ConsiderationLegal Environment of Business

Prepared By

Manu Melwin Joy

Assistant ProfessorIlahia School of Management Studies

Kerala, India.

Phone – 9744551114Mail – manu_melwinjoy@yahoo.com

Kindly restrict the use of slides for personal purpose.Please seek permission to reproduce the same in public forms and presentations.

Definition

The term consideration isdefined in Sec. 2 (d) of theIndian contract Act as “Whenat the desire of the promisor,the promise or any otherperson has done orabstained from doing, orpromises to do or to abstainfrom doing something, suchact, abstinence or promise iscalled a consideration for thepromise.”

Definition

• Consideration is the

backbone of all promises.

• Consideration means

something in return to

the promisor.

Essentials of consideration

• Consideration must moveat the desire of thepromisor.

• Consideration may movefrom promisee or any otherperson.

• Consideration may be past,present or future.

• Consideration need not beadequate.

Essentials of consideration

• Consideration must be realand not illusory.

• Consideration must belawful.

• Consideration must besomething which thepromisor is not alreadybound to.

Essentials of consideration

• Consideration must moveat the desire of thepromisor.

– Example – X’s son is missingand Y voluntarily goes insearch for him. Y cannotclaim any remuneration orreward for finding out X’sson because he has notdone it at X’s request.

Essentials of consideration

• Consideration may movefrom promisee or any otherperson.

– Example – In Chinnayya VsRammayya, it was held thatconsideration moving fromthird party is also goodconsideration.

Essentials of consideration

• Consideration may be past,present or future.

– Example – X’s son wasrescued from drowning by Yon 15th August at therequest of X. Subsequentlyon 17th, X promised to payRs 500 for the servicerendered in the past. Y’sconsideration in this case ispast consideration.

Essentials of consideration

• Consideration may be past,present or future.

– Example – X agrees to lookafter the child of Y and hefurther agrees to receive allexpenses incurred by himfrom Y at the end of theyear. In this case,consideration is a future onefor X.

Essentials of consideration

• Consideration need not beadequate.

– Example – A agrees to sellhis horse worth Rs 25,000 toB for Rs. 1000. The contractis valid provided A’s consentwas freely obtained.

Essentials of consideration

• Consideration must be realand not illusory.

– Example – A promises toshift a mountain from oneplace to another if B paid Rs10,000. A’s promise isphysically impossible ofperformance.

Essentials of consideration

• Consideration must belawful.

– Example – Where Apromises to obtain anemployment for B in thepublic service and B, inreturn promises to pay Rs.1000 to A, the agreement isvoid as the consideration isunlawful.

Essentials of consideration

• Consideration must besomething which thepromisor is not alreadybound to.

– Example – A is paid salaryfor doing a job. So he isbound to do the job. But apromise to pay another sumof money for doing the job iswithout consideration.

Different Kinds of consideration

• Present consideration –When consideration is givensimultaneously withpromise, ie at the time ofpromise, it is said to bepresent consideration.

– Example – Cash sales.

Different Kinds of consideration

• Future consideration – Aconsideration is said to befuture consideration when itis done in future or yet to becomplied with.

Different Kinds of consideration

• Past consideration – Whenconsideration for a presentpromise was given by partyin the past, ie before thedate of promise, such aconsideration is a pastconsideration.

– Example – A has alreadyrendered some service to Band B now makes a promise.

• Definition of Consideration.

• Essential elements of a valid Consideration.

• Kinds of Consideration.