Importance of Consideration
Importance of Consideration
This Act came into force on 1st September , 1872 and is called the contract
act 1872.The legislative intent behind its legislation is to ensure that
contractual obligations must be performed .it provides terms and conditions
for the validity of the contracts but leaves the form and the conditions of
contract to be mutually settled by the contracting parties.
What is enforceability?
Essentials of a contract
Contract
Section 2(a)
“When one person signifies to another his willingness to do
or to abstain from doing anything, with a view to obtain the
assent of that their to such act or abstinence, he is said to
make a proposal.”
Acceptances
“when the person to whom the proposal is made signifies His assent
thereto ,the proposal is said to be accepted. A proposal when accepted
becomes a promise.”
Example
Mr. A offers Mr. X to purchase a Car and tell all the terms and conditions
afterward Mr. X signifies his Assent to purchase a car it is called
acceptances
Consideration:
“Something which is given and taken.”
Section 2 (d) of the Contact Act1872:
Definition:
Importance of consideration
Executed consideration
consideration is an act in return for a promise. If ,
for example, A offers a reward for the return of lost property, his promise
becomes binding when B performs the act of returning A’s property to him.
A is not bound to pay anything to anyone until the prescribed act is done.
C’s act in Carlill’s case in response to the smokeball’s company’s promise
of reward was thus executed consideration.
Executory consideration
consideration is a promise given for a promise. If,
for example, customer orders goods which shopkeeper undertakes to obtain
from the manufacturer, the shopkeeper promises to supply the goods and the
customer promises to accept and pay for them. Neither has yet done
anything but each has given a promise to obtain the promise of the other. It
would be breach of contract if either withdrew without the consent of the
other.
Both executed and excutory consideration is provided at the time when the
promise is given; the act required as executed consideration is given
subsequently (eg the return of lost property). Anything which has already
been done before a promise in return is given is past consideration which
as general rule is not sufficient to make the promise binding. In such a case
the promisor may by his promise recognize a moral obligation (which is not
consideration), but he is not obtaining anything in exchange for his promise
(as he already has it before the promise is made).
The promise was made after the sale had been concluded and was
unsupported by fresh consideration.
In three cases past consideration for a promise does suffice to make the
promise binding.
• After six (or in some case twelve) years the right to sue for recovery of a debt becomes
statute-barred by the Limitation Act 1939. if , after that period, the debtor makes written
acknowledgement of the creditor’s claim, it is again enforceable at law. The debt, although
past consideration, suffices.
• When a request is made for a service this request may imply a promise to pay for it. If, after
the service has been rendered, the person who made the request promises a specific reward,
this is treated as fixing the amount to be paid under the previous implied promise rather than
as a new promise.
Essentials of a valid consideration:
The essentials of valid consideration are as under:
The valid consideration is that consideration needs not to move from the
promise alone but may proceeds from a third person. This means that even
stronger to the consideration can sue on a contract.
Exceptions:
1: Trust:
In case of trust, the beneficiary can sue to enforce his rights under the trust,
though he was not a party to the contract between the settler and the
trustees.
2: Charges:
A person in whose favour a charge in same specific immovable property has
been created may enforce it. Though he may be a stranger to the contract
creating the charge.
3: Family settlements:
4: Agent:
Where a person act as a agent for his principal , the principal can sue on a
contract though he is not a party to a contract.
5:Agency:
6:Assignment:
The words “has done or abstained from doing (past) or does or abstains from
doing or promises to do (present) or to abstain from doing (future)” It
indicates which has already been done at the desire of the promise or in
progress or is promised to be done in future.
1: Positive or Negative:
It’s may consists of either a positive act or an abstinence i.e a negative act.
2:Past Consideration:
When the act has been done before means its show its past consideration
3:Present:
4:Future:
1- Physical Impossible
2- Legally
3- Uncertain Consideration
4- Illusory Consideration
The court will also seek to ensure that a particular act or promise can
actually be seemed to be consideration. Learn these rules:
Adequacy:
It is presumed that each party is capable of serving his own interests, and the
courts will not seek to weigh up the comparative value of the promises or
acts exchanged.
Decision:
Compliance with the husband’s wishes was not valuable
consideration (no economic value attached to it), but the nominal rent was
sufficient consideration.
Sufficiency:
The Facts:
As a sales promotion scheme, the defendant offered to supply a record to
anyone who sent in a postal order for 1s.6d and three wrappers from 6d bars
of chocolate made by them. The claimants owned the copyright of the tune.
They sued for infringement of copyright. In the ensuing dispute over
royalties the issue was whether the wrappers, which were thrown away when
received, were part of the consideration for the promise to supply the record.
The defendants offered to pay a royalty based on the price of 1s.6d per
record, but the claimants rejected this, claiming that the wrappers also
represented part of the consideration.
Decision:
The wrappers were part of the consideration as they had commercial value to
the defendants.
• As stated earlier, forbearance or the promise of it may be sufficient
consideration if it has some value, or amounts to giving up
something of value.
“English law recognizes only two kinds of contracts, the contract made by
deed that is under seal, which is called a deed or specially and the simple
contract”
A promise to compensate a person who has already done something for the
promisor is enforceable. It is important to note that the service should have
been rendered voluntarily.
It was held in Sindha v Abraham (1895) that services rendered at the desire
of the minor expressed during his minority and continued at the same
request after his majority from a good consideration for a subsequent
promise by him in favour of the person who rendered the services.
A time barred debt is one which cannot be recovered from the debtor
through the court of law, because, the limitation law helps the vigilante not
the indolent. However, the section 25(3) of the law of contract states that
where there is an agreement, made in writing and signed by the debtor or by
his authorized agent to pay a debt barred by the law of Limitation, the
agreement is valid even it is not supported by consideration.
A contract whereby one contracting party agreed with the other party to give
something as gift against no reciprocal consideration is valid and
enforceable. The section 25-explanation 1, states that a gift does not require
reciprocal consideration to be valid and enforceable. Any gift made and
possession delivered will be binding between the contracting parties i.e.,
donor and donee.
In order to make a valid gift the following essentials are considered
necessary:
i. Capacity of donor
ii. Intention of donor to make gift
iii. Intention of possession of the gift property
iv. Acceptance of gift by the donee.
SOURCES:
BIBLIOGRAPHY:
Net Resources
Business Law
Resource person
Mr.Rehan Aziz Sherwani
Assignments
Submitted by
Sabahat Javeed
084232068