Why is Consideration Necessary?

Existence of consideration in a promise implies that the parties to the agreement are serious to create legal obligation. The law does not recognize an agreement to do something without any compensation. According to Blackstone: “The law supplies no means nor affords any remedy to compel the performance of an agreement made without consideration.

If I promise a man to give Rs. 100 for nothing, he neither doing nor promise has no force in law.” Therefore, a consideration of some sort or other is so necessary to the forming of a contract, that a nudum pactum, or agreement to do or pay something on one side, without any compensation on the other, will not at law support an action, and a man cannot be compelled to perform it. According to Pollock, “Consideration is the price for which the promise of the other is bought.” Hence, no consideration, no contract, is the general rule.

Meaning and Definition of Consideration :

Consideration, literally, means something in return. It is used in a technical sense of quid pro quo. In the words of Pollock, “Consideration is the price for which the promise of the other is bought and the promise thus given for value is enforceable. When a transaction takes place, each party gets something. This something is called consideration.”

Example:

A purchases a pen from B for Rs. 5. In this example, A is getting a pen and B is getting Rs. 5. For A, the consideration is the pen and for B, the consideration is Rs. 5.

Consideration need not always be something in return. It may even take the form of some loss or responsibility suffered by one party and benefit or profits etc. to the other party.

“A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other,” [Currie v. Misa.]

There are two leading cases which clearly explain the law on consideration:

A person promised to pay Rs. 500 to the Secretary of a Mosque Committee for the repairs of the mosque. When the person who made the promise refused to pay Rs. 500, the Secretary filed a suit to recover the amount. The Court held that there was no consideration and the Secretary could not recover anything. [Abdul Aziz v. Mazum Ali]

In the second case, K was the Secretary of a Town Hall. He approached G to give some donation for the construction of a Town Hall at Howrah. G promised to give Rs. 100 for the same. On the faith of the promise, the Secretary engaged the contractors and thus incurred a liability to pay them. G refused to pay the amount of Rs. 100, as promised. Thereupon, the Secretary filed a suit for the recovery of the amount.

There was no return of Rs. 100. But the Court held that there was sufficient consideration in as much as the Secretary incurred a liability to pay the contractors on the faith of the promise made by G. Hence, G was liable to pay to the extent of the liability incurred subject to a maximum of Rs. 100. [Kedar Nath v. Gori Mohammed]

The second case is more or less similar to the first case except that in this case, the plaintiff had incurred liability on the faith of the promise made by the defendant. Hence, in this case the Court held that there was consideration.

Thus, from the two cases discussed above, it would be clear that there must be consideration either in the sense of something in return or in the sense of some benefit or interest to one party, or detriment, or loss or responsibility given, suffered or undertaken by the other.

Now let us examine the definition of “consideration” given in the Indian Contract Act.

Sec (2) D Defines ‘Consideration’ as Follows:

“When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstain from doing or promises to do or to abstain from doing something, such act or abstinence, or promise is called a consideration for the promise.”

From the above definition, consideration means an act done by the promisee or any other person at the request of the promisor.

Example:

A agreed to pay Rs. 20 to a tailor for stitching his pant.

Consideration may be an abstinence or forbearance. It may be positive or negative, i.e. to do or not to do something.

Example:

A’s scooter is damaged by B’s negligence in driving his car. B promises to pay Rs. 20 for the damage if A does not sue him in the Court to recover this loss.

Here B gives consideration for A’s abstinence or forbearance.