January 18, 2024
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The basic structure of binding agreements in India is the Indian Contract Act of 1872. It was enacted during the time of British colonialism and still governs how contracts are created and then carried out in the nation. Consideration, which is fundamentally rooted in the foundation of binding contracts, is one of the essential components of a valid contract.

When a contract is backed by consideration, it becomes legally enforceable and binds the parties to their commitments. Without remuneration, such an agreement would count as essentially gratuitous and void in accordance with the law. One party may profit by consideration at the expense of the other.

consideration in indian contract act: About

  • consideration in contract law section defines it under Section 2(d). According to the statement, an act, promise, or refraining from doing something at the promisor’s request by the promisee or any other person is referred to as consideration of the promise.
  • Therefore, the amount paid for the fulfilment of the agreements made between the two parties is essentially the consideration. In this instance, the proposal is being made by Promisor, and the proposal is being accepted by Promisee.

consideration in contract law example

  • Under the terms of their agreement, A pays B Rs 20,000 to have B relocate his workplace, and B agrees to supply A with these services. In this case, the money is the consideration for B, while the services that B provides are the consideration for A.
  • If Y offers to paint a picture for X at his request and at a predetermined fee, the painting would be considered consideration moving from Y and the payment would be considered consideration moving from X.

consideration in indian contract act: Essentials Ingredients

The consideration must proceed at the promisor’s request:

  • This suggests that the consideration won’t be considered legitimate unless the promisor makes that request.
  • In other words, voluntary actions do not qualify as legitimate consideration.
  • For instance, you are not obligated to pay someone if you assist them in finding their misplaced wallet and then want a compensation. You helped someone out of the blue and without their request.

Consideration may come from the promisee or any other individual:

  • It implies that it doesn’t matter who provides the promise as long as it is given due respect.
  • If the promisor has no objections, it can relocate from the promisee or from anyone else.
  • For instance, in the scenario when A buys a watch from B and C pays him the consideration, A does not. This contract is valid in accordance with Section 2(d) of the Indian Contract Act, which says that the promisee or any other individual may provide consideration.

The consideration needs to be legitimate and lawful:

  • A contract that contains an illegal consideration is null and void.
  • The Act defines a concept as illegal if it violates any legal prohibitions, harms a person or his property, or is immoral.

The consideration ought to be reasonable and genuine:

  • It is impossible to classify an impossible deed as a legitimate consideration.
  • Anything that is decided upon and accepted as consideration ought to be able to be carried out.
  • One can be physically or legally impossible. Furthermore, the factor in question must be certain.

The amount of consideration might not be adequate:

  • According to Indian law, adequate deliberation is not required. Parties are allowed to negotiate.
  • A party’s bad bargaining does not render the agreement null and void. But both parties must freely consent to the choice being made.
  • For instance, you can choose to sell your books, which are worth Rs. 1,000, for Rs. 200. Legally, you cannot later argue that this was insufficient consideration.

consideration in indian contract act: Case Rulings

  • In the case of Ramachandra Chintaman v Kaluraju, a sum of money was promised to the advocate in the event that the lawsuit was successful. Held, for lack of contemplation, the pledge was null and invalid. The advocate had a pre-existing duty under the terms of the original contract to provide his best services.
  • In the case of Mr. Raghunath M.G.v Sri D.N. Badriprasad, the court determined that an agreement without consideration is null and void under portion 25 of the Indian Contract Act 1872, with the exceptions listed in the contested portion. The accused was told there was a three-year statute of limitations to return a loan transaction, but he disregarded it, the court decided based on the prosecution witnesses’ depositions.

A legitimate contract must have consideration. The contract is null and invalid without it, and it cannot be enforced. For consideration to be valid, it must be sufficient, meaningful, and unconditional. Genuine consideration means that it ought not to be impractical or against the law. It is crucial to remember that you need a legitimate consideration, the amount of which is irrelevant, in order to enter into a contract. It could be a past, current, or future deed.

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