What do you understand by consideration? Define past, present and future consideration. "No consideration no Contract" - mention the exception to the rule.
Consideration
Consideration is one of the essential elements to support a contract. Subject to certain exception, an agreement made without a consideration is meaningless and is therefore void.
Consideration is a technical term used in the sense of ‘Quid Pro Quo’ (something in return) when a party to an agreement promises to do something, he must get something in return.
Pollock defined consideration to be the price for which the promise of a person can be bought and such a promise given for a value is enforceable.
A valuable consideration in the sense of the law may consist either in some right interest,profit or benefit accruing to one part or some undertaking given by the other.
Justice Patterson was of the view that Consideration means something in return which has a value in the eyes of law.
Section- 2(d) of the Indian Contract Act, 1872 provides that when at the desire of the promisor, the promise or any other person-
* Has done or abstained from doing or
* Does or abstains from doing or
* Promises to do or to abstains from doing something
* Such act or abstinence or promise is called a consideration for the promise.
Example- A promises B promise to pay the price of the goods which B sells on credit to C. Here, selling of goods by B to C is the consideration for A’s promise.
•Past Consideration
Past consideration means that the consideration for any promise was given earlier and the promise is made thereafter. It is of course necessary that at the time the act constituting .
consideration was done must have been done at the desire of the promisor.
Example- A request B to find his pet dog. After B done the same, if A promise to pay B Rs- 1000 for that, it is a case of past consideration.
•Present Consideration
When one of the parties to the contract has performed his part of the promise, which constitutes the consideration for the promise by the other side, it is known Present Consideration. Performance of the promise by the other side is the only thing now to be done.
Example- A makes an offer of reward of Rs. 500 to anyone who finds his lost dog and brings the same to him. B finds the lost dog and delivers the same to A. When B does so, that amounts to both the acceptance of the offer, which results in a binding contract under which A is bound to pay Rs. 500 to B, and also simultaneously giving consideration for the contract. It is a case of present consideration.
•Future Consideration
When one person makes a promise in exchange for the promise by the other side, the performance of the obligation by each side to be made subsequent to the making of the contract, the consideration is known as Future consideration.
Example- A agrees to supply certain goods to B and B agrees to pay for them on a future date, this is a case of future consideration.
"No consideration no Contract" -mention the exception to the rule .
Answer -
The general rule is that an agreement made without consideration is void. Such an agreement cannot be enforced by any court of law because in the absence of consideration, no binding contractual relationship is created between the parties.
However this rule has certain exception and there are agreements which are enforceable in the eyes of law, but they are made without consideration.
Section -25 and section-185 of Indian Contract Act,1872 deals with the exceptions to the general rules that a contract without consideration is void. It is also expressed as “Ex Nudo Pacto Non Oritur Actio” (an agreement made without consideration is void).
The situation where the above mentioned general rule does not apply are as follows-
a. Love and Affection[Sec- 25(I)]
Where an agreement is expressed in writing and registered under the law for the time being in force, and is made on account of natural love and affection, it is an enforceable agreement. It is not considered that there is no real consideration.
[RAM DAS v. KRISHAN DEV AIR 1986 H.P.]
b. Compensation for voluntary services[Sec- 25(II)]
A promise to compensate wholly or in part, a person who has already voluntarily done something for the promisor is enforceable. The said promise may been forced even if there is no consideration.
Example- A finds B’s purse and gives it to her. B promises to give A Rs- 100 , law considers that as a contract and therefore in the event of a breach it can been forceable in a court of law.
c. Promise to pay a time barred debt[Sec- 25(III)]
A promise by a debtor to pay a time barred debt is enforceable, provided it is made in writing and is signed by the debtor or his agent authorized on this behalf.The promise may be to pay the whole or any part of the debt.
Example- D owes C Rs-100, but the debt is barred by the Limitation Act. D signs a written promise to pay C rs-50 on account of the debt.
d. Completed Gift
In cases of completed gifts the donor and the done enters into transactions on the basis of certain consideration which falls outside the ambit of ‘No consideration, no Contract’ it is a perfect and a valid agreement in the eyes of law.
e. Agency[Sec-185]
Any man may choose to authorize or appoint any other person as his agent, without any consideration. No consideration is necessary on the part of the principal to create agency.
f. Charitable Subscription-
Where the promise makes certain commitments by way of any written agreement,he is not allowed to change his position, especially when certain action has already being contemplated.
[SHARADA KRISHNA GHOSH V. RAMKRISHNA MISSION 1992 CALJ]
