group 6_law ppt

Consideration & Objects in Law

A Presentation By:

Deepanwita Banerjee (412) Manoj Bisht (413) Praful Gaikwad (417) Amogh Joshi (423) Sudarshan Kashikar (426) Hiral Saraiya (445)

Agenda

• What is Consideration?• Essentials of Consideration• Valid Contracts without Consideration• Kinds and Types of Considerations• Legal Objects• Unlawful Consideration• Agreements against Public Policy• Void Agreements

Executive Summary Definition of Consideration/Quid Pro Quo Requirements of a Valid Consideration Stranger to a Contract – Exceptions Importance of a Contract Exceptions to “No Consideration, No Contract” Kinds/Types of Consideration Legal Detriment Lawful Object Unlawful Consideration Public Policy Contracts expressly declared Void

Definition

• Section 2(d) of the Indian Contract Act defines ‘Consideration’ as –

“When, at the desire of the promisor, the promisee or any other person

(i) has done or abstained from doing, (ii) does or abstains from doing, (iii) promises to do or to abstain from doing,

something, such act or abstinence or promise is called a consideration for the promise”

Quid Pro Quo and Consideration

• A promise cannot be legally enforced

• This answer subsumed under the Heading ‘Consideration’

• The phrase “Quid Pro Quo” is a Latin term that is translated as “Something for Something”

• Quid pro quo is a general term; Consideration is a specific, Legal term.

Essentials of a valid consideration

• Consideration must move at the desire of the promisor- Case – A’s Son- Durgaprasad vs. Baldeo (Builder,Collector,Shopkeeper)

• Consideration may move from the promisee or any other person (Stranger)- Case – Chinayya vs. Ramayya ( old lady, Daughter, Propertry,Relative)

Essentials of a valid consideration

• Consideration may be past, present or future

• Consideration may be an act of doing or abstaining from doing something or it may be an act of forbearance or abstinence

• Consideration need not be adequate

Essentials of a valid consideration (contd…)

• Consideration must be real and not illusoryCase – Reasonable remuneration– Life into dead wife

• Consideration must not be unlawful, illegal, immoral or opposed to public policy

• Performance of existing obligation is no considerationCase – Ramchandra Chintamanya vs. Kalu Raju ( services of

lawyer)• Forbearance to sue is a good consideration

Importance of Consideration

• Nudum–Pactum – Bare Promise

• Ex-nudo-pacto non-oritur actio – From a bare promise no action can arise

• General Rule – ‘No Consideration, No Contract’

“An Agreement WITHOUT Consideration is VOID” - A Promise WITHOUT Consideration is Void and purely

gratuitous

Exceptions to the Doctrine of Consideration

• Exception 1 : Section 25(1) - Agreement made on account of

Natural Love and Affection

• Essentials – 1) Agreement must be in Writing and Registered

Father SonUnregistered Agreement

Oral ArrangementVOID

CONTRACT


2) Agreement must be for Natural Love and Affection

Father SonRs.500/-

Promise in Writing & RegisteredVALID

CONTRACT

Family Member 1

Family Member

2

Contract - Promote Goodwill VALID CONTRACTPromise in Writing & Registered

X Y

Contract VOID CONTRACTConsideration Immoral


3) Parties to the Agreement must stand in near relation to each other

Real Life Example- Rajlukhi Devi v. Nath Mookherjee

Father Son Husband Wife

Brother Sister

Valid

Contract

Valid

Contract

Valid

Contract


• Exception 2 : Section 25(2) - Promise to compensate for past voluntary

services

Essentials –

1) There must be promise to reward for past voluntary services2) Act must be done for the Promisor3) The Promisor must be in existence when the act was done4) The Promisor must be competent to contract at the time of

contract


X

Y’s SonSupports

YX’s Expenses

VALID CONTRACT

A B PRs. 1000/-

Q

TeachVOID

CONTRACT

Actual Scenario


• Example 1:

• Example 2: A owes B Rs 1000/- but the debt is barred by the Limitations Act. A signs a

written promise to pay B Rs 500/- on account of debt. This is a valid contract.

Mr. Ahuja

Mr. Somnath

Lended Rs.500/-

VALID CONTRACT

Jan 1, 1993

Mr. Somnath

Signs written promise to pay back

Jan 1, 1996Mr.

Ahuja


• Exception 4:• Explanation to Act 25 – Gifts do not require Consideration

Real Life Example- Kedarnath v. Gorie Mohamed

Mr. P Mr. QGift - Property

Promise in Writing & RegisteredVALID

CONTRACT

Mr. ADonation VALID

CONTRACTInstitute


• Exception 5 : Section 185 - No Consideration is necessary in case of

an agreement to create an agency Example: To appoint a person as an agent without

consideration is a valid contract

Mr. P Mr. QAuthorizes

AgentVALID

CONTRACTMr. R

On behalf

of Mr. P

Kinds of Consideration1) Executed Consideration – A consideration which is done, foreborne or suffered with in the making of the contract.

Example - A receives $200 in return for which he promises to deliver goods to B. The money A receives is the executed consideration for the promise he makes to deliver the goods.

2) Executory Consideration – An executory consideration is a promise to

do, forebear or suffer in the future. Example - A promises to deliver car to B after a week. B promises to

pay the price after a month. The promise of A is supported by the promise of B. the consideration in this case is future.

Kinds of Consideration

3) Past Consideration – Is a consideration which is wholly done, foreborne or suffered before making the contract.

Examples: a) A renders some services to B in the month of June. In July, B promises to pay A $100. The consideration of A is past consideration. b) A teaches the son of B in the month of January and in February B promises to pay A $200 for his services. The services of A will be past consideration.


4) Unlawful Consideration A consideration is unlawful if -

1) It is forbidden by law

2) It is of such nature that, if permitted, it would defeat the provisions of any law

3) It is fraudulent

4) It involves or implies injury to the person or property of another

5) The Court regards it as immoral or opposed to public policy

Kinds of Consideration5) Unreal/Illusory Consideration – Any consideration for a promise is unreal if it - 1) Subsists merely in words 2) Has no legal value 3) Is Physically/Legally impossible to perform the promise

Examples –

a) Putting life back into a dead body cannot be enforced as promise because of impossibility

b) A engages B for doing a certain work and promises to pay a “Reasonable Sum”. There is no recognized method of ascertaining the “Reasonable” remuneration. The promise is not enforceable as it is uncertain

Stranger to a Contract

• Who is beneficiary under the contract?

• When allowed by certain statutes e.g. Insurance Act

• When on partition of Hindu Joint Family

– provision made for maintenance of female members– provision made for marriage expense of female members

Stranger to a Contract

• Stranger to a Contract can sue because the Consideration can be furnished or supplied by anyone

• However a stranger cannot sue because of privity of contract

A Stranger can Enforce the Contract

• The nominee of insurance policy• Beneficiary of trust property• Third party of Insurance contracts• Endorsee of negotiable instruments• Holder of a document in title• Legal representatives• Undisclosed principles• An assignee

Exceptions to the ‘Stranger Can Sue’ Rule

• The rule that a Stranger to a contract can sue is subject to the following exceptions -

– In case of trust– In case of family settlement– Acknowledgement– Assignment of a contract


• Executed Consideration

• Executory Consideration

• Past Consideration

• Unlawful Consideration

• Unreal/Illusory Consideration

Types of Consideration

• A Right

• A Profit

• An Interest

• A Physical Object

• A Responsibility Undertaken

• A Legal Detriment

Legal Detriment

• Detriment - The “bargained for exchange" in a contract, where the parties take on some responsibility that they are not legally obligated to undertake

• Consideration can also be satisfied through actions

• When a person assumes a legal detriment, this can also satisfy the requirement of a consideration

PepperCorn Theory

• The Peppercorn Theory states that something as insignificant as a little peppercorn can be sufficient consideration when given in exchange for a promise

• No matter how little the consideration is, whether it's a peppercorn or a penny, it is still sufficient consideration

• A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn

• E.g Chappell & Co Ltd v Nestle Co Ltd

Object

• Section 10 states that agreements are contract if made for lawful consideration and with lawful object

• Consideration and Object are different from each other

• Though Consideration and Objects are Different, certain difficulties are faced in practice in distinguishing the two

• Object means Purpose or Design

Lawful Object

• The Object for which an agreement is entered into should be lawful in order to enable the agreement to be enforceable by law

• A Lawful Object, in short, is one that is permitted by law, is definite and is possible of performance

• The agreement is void if the Object and the Consideration are not lawful

Unlawful Object• Object is unlawful if –

- It is forbidden by Law

- It is of such nature that, if permitted, it would defeat the provisions of any law

- It is fraudulent

- It involves or implies injury to the person or property of another

- If the Court regards it as immoral or opposed to public policy

Public Policy

• Course of action taken by a State

• Nature is Not Precisely defined

• Agreement that conflicts morals of time

• Contravenes established Interest of Society

• Injurious to Public welfare

Agreement against Public Policy

• Trading with an Enemy

• Stifling Prosecutions

• Waiver of Illegality

• Marriage brokerage contracts

Agreement against Public Policy

• Contracts interfering with course of justice

• Contracts tending to create interest against duty

• Contracts tending to create monopolies

• Agreements not to bid against each other

• Contract between pleader and client

Contracts Expressly Declared Void

• Under Section 10 of Contract Act, 5 agreements are expressly declared Void:– Agreement in Restraint of marriage– Agreement in Restraint of Trade– Agreement in Restraint of judicial proceedings– Ambiguous agreements– Agreements by way of wager

Wagering Contract: Contract to give money’s worth upon determination of an uncertain event

Exceptions : Contracts Expressly Declared Void

• Agreement in Restraint of Trade – Contract of Service– Sale of Good Will

• Agreement in Restraint of judicial proceedings– Arbitration

• Agreements by way of wager– Winning from horse race are not rendered unlawful

group 6_law ppt

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