.100, showed his non-conformity regarding the payment that he promised earlier. In other words, he put forward that there is not any kind of personal benefit by the construction nor any personal significance of the hall and therefore he disagreed further.

The court, in this case, held the defendant liable. It was held that “the subscriber was very well aware of the purpose for which he is paying the amount and where it will be used, the person knowingly subscribed for it. All subscribers were very much cognizant of the fact that on the promise of their subscription and payment, obligation arose to pay the contractor and start the work of the construction of Town Hall. And the plaintiff entered into the contract with the contractor which was done at the desire of the promisor and thus it constitutes a good consideration within the meaning of section 2(d) of ICA.”[5]

Doraswami Iyer v. Arunachala Iyer

In the case, Doraswami Iyer v. Arunachala Iyer, here there was a temple whose repair was already started. The work was in progress and with time the work progressed further and now more amount of money was required for temple repairment and subscriptions were invited from general people to get money for the work and a list of subscribers was released soon. The defendant, in this case, gave his name and raised the amount of Rs. 125 knowingly but later refused to pay and it was to recover the amount thereafter the suit was filed in the court of law. And the plaintiff hereby considered the promise of subscriber as the consideration for the promise for which repairment of the temple was in progress for the public service. The court, in this case, held that “there was no evidence of any request by the subscriber to the plaintiff to do the temple repairs. Since the temple repairs were already in progress when the subscriptions were invited. The action was not induced by the promise to subscribe but was rather independent of it. Hence, no recovery was allowed.” And the court further opined that the promise to contribute an amount for a charitable purpose may not be enforceable because against this promise there may be no consideration. But a promise to pay subscription becomes enforceable when definite steps have been taken on the faith of the promised subscription.[6]

CONCLUSION

Thus, from both cases, it can be concluded that a promise where one specifies and promises to contribute an amount for any kind of public service or work may not be enforceable because against this promise there may lie no consideration and if there is no consideration then it won’t be enforceable. Any kind of consideration must be given at the desire of the promisor only every time, and it can never be any kind voluntarily act meaning it should always be according to the promisor demand and desire.

Author(s) Name: Shruti Saha

References:

[1] Indian Contract Act 1872, s. 25.

[2] Indian Contract Act 1872, s. 2(d).

[3] Avatar Singh, Law of Contract and Special Relief Act (12th edn., 2017).

[4] [1881] AII 221, Oldfield J At p.228.

[5] [1886] ILR 14 Cal. 64.

[6] [1936] Mad 135.

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