Consideration in contract law
Consideration in Law of Contract
Introduction:
The term "Consideration" is used in the sense of something in return. In other words consideration is a reward accepted or given in return for the promise. It is doing or abstinence from an act.
Consideration is an essential element for the formation of a contract.Usually a promise to give or to do something for nothing in return is not enforceable at law.It need not be in cash or kind.
Definitions of Consideration:
1. According to Contract act:
"When at the desire of 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, abstinence or promise is called the consideration for the promise"
2. According to Australian Law of contract:
4. According to Pollak:
5. According to David:
Rules of Consideration:
Unlawful Consideration:
- It is forbidden by law or
- It is of such nature that, if permitted it would defeat the provisions of any law or
- It is fraudulent or
- It involves or implies injury to the person or property of another or
- It is opposed to public policy.
Exceptions to the General rule that "agreement without consideration is void".
1. Love and affection:
If contract is expressed in writing and registered under the law for the time being in force for the registration of documents and "it is made on account of love and affection between the parties standing in a near relation to each other. (Sec 25)
2. Contract of Agency:
3. Voluntary Services:
It is a promise to compensate, wholly or in part, a person who has already voluntarily done something for promisor, or something which the promisor was legally compellable to do.
Illustration:
A finds B's purse and give it to him. B promise to give A $10. This is a contract.
4. Time barred debt:
Where a promise is made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for limitation of suits.
(where a person is bound to pay some debt but creditor cannot force him to pay such debt because debt is barred by the time limit under limitation act, that person promises to pay such debt wholly or in part so in such situation consideration is not required)
Explanation of Time barred debt:
If you have old debts, Collectors may not be able to sue you to collect their debts, because they have a limited number of years (Statute of limitation) to sue you. After it your unpaid debts considered time barred.
5. Contract under seal:
6. Extension of time:
Consideration should be adequate or not?
An agreement to which the consent the promisor is freely given is not void merely because the consideration is inadequate. But the inadequacy of consideration may be taken into account by the court in determining the question whether the consent of the promise was freely given or not?