Consideration

Consideration- Meaning and Essentials

Objective

After going through this lesson, you shall be able to understand the following concepts:
Before going through this lesson, let us read the meaning of difficult words that we will come across in this lesson.


Introduction

We have already learnt that in order to make a contract valid, it is necessary that it should hold some of the essentials as provided under the Indian Contract Act, 1872. One of the essentials is offer and acceptance, which we have already discussed in the previous lessons. Another essential of a valid contract is a lawful consideration.
What is this consideration? Is it related to the parties to contract? What constitutes a valid consideration? We will discuss about all this in our current lesson.

Meaning of Consideration

Look at the picture below. What can you make out of it?



The image clearly shows that Mr. Potu has sold his house to Mr. Motu for Rs 10,00,000 (as agreed by him previously). Why was this exchange carried out? What did Mr. Potu and Mr. Motu get in return of their assets lost?

As shown in the image, this exchange was carried out by Mr. Potu and Mr. Motu to execute the contract of sale of house for Rs 10,00,000. Under this contract Mr. Potu lost his house to earn Rs 10,00,000 and Mr. Motu got a new property in return of Rs 10,00,000. This ‘something that has been given in return’ for the act to be performed by the other party is called a consideration. Thus, at the time of entering into the contract, the promise to pay Rs 10,00,000 was the consideration for Mr. Potu and the promise to sell the house was the consideration for Mr. Motu.

Thus, a consideration is something of a value. It may be a promise, an act or an object that a promisor receives from a promisee in return for his/her promise. However, it must be noted that the existence of a lawful consideration is a must in every contract. A contract without a valid consideration is invalid and is called nudum pactum. It is a latin maxim that means an agreement to do something without any compensation in return. Such contracts are called naked contracts.

The definition of consideration as given by the Indian Contract Act, 1872 is presented in the diagram given below.



Let’s take another example. Suppose Neha agrees to sell her mobile to her friend Jayati for Rs 500. In this case, Jayati’s promise to pay the sum of Rs 500 is the consideration for Neha’s promise to sell her mobile and Neha’s promise to sell her mobile is the consideration for Jayati’s promise to pay the sum of Rs 500.

The following picture explains the consideration involved in a contract for both the parties.


Example: Suppose Akshay promises his debtor Arjun that he will not file a suit against him for one…