Doctrine of Consideration” (sometimes learners pronounce it close to “concentration”). This is a fundamental doctrine under the Indian Contract Act, 1872 and English Contract Law. Let’s go step by step:
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Doctrine of Consideration
Meaning
The word consideration means “something in return” (also called quid pro quo).
When two parties make an agreement, each must give something and get something in return.
Without consideration, a promise is generally not enforceable in a court of law.
? Section 2(d) of the Indian Contract Act, 1872 defines consideration:
> “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 abstain from doing something, such act or abstinence or promise is called consideration for the promise.”
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Essentials of Valid Consideration
1. Must move at the desire of the promisor
The act or abstinence that forms consideration must be done at the request of the promisor.
Example: If A saves B’s child from drowning voluntarily, and later B promises to pay A ₹5,000, there is no consideration because A did not act at B’s desire.
2. May move from promisee or any other person
Consideration can be provided not only by the promisee but also by a third person.
This is a key difference between Indian and English law.
Example: If A promises B to pay ₹10,000 if C (B’s son) marries D, and C marries D, the contract is valid even though C provided the consideration.
3. Can be past, present, or future
Past consideration: An act done before the promise is made. (Valid in India, not in English law).
Present consideration: An act done simultaneously with the promise.
Future consideration: A promise to do something in the future.
Example: A supplies goods to B at B’s request. Later B promises to pay A ₹5,000. This is past consideration and valid in India.
4. Must be real and lawful
Consideration must be possible, not imaginary or illegal.
Example: A promises B to bring a star from the sky; this is impossible, hence no valid consideration.
5. Need not be adequate, but must have value in the eyes of law
The courts do not judge adequacy; even something small is valid if freely agreed.
Example: If A agrees to sell a house worth ₹50 lakhs to B for ₹5 lakhs, the contract is valid if consent is free, though the price is inadequate.
6. Must not be illegal, immoral, or against public policy
Any unlawful object or consideration makes the contract void.
Example: A promises to pay B ₹10,000 if B beats C. This is unlawful consideration.
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Exceptions: When a Contract without Consideration is Valid (Sec. 25, ICA 1872)
1. Agreements made out of natural love and affection – If in writing and registered.
Example: Husband promises to transfer property to wife.
2. Compensation for voluntary services – A promise to compensate someone who voluntarily did something for the promisor.
3. Promise to pay a time-barred debt – If in writing and signed by the debtor.
4. Completed gift – Once a gift is made, it cannot be challenged for lack of consideration.
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Example from Current Scenario
Suppose a startup founder (A) promises to transfer 5% equity to an investor (B) in exchange for ₹10 crores.
B’s payment of ₹10 crores is the consideration for A’s transfer of shares.
A’s transfer of equity is the consideration for B’s investment.
? Both give and take something of value.
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✅ Conclusion
Consideration is the foundation of enforceable contracts.
Essentials: Must move at promisor’s desire, may move from promisee/other, can be past/present/future, must be real, lawful, and have legal value.
Exceptions exist where even without consideration, contracts are valid.
