Chapter 1: The Indian Contract Act, 1872

UNIT-2: CONSIDERATION

After studying this unit, you would be able to understand-

♦ Understand the concept of consideration, its importance for a contract and its double aspect.

♦ Clearly understand how consideration may move from a third party and how this makes the contract valid.

♦ Learn about the peculiar circumstances when a contract is valid even without consideration.

♦ Be aware of the rule ‘A stranger to a contract cannot sue’ and exceptions thereof

SUMMARY

The students may note that:

(a) Consideration is a price for the promise of the other party and it may either be in the form of ‘benefit’ or some ‘detriment’ to the parties.

(b) Consideration must move at the desire of the promisor.

(c) It may be executed or executory.

(d) Past consideration is valid provided it moved at the previous request of the promisor.

(e) It must not be something which the promisor is already legally bound to do.

(f) It may move from the promisee or any third party.

(g) Inadequacy of consideration is not relevant.

(h) Consideration must be legal.

(i) The general rule of law is “No Consideration, No Contract” but there are a few exceptional cases where a contract, even though without consideration is valid.

(j) “Stranger to a contract can’t sue but in some exceptional cases the contract may be enforced by a person who is not a party to the contract.