Final Up to date on Jun 2, 2025 by Aishika Banerjee
The Indian Contract Act states the principles for guarantees exchanged between two events. In case you promise one thing to a different individual, who assents to it, you each enter into an settlement. As soon as this settlement turns into enforceable by regulation, it turns into a legally binding contract.
In line with the Act, a contract has particular options and necessities that outline its existence. As an example, there should be free consent between the events and an intention to create a authorized obligation. Furthermore, there should be some consideration within the contract. This text will discover the definition of consideration, lawful object in contracts and different contractual obligations.
What’s Consideration?
Consideration in contract regulation is what makes the muse of a contract. An settlement with out consideration can not quantity to a legally enforceable contract. In line with the Indian Contract Act, 19872, consideration is one thing finished on the need of the promisor. As consideration, the promisor might ask the promisee or some other individual to do or abstain from doing one thing. This act of abstinence from it is called the consideration to the contract.
Allow us to perceive this in easier phrases with an instance.
Assume Mr. X sells his automotive to Mr. Y for Rs. 2,00,000. Mr. Y accepts the supply and agrees to pay him the quantity. The sum of Rs. 2,00,000 might be a legitimate consideration, making this settlement a contract.
To get into extra element, allow us to see the forms of lawful consideration to a contract.
What are the Forms of Consideration?
Consideration could also be of three sorts– previous, current, and future. These are defined as:
Previous consideration
Previous consideration is one thing that the promisee has already finished (or abstained from doing) earlier than coming into into any settlement. For instance, Mr. A supplied transportation to Mr. B in June. In July, Mr. B agreed to pay Mr. A Rs. 1,000 for the service. For the reason that act occurred earlier than promising to pay, it serves as previous consideration.
In lots of circumstances, additionally it is referred to as ethical consideration. Allow us to see how.
Assume that you’re driving if you witness an accident on the highway. You assist the injured individual and take them to a hospital. A couple of days later, as a token of appreciation, the individual presents Rs—2,000 on your assist and any expense you might have incurred. The make it easier to prolonged is taken as previous consideration.
Current or executed consideration
That is if you present the promisor with the consideration concurrently whereas coming into right into a contract. This type of act is at all times finished (or not finished) in response to an settlement with one other celebration.
For instance, you purchase fruits from a vendor and instantly pay him the worth. This cost is taken as executed or current consideration.
Future or executory consideration
Future consideration is when the promisor, promisee, or each transfer the act to a future date. It signifies that the events haven’t but carried out their obligations.
As an example, you buy a automotive from a showroom, which might be delivered subsequent week. You comply with pay the vendor when the automotive arrives. This suggests that there’s a contract between you and the vendor, with a future consideration.
Numerous components make the consideration legitimate. Allow us to get into the small print.
What are the Necessities of a Legitimate Consideration?
The next issues are required for authorized validity of contracts:
The consideration should transfer on the need of the promisor
This suggests that the consideration will solely be legitimate when the promisor has requested it. Successfully, any act finished voluntarily doesn’t represent legitimate consideration. For instance, for those who assist an individual discover his lacking pockets after which ask for a reward, he’s not certain to pay you. The make it easier to supplied was voluntary and never requested for by the individual.
The consideration might transfer from the promisee to some other individual
It’s not crucial for the promisee to produce the consideration. It might transfer from some other individual. Even in case you are a stranger to consideration, you may sue so long as you’re a celebration to the contract.
The consideration should be lawful
An unlawful consideration just isn’t legitimate and makes the contract void. The Act declares consideration as illegal if it’s a forbidden act below any contract regulation necessities, if it causes damage to an individual or his property, or whether it is immoral.
The consideration should be actual and potential
An not possible act can’t be labeled as legitimate consideration. No matter is determined and agreed to as consideration should be able to being carried out. Impossibility could also be authorized or bodily. Furthermore, the consideration should not be unsure.
The consideration will not be ample
The Indian regulation states that adequacy of consideration just isn’t crucial. The events are free to cut price. A poor negotiation by one celebration doesn’t make the contract void. Nevertheless, the choice should be made with the free consent of each events. For instance, you promote your books value Rs. 1,000 for Rs. 200 as per your want. You can not legally declare this as insufficient consideration later.
Significance of Consideration in a Contract?
The Indian Contract Act, 1872 clarifies that any contract with out consideration is void. It’s important as a result of it creates an obligation on each events to satisfy their guarantees. If it isn’t current, the burden on the events will not be sufficient to make sure the completion of the contract.
Nevertheless, there are exceptions to this rule. Right here is how they’re labeled.
Can there be Contracts With none Consideration?
Regardless that the Act deems consideration as crucial, there are circumstances the place you may enter into legitimate contracts with out consideration. These are:
- When the settlement is out of pure love and affection. That is between events who’re intently associated. The settlement needs to be in writing.
- When somebody offers voluntary providers for an additional individual’s profit. The primary situation is that the act should be finished in gratitude, not for private profit. Secondly, the promisor’s intent should be to compensate the promisee. The settlement could also be oral or written.
- A promise to pay a time-barred debt will also be with out consideration. Nevertheless, the settlement should be in writing.
- If it’s a contract to create an company.
- If the promise is to provide an entire present.
In Conclusion
Consideration is a vital factor of a legitimate contract. With out it, the contract is void and thus can’t be topic to contract enforceability. It is very important notice that if you enter right into a contract, you need to have a legitimate consideration, adequacy of which is immaterial. It might be an act finished prior to now, current, or future.
