Contract Law
Consideration Guided by- Prof. Eqbal Husain
Submitted by – Heba Rahman
It is my imperative duty to thank the following people for the successful completion of my Contract law project, - Professor Eqbal Husain for the clarity he brings into teaching thus enabling us to have a better understanding of his subject. I also feel obliged to thank him for providing us with such wonderful topics to choose from. -
FEED UR FRIENDS NAME, My resourceful classmate, who I ran into in the library, thus un-expectedly starting and successfully completing a rough handwritten draft of this project within the next days. !hough it is possible for our language to seem similar, it has to be noted that given some of our group member"s insistence on not depending on one single book led to all of us giving in e#ual contribution to the completion of this project.
- !he very cooperative and friendly staff members in the Central and $aw $ibrary who were instrumental in our finding the necessary books without wasting much time. It has to be noted that their contribution is essential as our %niversity is yet to get a fully functional centrali&ed database for its libraries.
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Contents 1. Free Consent…………………………………………………………………… …………………………4 2. Coercion…………………………………………………………………… ……………………………….5 3. Features of Coercion…………………………………………………………………… ……………..5 4. Act forbidden by IPC…………………………………………………………………………… ……..6 5. Una!fu detention of Pro"erty………………………………………………………………….6 6. #uress and #i$erence bet!een Coercion % #uress……………………………………& '. Case a!s………………………………………………………………………… …………………………( &. Undue In)uence…………………………………………………………………… ………………….1* (. +$ects of Undue In)uence…………………………………………………………………… ….11 1*. +ssentias of Undue In)uence……………………………………………………………….....1 1 11. Fraud………………………………………………………………… ……………………………………..15 12. Fase ,tate-ents of Facts………………………………………………………………………… 16 Page | 3
13. Actie Concea-ent……………………………………………………………… ………………….16 14. /ere ,ience is no fraud………………………………………………………………………… ..1' 15. +0ce"tion…………………………………………………………… …………………………………….1& 16. +e-ents of fraud………………………………………………………………………… …………..24 1'. /isre"resentation………………………………………………… …………………………………25 1&. #i$erence bet!een Fraud and /isre"resentation……………………………………26 1(. +e-ents of /isre"resentation……………………………………………………… ………..34 2*. +0ce"tions………………………………………………………… ……………………………………..34 21. /istae……………………………………………………………… …………………………………….34
Introduction to Contract La Page | 4
!"at is La#
Law means a set of rules! which "o#erns our beha#iours and relatin" in a ci#ili$ed society. So there is no need of Law in a unci#ili$ed society. %hy Should &ne 'now Law( &ne should )now the law to which he is sub*ect because i"norance of law is no e+cuse. Meanin$, contract is an a"reement made between two /or0 more
1arties which the law will enforce.2 3efinition, ccordin" to section 4/h0 of the 5ndian contract act6 7894. n a"reement enforceable by law is a contract. ccordin" to SL:&;36 a contract is n a"reement creatin" and definin" obli"ations between the 1arties2.
5ntroduction to Consideration Page | 5
:eanin", Consideration is a quid 1ro quo i6e somethin" in return it may be – • •
some benefit ri"ht6 interest6 loss or 1rofit that may accrue to one 1arty or6 some forbearance6 detriment6 loss or res1onsibility suffered on underta)en by the other 1arty7
ccordin" to Sir Frederick Pollock 6 'consideration is the price for which the promise of the other is bought and the promise thus given for value is e nforceable.( Consideration is a technical term used in the sense of quid-1ro-quo /i.e..6 somethin" in return0. %hen a 1arty to an a"reement 1romises to do somethin"6 he must "et somethin" in return. ,- when at the desire of the Promisor6 the 1romise or any other 1erson. a. has done or abstained from doin" 6 or =Past consideration> b. does or abstains from doin"6 or =Present consideration> c. 1romises to do or abstain from doin" somethin" =?uture consideration > such act or abstinence or 1romise is called a consideration for the 1romise. E%a&'le a( P! a""ress to sell his car to @! for Rs.AB6BBB Here @!s Promise to 1ay RsAB6BBB is the
consideration for P!s 1romise and P!s 1romise to sell the car is the consideration for @!s 1romise to 1ay Rs.AB6BBB. b( ! 1romises his debtor ! not to file a suit a"ainst him for one year on !s a"reein" to 1ay him Rs.7B6 BBB more. Here the abstinence of ! is the consideration for !s Promise to 1ay. Consideration is needed for the formation and #ariation of a contract.
1 Currie #. :ussa, Lush D - #aluable consideration in the eyes of the law may consist either in some ri"ht6 interest6 1rofit or benefit to one 1arty6 or some forbearance6 detriment6 loss or r es1onsibility "i#en6 suffered or underta)en by the other .2
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E%ecutor) consideration , Consideration is called e+ecutor where there is an e+chan"e of
1romises to 1erform acts in the future. ?or e+am1le6 a bilateral contract for the sale of "oods wherein 1romises to deli#er "oods to at a future date and 1romises to 1ay on deli#ery. E%ecuted consideration ,
the consideration. 5f one 1arty ma)es a 1romise in e+chan"e for an act by the other 1arty6 when that act is com1leted6 it is e+ecuted consideration. Howe#er6 this label is also used to describe the situation where6 in a bilateral contract6 one 1arty has 1erformed as 1er his 1romise – in the abo#e e+am1le it would be when deli#ers the "ood to . Past consideration, Consideration that comes before the 1romise. 5f one 1arty #oluntarily
1erforms an act and the other 1arty then ma)es a 1romise6 the consideration for the 1romise is said to be in the 1ast. Past consideration is not a #alid form of consideration. It &ust &o*e at t"e desire of t"e 'ro&isor+
5n order to constitute a le"al consideration6 the act /or0 abstinence formin" the consideration for the 1romise must mo#e at the de sire /or0 request of the 1romisor. 5f it is done at the instance of a third 1arty /or0 without the desire of the 1romisor6 it will not be a #alid contract. It &ust not be ille$al, i&&oral or- not o''osed to 'ublic 'olic)+ •
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o11osed to 1ublic 1olicy. %here it is unlawful6 the court will not allow an action on the a"reement.
It need not be adequate+
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Consideration need not be any 1articular #alue. 5t need not be a11ro+imately equal #alue with the 1romise for which it is e+chan"ed. ut
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it must be somethin" which the law would re"ard as ha#in" some #alue. 5n other words consideration6 as already e+1lained6 it means somethin" in return2.
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means somethin" in return need not be necessarily be an equal in #alue to somethin" "i#en2.
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Consideration must be sufficient /of economic #alue0 but need not be adequate.4 •
Past consideration is not "ood consideration.
E+ce1tion, 3octrine of im1lied assum1sit.F Consideration must mo#e /come0 from the 1romise.A ;ote there is no equi#alent requirement that consideration must mo#e to the 1romisor . Consideration must not be somethin" the 1romisee is already bound to do, •
Le"al 3uty.9
E+ce1tion, Performance e+ceeds le"al duty.8 •
Contractual 3uty.
E+ce1tion 7, Performance e+ceeds contractual duty.7B
2 Cha11ell # ;estle I %hite # luett 3 Re:crdle 4 Lam1ei"h # raitwait I Pau &n # Lau Lon" 5
E+ce1tion 4, Practical benefit.77
ut consideration can be somethin" the 1romisee is bound to do for a third 1arty.7
Consideration must not be 1art 1ayment of a debt.7F E+ce1tion, Pinnel!s Case • •
Consideration must not be forbearance to sue for an in#alid claim.7A Consideration e+ists when the #ariation or dischar"e is ca1able of benefitin" either 1arty.7
Le$al Rules for *alid consideration 7. Consideration must mo#e at the desire of the 1romisor. 3 constructed a mar)et at the instance of 3istrict collector. &ccu1ants of sho1s 1romised to 1ay 3 a commission on articles sold throu"h their sho1s. Held6 there was no consideration because money was not s1ent by Plaintiff at the request of the 3efendants6 but at instance of a third 1erson #i$. the Collector and6 thus the contract was #oid.79
11 %illiams # Roffey 12 Re, Selectmo#e 13 Scottson # Pe"" 14 ?oa)es # eer 15 %ade # Simeons I Coo) # %ri"ht 16 %D lan # El ;asr 1' 3ur"a Prasad #. aldeo Page | (
4. Consideration may mo#e from the 1romisee or any other 1erson who is not a 1arty to the contract.78 owed Rs.4B6BBB to . 1ersuaded C to si"n a Pro ;ote in fa#our of . C 1romised that he would 1ay the amount. &n faith of 1romise by C6 credited the amount to !s account. Held6 the dischar"e of !s account was consideration for C!s 1romise.7 . Consideration may be 1ast6 1resent6 ?uture, Jnder En"lish law6 Past consideration is no consideration. • Present consideration ,- cash sale • ?uture or e+ecutory consideration, - Promises to to deli#er him 7BB ba"s of • su"ar at a future date. 1romise to 1ay first on deli#ery. F. Consideration should be real and not illusory. 5llusory consideration renders the transaction #oid consideration is not #alid if it is. 5. Physically im1ossible 55. Le"ally not 1ermissible 555. Jncertain 5K. illusory /fulfillment of a 1re-e+istin" obli"ation0 A. :ust be le"al,Consideration must not be unlawful6 immoral or o11osed to 1ublic 1olicy. . Consideration need not be adequate. contract is not #oid merely became of the fact that the consideration is inadequate.
1& =Chinnaya!s Ks Ramayya> 1( ;ational an) of J11er 5ndia #. ansidhar Page | 1*
9.
E%( Nudo Pacto non oritur action, i,e, an a$ree&ent it"out consideration is *oid .
E+ce1tions to the Rule ;o consideration. ;o contract2. 7. %ritten and re"istered a"reements arisin" out of lo#e and affection,- =4A /70> E+1ressed in writin" and re"istered under law for the time bein" in force for • • •
re"istration of document ;atural lo#e and affection etween 1arties standin" in a near relation to each other
E+am1le, - n elder brother6 on account of natural lo#e and affection6 1romised to 1ay the debts of his youn"er brother. "reement was 1ut to writin" and re"istered. Held6 a "reement was #alid. E+ce1tion, - Rajlukhy Dabee #. Bhootnath Mukharjee E+am1le, Hindu husband by a re"istered document6 after referrin" to quarrels and disa"reements between himself and his wife6 1romised to 1ay his wife a sum of money for her maintenance and se1arate residence. Held that the 1romise was unenforceable since natural lo#e and affection was missin".
4. Promise to com1ensate =4A/40> Promise to com1ensate wholly or in 1art • %ho has already #oluntarily done somethin" for the 1romisor • Somethin" which the 1romisor was le"ally com1ellable to do. • E+am1le,- finds !s 1urse and "i#e to him. Promise to "i#e Rs.ABB.
. Promise to 1ay a time – barred debt. =Sec 4A/0>
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debt barred by limitation con not reco#ered. Hence6 a 1romise to 1ay such a debt is
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without any consideration. Can be enforced only when – in writin" and si"hed by 3ebtor or his authori$ed a"ent.
E+am1le, owes Rs.7B6 BBB but the debt is barred by Limitation ct. si"ns a written 1romise to 1ay Rs.86 BBB on account of debt.
Cases •
Abdul Aziz #. Masum Ali !
?acts,
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Dur"a Prasad #. Baldeo#
?acts, ! s1ent some money on the im1ro#ement of a mar)et at the desire of the collector of the district. 5n consideration of this 3! who was usin" the mar)et 1romised to 1ay some money to !. Dud"ment,
?acts, n old lady6 by a dead of "ift6 made o#er certain 1ro1erty to her dau"hter 3!6 under the directions that she should 1ay her aunt6 P! /sister of old lady06 a certain sum of money annually.
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%enkats&amy # . Ran"as&amy'
?acts, y a re"istered a"reement6 K!6 on account of nature6 lo#es and affection for his brother6 R!6 1romises to dischar"e debt to !. 5f K! does not dischar"e the debt. Dud"ment, R! may dischar"e it and then sue K! to reco#er the amount.
(edernath #. )houri Mohammed *
21 1&&* 22 1&&2. 23 1(*3 Page | 13
?acts, G! had a"reed to subscribe Rs.7BB- towards the construction of a town hall at Howrah.
Ramchandra Chintaman #. 'alu Ra*u.4
Hindu husband6 after referrin" to quarrels and disa"reement between him and his wife e+ecuted a re"istered document in fa#our of his wife a"reein" to 1ay her maintenance. ut no consideration mo#ed from the wife. Held6 the a"reement was #oid for want of consideration.49
24 1&&6. 25 1&61 123 + '62 26 1&'' 2' auy s. 7ootnat Page | 14
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3ebi Radha Rani #s. Ram 3ass.48
3 is ready to sue her husband for maintenance allowance. &n husband!s a"reein" to 1ay her a monthly allowance by way of maintenance6 she forbears to sue. Held,
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3unlo1 Pneumatic
S bou"ht tyres from the 3unlo1 Rubber Co. I sold them to 36 a sub-dealer6 who a"reed with S not to sell these tyres below 3unlo1!s list 1rice and to 1ay the 3unlo1 Co. MA as dama"es on e#ery tyre 3 undersold6 3 sold two tyres at less than the list 1rice and thereu1on the 3unlo1 Co. Sued him for the breach. Held,
Roscorla #
3 1romised claimant that horse bou"ht by claimant was sound and free from #ice. Held, 1romise made ?
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