KIIT LAW SCHOOL
Project on Contract Law (1st Semester)
Topic: Critical Evaluation of Consideration in the Matter of Love and Affection
Guided By: Biswajit Chatterjee Assistant Professor of Law KIIT Law School
By: Amartya Bag B.A. LL.B. (1st Sem.) Roll: 883006
Contents i) Introduction........................................ Introduction.......................................................................... ....................................................... ..................... 1 ii) Hypothesis.................................................... Hypothesis....................................................................................... ............................................ ......... 2 iii) Objective of the study................................................... study.............................................................................. ........................... 2 iv) Research Questions......................................................................... Questions.................................................................................. ......... 2 v) Research Methodology..................................................................... Methodology............................................................................. ........ 3 Chapter 1: Consideration – Its meaning and definition.......................... 4 Chapter 2: Rules of Consideration......................................................... Consideration......................................................... 5 2.1 On the request of the promisor.................................................... promisor.................................................... 5 2.2 Consideration must move from the promisee........................ promisee.............................. ...... 6 2.3Adequacy 2.3Adequacy of Consideration........................................... Consideration...........................................................7 ................7 Chapter 3: Exceptions Ex ceptions to Consideration................................................ Consideration................................................ 8 3.1 Contracts under seal in English law..............................................8 law..............................................8 3.2Natural 3.2 Natural love and affection............................................................. affection............................................................. 8 3.3Promise to Compensate............................................... Compensate................................................................. .................. 9 3.4Time Barred Debt.......................................................... Debt.......................................................................... ................ 9 3.5Gifts 3.5 Gifts actually made.................................................. made........................................................................10 ......................10 Chapter 4: Conclusion................... Conclusion................................................... .........................................................11 .........................11 Bibliography........................................... Bibliography............................................................................ ................................................12 ...............12 Table of o f Cases..................................................................................... Cases........................................................................................ ... 13
Introduction Consideration is the doctrine designed to establish which promises should be legally enforceable. The most acceptable definition given so far has been given by Lush J. in the case of Currie v. 1 Misa; “A valuable consideration in the sense of law, may consist of some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility, given, suffered, or undertaken by the other.” 2
As per Blackstone , “Consideration is the recompense given by the party contracting to the other.” According to the Section 2 (d) of the Indian Contract Act, consideration has been defined as; “When, at the desire of the promisor, the promisee or any other person has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for a promise.” For a valid consideration we have to follow some basic rules; firstly, an act or abstinence which is to be a consideration for a promise must be done or promised must be done on the desire or the promisor. Secondly, consideration must move from the promisee (or any other party in the case of India) but need not necessarily move to the promisor. Lastly, consideration must have some value in the eyes of law. However there are several exceptions to consideration; firstly in English law a contract under seal is enforceable without consideration. The Section 25 of the Indian Contract Act deals with the exceptions. First exception under the section states that in case of a contract which has been expressed in writing and has been made due to involvement of natural love and affection there is no need for presence of a valid consideration. In that case love and affection is taken as the valid consideration. Second exception states that a promise to compensate a person for a past voluntary act partly or wholly for the promisor is enforceable. Lastly, a promise made in writing to pay a time barred debt is enforceable.
1. (1875) LR 10 Ex 153, 162 2. Singh (1973), p. 84
Hypothesis Consideration is an important component of a contract. Law says that there must be some consideration. There should be an act or omission or a counter promise which may act as a price for a promise. In most of the cases we see that consideration is required for the validity of a contract. However, there remains certain areas where may be contract without consideration and law may treat such a contract as valid one. Natural love and affection is one such area where a contract without consideration is treated as valid. In such cases natural love and affection is treated as good consideration. This is an exception to the general rule.
Objective of the Study The main aim of the study is to find out how consideration forms an important part of a contract and how natural love and affection affects the normal rules for a valid consideration. Moreover, it is necessary to know the other exceptions and the rules involved in formation of a valid consideration to get an extensive overview of the research topic. The research has been made with a view to get a comparative idea of the law in India and England and how the law differs or follow the same in the both legal system. Another objective of the research is to find how the law and principles related to consideration act as a beneficiary or determinant to either party of the contract.
Research Questions The central motive of the research is to find out the answers of the following questions. These questions are core to the research and set a goal to achieve. •
How consideration can affect a contract?
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What are the rules involved in formation of a valid consideration for a promise?
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What are the exceptions to Consideration?
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How natural love and affection affects the normal rules for a valid consideration?
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Who can be termed as “near relation”?
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Whether existence of “near relation” the only criteria for having a valid consideration under the exception rule of presence of natural love and affection?
Research Methodology In the research I have followed the analytical approach which deals with understanding what the present law is. Firstly, I have scrutinised the act under consideration, consideration , i.e. the Indian Contract Act of 1872 and checked for the statutes which has been repealed and amended to the act. Secondly, I have gone through the library for the statutory materials and the various books on Contract law and specially the official volumes including the All England Reports. Finally, I have studied several case laws on the related act by using the Digest and the law reports and journals. Moreover, I have followed the Comparative Research Method which collects, examines, collates the notions, doctrines, rules and institutions which are found in most developed legal system and compare the points in which they agree or differs. I have tried to notice the areas in which the Indian and English laws differ and agree with each other. The other methodologies applied during the research include the critical research method. I have tried to understand the current law in place and the present need of the society and tried to watch out for any flaw in the law.
Chapter 1: Consideration – its meaning and definitions Since the sixteenth century, the presence or absence of consideration is a crucial factor in a contract. Consideration is the doctrine designed to establish which promises should be legally 1 enforceable. Consideration also means the reason for binding of the promise. The most 2 acceptable definition given so far has been given by Lush J. in the case of Currie v. Misa; “A valuable consideration in the sense of law, may consist of some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility, given, suffered, or undertaken by the other.” This definition shows the reciprocity of the two parties to the contract and helps to distinguish a valid contract from a gratuitous promise. The definition shows that there is some benefit to the promisor and detriment to the promisee. Detriment to the promisee has been accepted universally 3 as a good consideration. Sir Frederick Pollock, stated that “Consideration is the promise for which the promise of other is bought, and the promise thus given for value is enforceable.” This benefit to the promisor has been challenged by many modern authorities, and considered as a coincidence. However, some cases have surfaced in which a promise has been held not gratuitous because there has been some benefit to the promisor even though there has been no detriment to the promisee. 4
As per Blackstone , “Consideration is the recompense given by the party contracting to the other.” Which simply means consideration is the price for the promise given by one party to another party. According to the Section 2 (d) of the Indian Contract Act, consideration has been defined as; “When, at the desire of the promisor, the promisee or any other person has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for a promise.” The definition gives emphasis on that the consideration is some act, done or abstained from an act or a promise which is done on the request of the promisor, and which can be done by promisee or any other person, and that promise may have already been performed, in the process of being done or may be done in future. This definition helps to avoid the theory of consideration which states that it as an act which causes benefit to one party and detriment to other, it simply states that any act done on the request of the promise constitute a valid consideration. 1. See Atyiah, Essays on Contract (1986), Ch 8; Treitel (1976) 50 A.L.J. 439 2. (1875) LR 10 Ex 153, 162 3.F. Pollock, Principles on Contracts , 13th ed. (1950), p. 133 4. A. Singh, Law of Contract and Specific Relief , 9th ed. (1973), p. 84
Chapter 2: Rules related to Consideration For a valid consideration we have to follow some basic rules; firstly, an act or abstinence which is to be a consideration for a promise must be done or promised must be done on the desire or the promisor. Secondly, consideration must move from the promisee (or any other party in the case of India) but need not necessarily move to the promisor. Lastly, consideration must have some value in the eyes of law.
i)
At the desire of the promisor
Going by the definition of consideration in Sec. 2(d) of the Indian Contract Act, an act or abstinence of an act which is to be a consideration for a promise must be done or promised must be done on the desire of the promisor. promisor. An act will not be a good consideration if it is not done in accordance of the will of the promisor. 1
In the case of Durga Durga Prasad v. Baldeo;
The plaintiff, on the order of the collector of the town, built at his own expense, certain shops in a bazaar. The shops came to be occupied by the defendants, who promised to give the plaintiff a part of the article sold through their agency as commission in consideration of the money spent for building the shops. It was held that, though the promise was made in respect of the expense incurred by the plaintiff but the construction of the shops were not done on the request of the defendant, but by request of the collector thus there was no valid consideration. Even though there is no personal benefit, the act done on the request of the promisor constitutes a 2 valid consideration. In the case of Kedar Nath v. Gorie Mohamed ; There were insufficient funds for building a town hall at Howrah. The commissioners of Howrah municipality decided to gather money from public subscription. The defendant has agreed to pay Rs. 100 and signed his name in the subscription book for that amount. Further, the plaintiff entered into a contract with a contractor to build the hall. The defendant failed to pay the amount and argued that there was no consideration. However, the court held the defendant liable. The consideration was the act of entering into contract with the contractor in return of the money paid by the defendant. The act was done at the desire of the promisor, thus constituting a valid consideration. The promise to pay the money cannot be revoked once the performance has been started. In England for many centuries, the law is that any act done at the request of another, expressed or implied would be a valid consideration to support a promise.
1. (1880) 3 All 221 2.1886 14 Cal 64
ii)
Consideration must move from the promisee (or any other person) A party to a contract, who wishes to enforce the contract must perform an act or have abstained from an act as a consideration for the promise of the other party. It must benefit the other party. It must move from the promisee but need not move to the promisor. As early as 1677, it was possible to support an action by a person for whose the promise was given even 1 though the consideration was given by someone else. However, the principle was repudiated repudiated 2 in the case of Price v Easton, in which the defendant promised a person that if he does some work he will pay some money to the plaintiff. The person performed the work, but the defendant refused to pay the money. Lord Denman in the case held that there was no consideration moving from the plaintiff to the defendant, so the plaintiff could not recover the amount. This principle is closely linked to the doctrine of privity. It is often said that these doctrine are the two faces of same coin. It differs in the fact that in doctrine of privity if a person is not a party to the contract he can’t sue whereas in doctrine of consideration even if the person is a party to the contract, if the consideration has not moved from him he can’t sue. The Contract (Rights to Third Parties) Act 1999, doesn’t specifically mention that consideration must move from the promisee, but it is clear that whenever a third party acquires rights under the act, it will not be open to the defendant to argue that consideration has not moved from the third party. Consideration must move from either from a single promise or from one of a number of joint 3 McEvoy v Belfast Banking Co Ltd ; promises. In the case of McEvoy A father, deposited £ 10,000 in the bank in an account jointly held by him and his minor son. He died. The executors were allowed by the bank to withdraw the money, the money was lot to keep the family business alright. The son sued the bank. The court said that the contract was made by both the father and the son jointly, and the consideration therefore has moved jointly. However, this principle is not applicable in India. Sec. 2 (d) of the Indian Contract Act states that the consideration can move from the promisee or any other person. If consideration has been made, it hardly matters who has provided the consideration.
1. Dutton v Poole, Court of King’s Bench, (1677) 2 Levinz 210: 83 ER 523 2. (1833) 4 B & Ad 433 3. (1935) AC 24
iii) Consideration must have some value Consideration has been defined as some act, abstinence or promise on part of the promisee or any other person which has been done at the desire of the promisor. But that doesn’t mean that every act done at the desire of the promisor constitute a valid consideration. An act or abstinence which constitutes the consideration for the promise must have some value not only to the parties 1 but also in the eyes of law. 2
Consideration need not be adequate but it should not be illusionary , physically or legally 3 impossible or uncertain. Courts cannot decide upon what the amount should be. If two parties contract with each other on a small amount with free consent, it is sought as good consideration. In the case of Thomas v 4 Thomas; A person had declared in his will that he wishes to give a part of his property to his wife for life. His executor of the will allowed to give away the property if the wife is ready to pay £ 1 per year as rent. The court declined to be influenced by the husband’s wishes and stated that, “motive is not the same thing with consideration”. However, the court agreed that there was some consideration by giving £ 1 per year as rent. Explanation 2 in the Sec. 25 of the Indian Contract Act has mentioned that “An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate;…”
J. Beatson (2002) 28 th ed., Anson’s Law of Contract , Oxford University Press, London, ISBN 978-0-19876576-9, p. 98 2. White v Bluett (1853) 23 L.J. Ex. 36. 3. Harry v Gibbons (1675) 2 Lev. 161. Where a bailiff was promised £40 in consideration of a promise made by him that he would release a debt due t o his master is an example of legal impossibility. 4. (1842) 2 QB 851 1.
Chapter 3: Exceptions to rules of Consideration There are several exceptions to rules of consideration; firstly in English law a contract under seal is enforceable without consideration. The Section 25 of the Indian Contract Act deals with the exceptions. First exception under the section states that in case of a contract which has been expressed in writing and has been made due to involvement of natural love and affection there is no need for presence of a valid consideration. In that case love and affection is taken as the valid consideration. Second exception states that a promise to compensate a person for a past voluntary act partly or wholly for the promisor is enforceable. Lastly, a promise made in writing to pay a time barred debt is enforceable.
1. Contracts under the seal in English Law A contract made under seal, known as deed or speciality is enforceable even without the presence of consideration. A contract under seal means a contract which is made in writing and which has been signed, sealed and delivered. In English law there are only two kinds of contracts; one which is made under the seal known as deed or speciality and other is simple contract.
2. Natural love and affection According to Section 25 (1) a contract can rise without consideration when it is made in writing and registered under the law, and it has been made due to presence of natural love and affection between the parties in near relation. In these types of cases natural love and affection are considered as valid consideration. This section helps to give effect to those contracts which would have been void due to lack of consideration, but no to agreement which are not gifts when the instruments embodying the agreements are void, for example under Sec. 28. The words “is made” are not same as “is expressed to be made”. However, there is no need to expressly mention in the deed that the contract was made on the ground of love and affection; the court could establish the same from the facts and evidence of the case 1
In the case of Poonoo Bibee v. Fyez Buksh where a husband agreed to pay his earning to the wife and this was made in writing. It was held that wife will be able to claim the amount as the agreement was made under love and affection between the parties. The section also states that the party should be in “near relation” to each to other, but that doesn’t mean they should be “mere relatives” or in blood relation to each other. Persons who are legal successor automatically can come within the purview. The words “near relation” have not been construed judicially. There have been cases where persons who are not relatives within the meaning of the law, have been seen as person to stand in a real relation. In the case of Nisar Ahmed v Rahmat Begum2, paying some amount to the parents of a Mohammeden woman have been held valid and has been seen as person standing in near relation. However, a person and his father-in-law’s divided 3 brother’s widow has been seen by court as person not in near relation. 1. (1874) 15 Bom LR App 5. 2. AIR 1927 Oudh 146 3. Taranata v Gopala AIR 1943 Mad 591
However, nearness of relationship doesn’t mean there is presence of natural love and affection. If there is quarrel in between the parties, it has been held that there was no natural love and affection to constitute a valid consideration for a contract. In the case of Rajlukhy Dabee v. 1 Bhootnath Mookerjee, The defendant promised to pay his wife a fixed amount every month for her separate residence and maintenance. The agreement was made in writing and it mentioned about the quarrels. The case was filed to recover the amount. The court held that there was no presence of love and affection to make the contract effective. 2
However, in the case of Bhiwa Bhiwa v Shivaram,
A sued B, his brother, for a share in certain lands. But the suit was dismissed as B claimed the land was not ancestral; B then agreed to give A, a part of the same land. The present suit was made to obtain that share. It was held that inspite of the brothers are in quarrels, the Sec. 25 (1) could be applied as the defendant has such love for his brother that he is willing to give away his property.
3. A promise to compensate for something done in past According to Sec. 25 (2) of the Indian Contract Act, a promise to compensate wholly or partially, a person who has already voluntarily done something for the promisor; or something which the promisor was legally compellable to do is enforceable. For enforcing this section the act performed should be done voluntarily. A promise to pay after attaining majority for the act performed during his/her minority could be brought within this exception. The promisor must be in existence during the performance of the act. In the case of Jubilee S. & 3 W Co. v Chhotalal, it was held that work done by the promoter of a company before its incorporation cannot be regarded as the work done for the company.
4. Time-barred debt According to Sec. 25 (3) of the Indian Contract Act, a promise to pay a time-barred debt is legally enforceable, if it is made in writing and signed by the person to be charged with or by his legal agent. The promise may be to pay the whole or part of the debt. The debt must be such “of which the creditor might have enforced but for the law of limitation of suits.” The promise made should be an expressed one. A person to be charge with is a term wide enough to take into account the promise made by the person who is willing to pay the debt of another. 1. 2. 3.
(1900) 4 Cal WN 488 (1899) 1 Bom LR 495 10 Bom LR 141
4. Gift actually made Sec. 25 (Expl. I) of the Indian Contract Act states, the general rules of consideration don’t affect as between donor and donee the validity of any gift which has been made. A gift of movable properties which has been registered according to law cannot be questioned on the grounds of presence of consideration. However, when a gift of property was made by registered deed and attested by two witness, one cannot claim that he was a victim of fraud.
Chapter 4: Conclusion A contract in general cannot conclude without the presence of some consideration. Consideration is the price for the promise; it may consist of some act or abstinence which is beneficial to the one party and detrimental to the other. It is a general practice of the courts, in the cases related to contracts, to require satisfactory proof that consideration has been received according to the terms of the contract. However there are few exceptions to the general rule and a contract can conclude even without any consideration. According to Section 25 (1) a contract can rise when it is made in writing and it has been made due to presence of natural love and affection between the parties in near relation. In these types of cases natural love and affection are considered as valid consideration. This section helps to give effect to those contracts which would have been void due to lack of consideration. The section also states that the party should be in near relation to each to other, but that doesn’t mean they should be “mere relatives” or in blood relation to each other. However, nearness of relationship doesn’t mean there is presence of natural love and affection. If there is quarrel in between the parties, it has been held that there was no natural love and affection to constitute a valid consideration for a contract.
Bibliography Surveying of existing literature forms an important part of research. The following books, journals, reports and other literatures have been used in the research as a source and for giving a concrete shape to the research.
th
Atiyah, P.S.; Smith, Stephen A. (1995) 6 ed., Atiyah’s Introduction to the Law of Contract , Oxford University Press, ISBN 0-19-568749-3 th Beatson, J. (2002) 28 ed., Anson’s Law of Contract , Oxford University Press, ISBN 978-0-19-876576-9 rd Fransworth, E. Allan (2004) 3 ed., Fransworth on Contracts, Vol. I, Aspen Publisher, ISBN 0-7355-4605-3 th Furmston, Michael (2007) 15 ed., Cheshire, Fifoot & Furmston’s Law of Contract , Oxford University Press, ISBN 0-19-568925-9 Indian Contract Act, 1872 rd Myneni, S.R. (2001) 3 ed., Legal Research Methodology, Allahabad Law Agency Rao, V. Kesava (2004), Contracts I Cases and Materials, LexisNexis, ISBN 81-8038058-0 th Nair, M. Krishnan (1973) 5 ed., The Law of Contracts, Orient Longman Pvt. Ltd., ISBN 81-250-0691-5 th Peel, Edwin (1962) 11 ed., Treitel The Law of Contract , Sweet & Maxwell Ltd., ISBN 97804219 948402 th Saharay, Saharay, H.K. (1935) 10 ed., Dutt on Contract , Eastern Law House, ISBN 81-7177-1831 th Singh, Avtar (1973) 9 ed., Law of Contract and Specific Relief , Eastern Book Company, ISBN 81-7012-850-1 Ujjannavar, S.S. (2000), Law of Contract , Eastern Law House, ISBN 81-7177-117-3
Table of Cases
Bhiwa v Shivaram (1899) 1 Bom LR 495 Currie v. Misa (1875) LR 10 Ex 153, 162 Durga Prasad v. Baldeo . (1880) 3 All 221 Harry v Gibbons (1675) 2 Lev. 161 Jubilee S. & W Co. v Chhotalal 10 Bom LR 141 Kedar Nath v. Gorie Mohamed (1887) 14 Cal 64 McEvoy v Belfast Banking Co Ltd (1935) AC 24 Nisar Ahmed v Rahmat Begum AIR 1927 Oudh 146 Poonoo Bibee v. Fyez Buksh (1874) 15 Bom LR App 5 Price v Easton (1833) 4 B & Ad 433. Rajlukhy Dabee v. Bhootnath Mookerjee (1900) 4 Cal WN 488
Taranata v Gopala AIR 1943 Mad 591 Thomas v Thomas (1842) 2 QB 851 White v Bluett (1853) 23 L.J. Ex. 36.
