The Indian Contract Act of 1872 provides the fundamental framework for legally binding agreements in India. It still controls how contracts are made and then carried out in the country and was passed during the British colonial era. One of the most important elements of a legitimate contract is consideration, which is essentially based on the principles of legally binding contracts.
A contract that is supported by adequacy of consideration that binds the parties to their obligations and is legally binding. In the absence of payment, such an agreement would be legally void and considered essentially gratuitous. One party may profit at the expense of the other through consideration.
What is Consideration in Contract Law?
- Section 2(d) of the contract law section defines consideration. The consideration meaning, states that consideration of the promise is defined as an act, promise, or refraining from doing something at the promisor’s request by the promisee or any other person.
- As a result, consideration in Indian contract act is essentially the sum of money paid in exchange for the two parties fulfilling their agreements. In this instance, the proposal is made by the promisor and accepted by the promisee.
Consideration in Indian Contract Act: Essentials
- Only the promisor may request a change in consideration.
Assume, for example, that A purchases a watch from B. But rather than giving A consideration, C gives it to B. This contract is valid in accordance with Section 2(d) of the Indian Contract Act, which says that the promisee or any other person can offer consideration.
- Promisee’s or any other person’s consideration
Assume, for example, that A purchases a watch from B. But rather than giving A consideration, C gives it to B. This contract is valid in accordance with Section 2(d) of the Indian Contract Act, which says that the promisee or another individual may provide consideration.
What is Legal Consideration in a Contract?
- The benefit that each party to a contract receives is referred to as consideration in law.
- This is frequently a payment made in return for products or services.
- However, consideration need not always be monetary; it can also take the form of anything valuable that is received as part of a contract, such as labor or equipment.
What is an Example of consideration in a contract?
Here is an example of consideration in a contract:
- In accordance with their agreement, B consents to offer A these services in return for A giving B Rs 20,000 to force B to shift employment. In this instance, B’s consideration is the money, and A’s consideration is the services that B renders.
- If Y offers the opportunity to paint a picture for X at his request and for a particular price, then the painting would be considered consideration moving from Y and the money will be considered consideration going from X.
What is a Good Consideration in Contract Law?
- Even if it is extremely little, it must have some worth in order to be a favorable consideration.
- This means that the value must be sufficient but need not be adequate when the parties exchange it that way.
What is a Valuable Consideration in Contract Law?
- As a result, valuable consideration is frequently used to assess whether a contract is legitimate by assessing whether the consideration is “valuable” in any sense, not just monetary, to one or both parties.
- A valid contract requires consideration to be “sufficient.”
- An important consideration is one that the parties would and have valued in asking for and/or accepting it, not necessarily one that a market would value.
Consideration in Indian Contract Act: Important Judgments
- In the Ramachandra Chintaman v Kaluraju case, the counsel was guaranteed a certain amount of money should the litigation be successful. It was determined that the vow was null and void for want of thoughtfulness. According to the provisions of the initial contract, the advocate had an obligation to use his best efforts from the outset.
- The court held Mr. Raghunath M.G. v Sri D.N. Badriprasad that, Section 25 of the Indian Contract Act 1872 declares that an agreement without consideration is void, subject to the exemptions mentioned in the challenged portion. The accused was notified that there existed a three-year statute of limitations for returning a loan transaction, but he disregarded it, the court found based on the prosecution witnesses’ depositions.
A valid contract needs to be supported by consideration in Indian Contract Act. Without it, the agreement is void and unenforceable, and it cannot be enforced. Consideration needs to be sufficient, significant, and unconditional in order to be accepted. If something is truly considered, it shouldn’t be illegal or unfeasible. Remember that regardless of its value, you have to give a legitimate consideration in order to enter into a contract. It might be an act from the past, present, or future.
Consideration in Contract Law FAQs
1. Why consideration is essential in a contract?
The other party has the duty of providing the consideration, which is the advantage of the contract for one party (for example, getting money). A contract cannot be legally binding if neither party gives the other any consideration. As a result, gratuities are not legally enforceable.
2. Is consideration necessary in every contract?
Consideration is the performance, promise, or forbearance that a promisor agrees to in exchange for their pledge. Consideration is a contract’s essential element. In the absence of mutual consideration, a contract is unenforceable.
3. What must always be considered for a contract?
For consideration to be considered valid, it must have: Legally sufficient value is defined as each party’s consideration having to be equal in value, without including any criminal activity or situations in which doing so is already required by law. agreed upon both sides consent to acquire a disadvantage as well as a benefit.
4. What are the benefits of consideration?
By guaranteeing that both parties gain something worthwhile from participating in the agreement, it stops parties from making hollow promises or taking advantage of others.
5. Can consideration be modified in a contract?
Usually, one party defines consideration as financial gain. Whenever you wish to amend a contract, you usually need to provide a new advantage to both parties. The benefit may take the form of money or another agreed-upon benefit between the parties.
6. What is adequate consideration?
According to contract law, a fair and agreed-upon exchange of value is adequate consideration. All parties involved must be aware of the agreement’s definition and purpose.
7. Is nominal consideration valid?
It is up to the parties to determine the subjective value of each promise, therefore nominal compensation will serve as adequate consideration for a contract. Courts will not assess the appropriateness of the consideration.
8. What is an illegal consideration in a contract?
It entails or suggests harm to another person’s person or property, or the court finds it to be immoral or against public policy.
9. Is consideration sufficient or adequate?
Only when there is a purposeful exchange between the parties is consideration present. Though it need not be sufficient, thought must be given.
10. Does consideration must be real?
The consideration must be genuine, capable, and legally significant. For instance, if B gives A Rs. 1000/-, A will bring B’s deceased wife back to life. Since it is physically impossible for A to fulfil her commitment, there is no true consideration.
11. What is immoral consideration?
Anything provided or promised in return for a promise that is deemed insulting to societal norms is referred to as an immoral consideration. This kind of compensation is typically invalid and can render a contract voidable or unenforceable.
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