Understand consideration as per Indian Contract Act

Consideration is one of the essential elements of a valid contract under the Indian Contract Act, 1872. It refers to the benefit or interest that one party receives or expects to receive from another party in exchange for a promise or an act. Consideration can be in the form of money, goods, services, forbearance, or anything else that has some value in the eyes of the law.

Consideration is one of the essential elements of a valid contract under the Indian Contract Act, 1872. It is defined in Section 2(d) of the Act as When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.

In simple words, consideration means something in return. It is the benefit or detriment that the parties exchange with each other in a contract. For example, A agrees to sell his car to B for Rs. 5 lakhs. Here, the car is the consideration for B and the money is the consideration for A.

There are some important points to note about consideration:

1. Consideration must be at the desire of the promisor. If a person does something voluntarily or out of natural love and affection, it is not a valid consideration. For example, A saves B's life without being asked by B. A cannot demand any reward from B for his act.
2. Consideration may be given by the promisee or any other person. This means that a stranger to the contract can also provide consideration, as long as there is privity of contract between the promisor and the promisee. For example, A owes money to B and C pays B on behalf of A. C can enforce A's promise to repay him.
3. Consideration may be past, present or future. Past consideration is something that has already been done or given before the contract is made. Present consideration is something that is done or given simultaneously with the contract. Future consideration is something that is promised to be done or given in the future. For example, A promises to pay B Rs. 10,000 if B delivers him a book next week. Here, A's promise is the future consideration and B's delivery is the present consideration.
4. Consideration must be real and not illusory. It must have some value in the eyes of law and not be vague, uncertain or impossible. For example, A promises to pay B Rs. 10,000 if B finds out whether it will rain tomorrow. This is not a valid consideration because it is uncertain and beyond human control.
5. Consideration need not be adequate but must be sufficient. This means that the law does not concern itself with the fairness or adequacy of the consideration, as long as it is something of value and agreed upon by the parties. However, it must be sufficient to support a contract and not be unlawful, immoral or opposed to public policy. For example, A agrees to sell his house to B for Rs. 1 lakh. This may be an inadequate consideration but it is valid as long as A consents to it freely.

There are many Indian case laws that illustrate the concept and application of consideration in contracts. Here I'm presenting some case law on Consideration as per Indian contract Act 1872.

1. Currimbhoy & Co. Ltd. v. L.A. Poonawalla (AIR 1954 Bom 423): In this case, the plaintiff company agreed to sell some shares to the defendant at a certain price, and also promised to pay him a commission of Rs. 2 per share if he could find a buyer for the remaining shares. The defendant found a buyer and claimed his commission, but the plaintiff refused to pay. The court held that the defendant was entitled to his commission, as he had done something at the desire of the plaintiff, which was a valid consideration for the promise.
2. Durga Prasad v. Baldeo (AIR 1934 All 620): In this case, A owed B Rs. 2000 and executed a mortgage in his favour. Later, A executed another mortgage in favour of C for Rs. 3000, out of which Rs. 2000 was paid to B to discharge the earlier mortgage. C sued B to recover his money, but B contended that he had not received any consideration from C, as he was already entitled to Rs. 2000 from A. The court held that B had received a valid consideration from C, as C had paid off A's debt to B, which was a benefit to B and a detriment to C.
3. Chinnaya v. Ramayya (ILR (1882) Mad 1): In this case, A transferred some land to B on condition that B would pay an annuity to A's daughter C. B agreed and promised to pay C accordingly. Later, B refused to pay C on the ground that he had not received any consideration from her. The court held that C could enforce B's promise, as she was a beneficiary of the contract between A and B, and A's transfer of land to B was a valid consideration for B's promise to C.