Consideration: The Essential Characteristic of Consideration
Consideration: The Essential Characteristic of Consideration
How does consideration work in the real world? Let's say you backed into your
neighbor's golf cart and damaged it. Your neighbor is legally permitted to sue you for
the damage but instead agrees not to sue you if you pay him $1,000. This agreement
provides adequate consideration for the contract, because each party is giving up
something in the exchange -- you're giving up some of your money while your
neighbor is giving up the right to sue you.
1. a promise to do something
Tweddle Vs. Atkinson The plaintiff was to be married to the daughter of one G and in
consideration of this intended marriage G and the plaintiff ‘s father entered in to a
written agreement by which it was agreed that each would pay the Plaintiff a some of
money. G failed to do so and the plaintiff sued his executors. Whitman J considered it
to be an established principle that a person can not take advantage of a contract, who
is stranger to the contract.
3. It may be Past, Present or Future: the word used in Section 2(d) are”… has done or
abstained from doing (Past), or does or abstains from doing (Present), or promises to
do or to abstain from doing (Future), something,”
Past consideration: when the consideration by the party for the present promise was
given in the past, i.e., before the date of promise, it is said to be past consideration.
Present consideration: when consideration is given simultaneously with promise, i.e.,
at the time of the promise, it is said to be present consideration. E.g., cash sale.
Future consideration: when consideration for one party to the other is to pass
subsequently to the making of the contract, it is future consideration.
5. It must be real:
although consideration need not be adequate, it must be real and of some value in the
eye of law. There is no real consideration in the following cases:
Physical impossibility: A promises to put life into B’s dead wife on the consideration
of Rs.999. A’s promise is physically impossible to perform.
Legal impossibility: A owes Rs.500 to B. he promises to pay Rs.50 to, C the servant
of B, who in return promise to discharge A from the liability. This is legally
impossible, because C cannot discharge A from the debt due to B.
Uncertain consideration: A engages B for doing a certain work and promises to pay a
“Reasonable some”. There is no recognized method of ascertaining the “Reasonable
Some”.
6. It must be lawful:
the consideration given for an agreement must not be unlawful. A consideration to the
contract must not be against Public Policy, Immoral and illegal.
7. It must be something which the promisor is not already bound to do: a promise to
do what one is already bound to do, either by general law or under an existing
contract, is not a good consideration for the new promise, since it adds nothing to the
pre-existing legal or contractual obligation.
CL: There was a promise to pay to the vakil an additional sum if the suit was
successful.
Held, the promise was void for the want of consideration. The vakil was under a pre-
existing contractual obligation to render the best of his services under the original
contract.
In some situations, courts will step in and declare that a contract is unenforceable
because it lacks consideration. Let's look at some of these scenarios.
One of the parties was already legally obligated to perform. For example, a police
officer cannot claim the reward for capturing a wanted suspect, because the officer is
already legally obligated to capture and arrest people who break the law.
The promise amounts to a gift, not a contract. If your rich uncle promises to give
you money to buy a house, without any strings attached, that is a promise to make a
gift. If he changes his mind, you can't force him to come up with the cash because his
promise was one-sided; you have not done or promised to do anything in exchange.
On the other hand, if you make a down payment on a house in reliance on his
promise, and your uncle knows about it, a court may enforce his original promise.
Although it still isn't a true contract, the law recognizes that it's necessary to hold
people to their promises once others take action on the assumption that the promise
will be kept. This legal theory -- called "promissory estoppel"-- treats promises as
contracts if the promise was reasonably relied upon.
Many contracts provide a recital (a statement at the beginning of the contract) that the
contract is being entered into "for good and valuable consideration, the sufficiency of
which is acknowledged," or something to that effect. The writers of these contracts
mistakenly believe that simply stating that consideration exists actually fulfills the
requirement of contractual consideration. In a majority of states, however, this is not
the case; such recitals don't prove anything. In other words, saying there is
consideration doesn't necessarily mean there is consideration.
Legal scholars agree that generally, a contract doesn't need to include anything other
than a statement that "the parties agree." The exception is for contracts that only one
party signs, such as assignments, option agreements, or promissory notes. In these
contracts, a recital that the consideration is sufficient should be included, because it's
not self-evident that a bargained-for exchange has taken place.