DAMODARAM SANJIVAYYA NATIONAL LAW

UNIVERSITY

VISAKHAPATNAM

PROJECT ON

CONSIDERATION

BY

Prashant Dixit

Roll.no. 2019 B.A L.L.B 110

1
 ACKNOWLEDGEMENT

“To write a project is one of the most significant academic challenges, I have faced
ever. This project has been written by me but there are many people who helped me in
research work , who gave their support and helped me to present this project.

I am very thankful to Mrs. Sunita Gadela for her help to write this project, without the
help of whom and support to completion of the project couldn’t have been possible for
me. She gave her precious time from her busy schedule to support me to write this
project and advised me time to time and told me how to collect data from which source.

I am very grateful to the librarian who provided me several books on this topic which
proved beneficial in completing this project.

I acknowledge my friends who gave their valuable and meticulous advice which was
very useful and could not be ignored in writing the project. I want to convey most
sincere thanks to my seniors, for helping me throughout the project.

Last but not the least, I am very much thankful to my parents and family, who always
stand aside me and helped me a lot in accessing all sorts of resources.”

2
 Table Of Contents

1. Introduction to Consideration-------------------------------------------5

2. Essentials of Consideration----------------------------------------------6

3. Privity To Contract--------------------------------------------------------8

4. Types of Consideration---------------------------------------------------11

5. Forbearance to Sue is Consideration----------------------------------17

6. Conclusion-------------------------------------------------------------------20

7. Bibliography-----------------------------------------------------------------21

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AIMS AND OBJECTIVES

To have a detailed study of consideration under Indian Contract Act.

RESEARCH METHODOLOGY

This research project is solely based on doctrinal type of research work.

SOURCES OF DATA

The researcher has used secondary sources to complete his research. The secondary
sources includes books and internet.

HYPOTHESIS

The researcher thinks that without consideration a valid contract can never be possible.

RESEARCH QUESTIONS

1.) What is Consideration?

2.) Why and How Consideration Important for a valid Contract?

3.) Is a valid Contract possible without Consideration?

4.) Types of consideration?

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 Chapter-1
Introduction to Consideration

The section 25 of the Indian Contract Act, 1872 openly declares that “an agreement made
without consideration is void…”1 In other words the presence of consideration is an essential
for a contract to be valid.2 In England too “promises without consideration are not enforced,
because they are gratuitous”.3 In England the contracts are divided into two categories:
1. Contracts under seal, or contracts in the form of a deed. Such contracts are valid even
without consideration.
2. Simple contracts or parol contracts. For validity of such contracts the presence of
consideration is needed.
Consideration in simple words means something in return of a promise which may either be
benefit gained by one party or something lost by the other. So generally there can be no doubt
that for a valid contract, there must be consideration, and also free consent.4

Definitions of Consideration

According to Blackstone5:
“Consideration is the recompense given by a party contracting to the other.”
Or the price of the promise.

Sir Fredrik Pollock summarized the position of words adopted by the House of Lords in
1915: “An act of forbearance of one party or the promise thereof is the price for which the
promise of the other is bought, and the promise thus given for value is enforceable.”6

The definition given in Curre v Misa7 by Lush J is widely accepter and stated on the
next page:
“A valuable consideration in the sense of the law may consist either in some right,
interest, profit or benefit accruing to the one party, or some forbearance, determent,
loss, or responsibility given, suffered or undertaken by the other…”

Definitions of Consideration under Section 2(d)

Section 2 (d), The Indian Contract Act, 1872 defines consideration as given under:
“When, at the desire of the promisor, the promise or any other person has done or
abstained from doing, or does or abstains from doing or promises to do or abstain from doing
something, such act or abstinence or promise is called a consideration for the promise.”

1
The section also provides some exceptions to the rule.
2
Section 10
3
See HEATH J in Lee v Muggeridge, (1813) 128 ER 559
4
Sunitibala Devi v Manindra Chandra Roy, A.I.R. 1930 P.C. 217
5
Commentaries.
6
Pollock On Contracts (13th Ed.) p. 133
7
(1875) LR 10 Ex 153, 162

5
 Chapter-2
Essentials of Consideration

The definition of consideration highlights the following essentials to be fulfilled for the
presence of a valid consideration:

1) Consideration to be given “at the desire of the promisor”

2) Consideration to be given “by the promise or an other person”
3) Consideration may be past, present or future, in so far as definition says that the
promisee:
a) Has done or abstained from doing, or
b) Does or abstains from doing, or
c) Promises to do or to abstain from doing, something.
4) There should be some act, abstinence or promise by the promisee, which constitutes
consideration for the promise.

These essentials have been discussed in detail in the project.

Consideration at the Desire of the Promisor

The definition of consideration under section 2(d) clearly emphasizes that the consideration
must be given at the desire of the promisor, rather than merely voluntary or at the instance of
some third party.
In the case Durga Parsad v Baldeo:8
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, in
consideration of the plaintiff having expended money in the construction, promised to
pay him a commission on his articles sold through their agency in the bazaar. The
plaintiff’s action to recover the commission was rejected. It was held because as the
construction had not been done as per the desire of the defendants, but the order of the
collector. Hence, the consideration was not valid and the defendants not liable for the
same.

Consideration by Promisee or any other Person

(Privity of Consideration)

According to the Indian Law9, consideration may be given by ‘the promisee or any other
person’. It means that as long as there is a consideration for a promise, it is immaterial who
has furnished it. It may move from the promisee, or, if the promisor has no objection, from
any other person. But in English Law the position is different, here the consideration must
move from the promisee himself.10 For example, A promises to give his watch to B and a
consideration of Rs.5000 for the same is given to A by C and not B himself. This will not be
a valid contract in England but in India it will be valid as the section 2(h) clearly states that
“…at the desire of the promisor, the promisee or any other person” may provide
consideration. This can be further understood in the case of Chinnaya v Ramaya11. In this
case A, an old lady granted her estate to her daughter (the defendant) with a direction that the
8
(1880) 3 All. 221, Oilfield J at p. 228
9
Section 2(d); Indian Contract Act, 1872
10
Thomas v. Thomas, (1842) 2 Q.B. 851; Tweedle v Atkinson, (1816) 1 B.&S. 393
11
(1882) 4 Mad. 137

6
daughter should pay an annuity of Rs.653, to A’s brothers (the plaintiffs). On the same day,
the defendants made a promise with the plaintiffs that she would pay the annuity as directed
by A. The defendant failed to pay the stipulated sum. In an action against her by the plaintiffs
she contended that since the plaintiffs themselves had furnished no consideration, they had no
right of action. The Madras High Court held that in this agreement the consideration had been
furnished by the defendant’s mother and that it was enough consideration to enforce the
promise between the plaintiff and the defendant.
In the above case it can be seen that A enters in a contract with B, but A himself has not
given any consideration to B, but the consideration has been provided by third party i.e. C to
B. Although A is a stranger to consideration, he can still enforce the contract against B. One
has to remember that this is only true under Indian Law and the situation is different under
English Law where the consideration can only move from the promisee and a stranger to the
consideration in no condition can maintain any action.

Chapter-3

7
 Privity to Contract

The Doctrine of Privity of Contract in simple words means that only those persons who are
parties to the contract can enforce the same. A stranger to the contract cannot enforce a
contract even though the contract may have been for his benefit. To explain it with an
example, if there is a contract between A and B whose benefit has been conferred upon C, C
cannot file a suit to enforce the contract because only A and B are the parties to the contract
and C is a stranger to the same.
This rule has to be differentiated from the rule stated earlier according to which in
India a person who is a stranger to the consideration can sue. This does not affect the rule of
Privity of Contract.

English Law

In Tweedle v Atkinson12 the plaintiff was to be married o the daughter of one X and in
consideration of this intended marriage X and the plaintiff’s father entered into a written
agreement by which it was agreed that each would pay the plaintiff a sum of money. X failed
to do so and the plaintiff sued his executors. Whitman J considered it to be an established
principle “that no stranger to the consideration can take advantage of a contract, although
made for his benefit.” Thus, although the sole object of the contract was to secure a benefit to
the plaintiff, he was not allowed to sue as the contract was made with his father and not with
him.

This rule was further affirmed in the case of Dunlop Pneumatic Tyre Co. Ltd. v Selfridge &
Co. Ltd.13 by the House of Lords in the following words:
“In the law of England certain principles are fundamental. One is that only a person
who is a party to a contract can sue on it. Our law knows nothing of a Jus quaesitum
tertio arising by way of contract. Such a right may be enforced by way of contract.
Such a right may be enforced by way of property, as for example, under a trust, but
cannot be conferred on a stranger to a contract as a right to enforce the contract in
personam.”
In this case Plaintiffs (Dunlop & Co.) sold certain goods to Dew & Co. and secured an
agreement from them not to sell the goods below the list price and that if they sold the goods
to another trader they would obtain from him a similar undertaking to maintain the price list.
Dew & Co. sold the motor to the defendants (Selfridge & Co.) and promised that they will
pay to them the sum of £5 for every tyre sold below the list price. The Plaintiffs sued the
defendants for breach of contract for selling below the list price and not paying the money.
The House of Lords held that Dunlop & Co. could not bring an action against Selfridge and
Co. because there was no contract between the two parties. It was further observed even if it
is taken that Dew & Co. were acting as agents for Dunlop & Co., the latter still cannot
maintain an action as there was no consideration between Dunlop Co., and Selfridge & Co.,
since the whole of the purchase was paid b Selfridge & Co. to Dew & Co.

Indian Law

The rule of “Privity of Contract” is applicable in India as it is applicable in England. Even

though under the Indian Contract Act, 1872 the definition of consideration is wider than the

12
(1861) 1 B.&S. 393
13
(1915) A.C. 847, at 853, per Lord Haldane

8
English law, yet the common law principle of Privity of contract is generally applicable in
India, with the effect that only a party to the contract is entitled to enforce the same.14
In the case of Jamna Das v Ram Avtar15 here A borrowed Rs.40,000 by executing a
mortgage of her zamindari in favor of B. subsequently she sold the property to C for
Rs.44,000 and allowed C, the purchaser, to retain Rs.40,000 of the price in order to redeem
the mortgage if he thought fit. B sued C for the recovery of the mortgage money, but could
not succeed because he was not a party to the agreement between A and B.

There are also certain exceptions to this rule of a stranger to contract cannot sue which are
stated on the below:

Trust of Contractual rights or beneficiary under a contract

One of the exceptions of the doctrine of Privity of contract was recognized by Lord Haldane
in Dunlop Pneumatic Tyre Co. v. Selfridge & Co.16, itself. While it is mentioned that only a
party to a contract can sue on it, no such right is conferred on the third party, it was also
stated that “such a right may be conferred by way of property, as, for example, under a
trust.”17 For example, in a contract between A and B, beneficial right in respect of some
property may be created in favor of C. In such a case C can enforce his claim on the basis of
the right conferred upon him depending upon the particular case there is an obligation in the
nature of trust in favor of the third party, C, arising out of a contract will depend on the facts
of the case.18 The Indian Law also recognizes this exception in the case of Khwaja
Muhammad Khan v. Husaini Begum19, there was an agreement between the father of the
boy and a girl that if the girl (plaintiff in this case) married a particular boy, the boy’s father
(here the defendant in this case) would pay certain personal allowance known as Kharchi-i-
pandan (bettle-box expenses) or pin money to the plaintiff. It was also mentioned that a
certain property had been set aside by the defendant and this allowance would be paid out of
the income of the property. The plaintiff married the son but defendant failed to pay the
allowance paid to him. In an action by the plaintiff to claim this allowance, the defendant
contended that his contract to pay the allowance had been made only with the plaintiff’s
father and not with the plaintiff; she being a stranger to the contract cannot sue. But it was
held that since, the basis of the plaintiff’s claim being a specific charge on immovable
property in her favor, she was entitled to claim the same as a beneficiary, and as such, the
Common Law rule was not applicable to the facts and circumstances of the present case. It
was observed that:
“Here the agreement executed by the defendant specifically charges immovable
property for the allowance which he binds himself to pay to the plaintiff. She is the
only person beneficially entitled under it … although (she is) not a party to the
document, she is clearly entitled to proceed in equity to enforce her claim.”
In the case of Narayani Devi v. Tagore Commercial Corporation Ltd.20 A held various
shares of value of Rs. 40,500. It was agreed that A would sell his shared to B and in return B
will pay A Rs.500/month and after his death Rs.250/month to his A’s widow during her life.
C stood a surety for B. some payments were made by C to A and after his death to A’s
widow. Thereafter the payments were stopped. A’s widow brought action against B and C to

14
Narayani Devi v. Tagore Commercial Corporation Ltd., A.I.R. 1973 Cal. 401 at 405
15
(1911) 30 I.A. 7
16
(1915) A.C. 847
17
(1915) A.C. 847, at 853
18
Malda v. Raj Bahadur, A.I.R. 1937 Cal. 625, at 630
19
(1910) 37 IA 152: 12 Bom LR 638
20
A.I.R. 1973 Cal. 401

9
recover the amount. One of the defendants pleaded that the plaintiff was not a party to the
contract and it was entered into by his husband and the defendants, she was not legally
entitled to sue in respect of this agreement being a stranger to the contract. The Calcutta High
Court rejected this and held that from the facts and circumstances of the case the obligation
the obligation in the nature of trust was in favor of the plaintiff, and equity was created in her
favor and she was entitled to it even if she was not the party to the contract. A decree was
passed in her favor for the arrears of the amount due.

Conduct, Acknowledgment, or Admission

Sometimes there may be no Privity of contract between the two parties, but if one of them by
his conduct, acknowledgment, or admission recognizes the right of the other to sue him, he
may be liable on the basis of the law of estoppel.
In the case Narayani Devi v Tagore Commercial Corporation Ltd.21 discussed earlier
had no contract between the plaintiff and the defendants but the defendants in their agreement
had agreed to pay some money to them even after her husband’s death. Here the question to
sue the defendants arose. After the death of the husband same payments were received. Apart
from this the defendants had also called the plaintiff to administer some documents in the
same respect recognizing her rights. It was, therefore, held that the had created Privity with
the plaintiff by their conduct and by acknowledgment and admission of her rights hence the
plaintiff was entitled to the action even though at the time of the contract there was no
Privity.

Provision for marriage expenses or maintenance under family agreement

Where, under a family agreement, the contract is intended to secure a benefit to a third party,
he may sue in his own right as a beneficiary. 22 In the case of Sundara Aiyangar v.
Lakshmiammal23, under a family agreement, the male members of the family made a
provision for the expenses of her marriage to be contributed by the defendants, i.e., her father
and brothers. She brought an action to enforce the agreement between the defendants. It was
held that even though the plaintiff was not a party to the contract, yet the contract constituted
a situation like trust in her favor and therefore, she was entitled to the amount.

21
Ibid.
22
Mst. Dan Kuer v. Sarla Devi, A.I.R. 1947 P.C. 8: I.L.R. (1946) All.756: (1947) 49 Bom. L.R. 123
23
A.I.R. 1957 A.P. 965

10
 Chapter-4
Types of Consideration

Consideration may be Past, Present or Future (Executory)

Section 2(d) of the Indian Contract Act, 1872, recognizes three types of consideration,
namely, Past, Executed and Executory. It says that when at the desire of the promisor, the
promisee or any other person:
1. Has done or abstained from doing, (the consideration is Past.)
2. Does or abstains from doing, (the consideration is Executed or present.)
3. Promises to do or abstain from doing, (the consideration is Executory or future.)

These have been discussed in detail as under:

Past Consideration

Past consideration means that the consideration for the promise had been given earlier and the
promise has been made afterwards. It is, of course, necessary that at the time the act
constituting consideration was done, must have been done at the desire of the promisor. 24 For
example in lost or found cases if A looses his watch and puts out a notice that whoever finds
it will get Rs.500 as reward. The person who finds it has already done the consideration. This
amounts to valid (past) consideration under Section 2(d), and the promise is enforceable. The
words “has done and abstained from doing”, in Section 2(d) of the Indian Contract Act, 1872,
according to Pollock and Mulla25 “declare the law to be that an act done by A at B’s request,
without any contemporaneous promise from B, may be consideration for a subsequent
promise from B to A.”

Past services voluntarily rendered [Section 25(2)]

A voluntary service means a service rendered without any request and there is no subsequent
promise for the same. For example if a person A has lost his watch and another person B
finds it and returns it to A and now asks A to give him a reward for the same, A is not liable
for the same as A has not made any prior promise for the reward and this is not a contract.
The following illustrations also show the difference:
1. A finds B’s purse and gives it to him. B promises to give A Rs.50. This is a contract.26
2. A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a
contract.27

English Law Regarding to Past Consideration

According to English law if the act has been done before any promise is made, it is called
past consideration and a past consideration is no consideration. 28 The past act may explain
why the promise was given and may, thus, be a motive for the promise, but it furnishes no

24
See Section 2(d)
25
Indian Contract and Specific Relief Acts, 9th Ed. (1972) p.41
26
Illustration (c) to Section 25
27
Illustration (d) to Section 25
28
See Anson, Principles of the English Law of Contract, 23rd Ed., (1972), p. 85

11
legal consideration.29 “The consideration and the promise ought to go together.” 30 An
example is McArdle, In re:31
A effect certain improvements to certain property. The ultimate beneficiaries of the
property signed a document declaring that: “In consideration of your carrying out
certain alterations and improvements, we the beneficiaries shall repay to you the sum
of £488 in settlement of the amount spent on such improvements.” An action to
enforce this promise was rejected.

Past consideration at the Promisor’s Request

Past consideration in lieu of a prior request by the promisor is deemed to be a good
consideration. It was established as early as 1616 as in the case of Lampleigh v Barthwait32
that a past act done at request will be good consideration for a subsequent promise. The facts
were as given on the next page:
The defendant, having committed a murder, requested the plaintiff to labour and to do
obtain pardon from the King. The plaintiff did his best to obtain the King’s pardon,
riding and journeying at his own expense. Afterwards the defendant promised the
plaintiff to give him £100 and then refused to pay. He was, however, held liable.

On this context there is not much difference between the Indian and English laws. Indian law
recognizes past consideration, when the same is given “at the desire of the promisor.” Past act
done voluntarily is no consideration either in India or England. In India, however, a
voluntarily done consideration can render an agreement valid if it is declared valid under
exception mentioned in Section 25(2). There is no such provision under English law.

Executed or Present Consideration

When one of the parties to the contract performs his part of the promise which constitutes the
consideration for the promise by the other side is called executed consideration and the
performance of the promise by the other side is the only thing now to be done. For example,
A makes an offer to reward Rs. 100 to anyone who his lost phone and brings the same back to
him. B finds the lost item and delivers it to A. When B does so it amounts to acceptance of
the offer which results into a binding contract under which A will have to pay Rs.100 to B,
and also simultaneously giving consideration for the contract (i.e. the lost object). 33 The
consideration in this case is “executed”.
Executed consideration is different from past consideration as executed consideration
is provided simultaneously along with the making of the contract while past consideration is
provided prior to the making of the contract.

Executory or Future Consideration

When a person makes a promise in exchange of the promise made from the other side, the
performance of this promise is to be done after making the contract. This is called Executory
consideration. For example, A agrees to sell and B to buy a quantity of goods at a stated
price. In other words, A has promised to sell and B has promised to buy.
29
See Roscoral v. Thomas, (1842) 3 QB 234: 11 LJ QB 214: 114 ER 496, where a horse having been sold, a
subsequent warranty for its soundness was held to be based upon past consideration.
30
Street, Foundations of Legal Liability, 281
31
(1591) 1 Ch 669: (1951) 1 All ER 905
32
(1616) Hob 105: 80ER 255
33
See Carlill v Carbolic Smoke Ball Co., (1893) 1 Q.B. 256

12
Some Act, Abstinence or Promise by the Promisee Constitutes Consideration

According to Section 2(d), 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 not to
do or abstain from doing something, such
“act or abstinence or promise” is called consideration for promise. It means that if nothing is
done in exchange for the promise, i.e., where there is no act, abstinence or promise, there is
no consideration.

Consideration Received by one of the Joint Promisors.

In case there are joint promisors but consideration has been received by any one of them, then
it is held that the consideration is sufficient and binding on others also. In Andhra Bank v
Anantnath Goel,34 the father received a loan from the bank by the deposit of title-deeds of his
immovable property, but the promissory note, to repay the loan with interest, was signed by
the father and his son jointly, in favor of the bank. It was held that the son was equally liable
with his father on the said promissory note, even though he himself had received no direct
consideration.

Subscription for a Charitable Purpose

Consideration is needed in exchange in every promise in order to make it enforceable. A

mere promise to make contribution to a charitable purpose may not make it enforceable. In
Abdul Aziz v Mausam Ali35 the defendant promised to pay a sum of Rs.500 as donation for
the purpose of repair and reconstruction of a mosque. Nothing was done and the defendant
refused to pay the amount. It was held that nothing could be done to enforce the same as
nothing was done in faith of the promise and no consideration was given. Therefore, the
defendant was not liable for breaking his promise.
Although, a promise to contribute is not enforceable only till then the promise has
caused something done in faith of the promise.
The English decisions on this point are similar to the Indian ones.

In Re Soames,36 one Soames made a promise to the plaintiffs that he would leave a sum of
£300 by his will for the maintenance of a school which was to be established by the plaintiffs.
On the faith of this promise the plaintiffs established a school. But there was no such
provision in the will of Soames. It was held that the executors of the promisors will be liable
for the same.

Consideration Need Not be Adequate

It is not necessary for the consideration to be adequate to the promise. The courts can hardly
assume the task of setting what is the appropriate consideration for the promise. According to
Explanation 2 to Section 25 of the Contract Act, 1872:
An agreement to which the consent of the promisor is freely given is not void merely
because the consideration is inadequate; but the inadequacy of the consideration may be

34
A.I.R. 1991 A.P. 245 (D.B.)
35
A.I.R. 1914 All. 22
36
(1897) 15 T.L.R. 430

13
taken into account by the Court in determining the question whether the consent of the
promisor was freely given.

The parties are free to make the consideration of their choice. The adequacy of the
consideration is for the parties to consider at the time of making the agreement, not for the
court when it is sought to be enforced.37 For example, A agrees to sell his house worth
Rs.1,00,00,000 for Rs.1,00,000. A’s consent to the agreement was freely given. The
agreement is a contract notwithstanding the inadequacy of the consideration.38

Consideration must be real

It is necessary for consideration to be real and should not be unsubstantial. In White v

Bluett,39 a son used to complain to his father that his brothers had been given more property
then him. The father promised that he would release the son from his debt if he stopped
complaining. After the death of the father an action was brought by the executors to recover
the debt. It was held that the promise of not facing the father with the complaints in future
was not a good consideration for the father’s promise to release him from the debt. Therefore
the son continued to be liable for the debt.

Performance of an Existing Legal Duty in no Consideration

Doing something what a person is already legally bound to do is not a consideration. But for
a proper consideration there should be a promise to do something more than what a person is
already bound to do. In Collins v Godefroy,40 A received a subpoena, i.e. presence of
a witness to testify, in a case. Thereafter B promised to pay A some money for the trouble
caused to him in appearing in that case. A sued to recover B for the amount promised. It was
held that A was already under a public duty to give evidence and that the consideration to pay
by B did not constitute a good consideration.

Promise to Perform an Already Existing Contractual Duty

If a person is already contractually bound to perform a certain task for B then B’s promise to
pay something additional in return is no consideration. In other words compliance to a legal
obligation imposed by a contract is no consideration for promise. In the case of Ramchandra
Chintaman v Kalu Ram:41
The plaintiff accepted a vakalatnama from the defendant to act for him in a certain
suit on receiving his usual fee. Subsequently the defendant agreed to pay him a certain sum as
special reward (inam), if the suit is decided in his favor. The suit was decided in favor of the
defendant, who, however, did not pay the amount. The plaintiff, therefore, brought the
present suit action against him.
Rejecting the action, Westroppe CJ said: “The plaintiff, having accepted a
Vakalatnama was already bound to render his best service as a pleader. There was no fresh
consideration proceeding from the plaintiff when he obtained the agreement.”

37
Bolton v Madden, L.R. (1873) 9 Q.B. 55, at 57, per Blackburn J.
38
Illustration (f) to Section 25
39
(1853) 23 L.J. Ex. 36
40
(1831) 1 B. & Ad. 950
41
(1877) 2 Bom. 362

14
 Promise to Pay Less Amount than Due
The Rule of Pinnel’s Case

The rule laid down in Pinnel’s Case42 in English law laid down that in an agreement payment
of a smaller amount in lieu of a valid consideration is not binding as the agreement is without
consideration. This means in spite of the promise to pay the smaller amount the promisor can
claim the whole due amount. In the case a sum of £8-10 sh. was due to be paid on 11 th
November, 1600 on the basis of a bond executed by Cole in favor of Pinnel. On October 1,
1600 Cole paid £5-2 sh. 6d. to Pinnel, and he accepted the same as the full payment of the
original debt. Later Pinnel moved action against Cole to claim the whole amount on the basis
of the bond. It was held the Pinnel could succeed in recovering as mere partial performance
of contract would not discharge the contract. It was also stated that the original debt could be
discharged only by the introduction of a new element in the contract upon the request of the
creditor, e.g., tender of movable property in lieu of cash, or payment at fresh place.
This rule doesn’t appear to be logical. In 1937, the Law Revision Committee 43
recommended the abolition of the rule but so far the recommendation has not found the place
in the statute book.

Exception to the Rule in Pinnel’s Case

The various recognized exceptions to the rule, which are as given on the below:
1. Payment in kind – When the promise to deliver some movable property or assets in
lieu of a due sum, the promise is valid is these assets are of smaller value than the
amount due.
2. Payment before due date – Payment of a lesser sum before time, or different mode or
at a different place than appointed in the original contract.
3. Part payment by third party – A part payment made by a third party may be a good
consideration for the discharge of the whole of the debt. In other words if one party
has already accepted a part payment from the third party then he cannot sue for the
balance of the amount.
4. Composition with the creditors – Payment of a lesser amount in satisfaction of a
larger sum where this is done in pursuance of an agreement of compromise entered
into by the debtor with his creditors.
5. Promissory Estoppel – This is an equitable estoppel preventing a person from denying
what he asserted earlier. The person making the representation or promise becomes
bound by the same, on the basis of promissory becomes bound by the same, on the
basis of the law of estoppel if another person acted in faith of the representation. The
promise is enforceable at the instance of the instance of the promisee notwithstanding
that there is no consideration for the promise.44

Indian Law

In India such confusion is not likely to arise, for the Contract Act in Section 63 clearly
provides that “every promise may dispense with or remit, wholly or in part, the performance
of the promise made to him, or may extend the time for such performance, or may accept

42
(1602) 5 Co. Rep. 117a
43
6th Interim Report, paras 35, 40
44
Moti Lal, etc. Sugar Mills v State of U.P., A.I.R. 1979 S.C. 621, at 643

15
instead of any satisfaction which he thinks fit.” The section also provides the following
illustrations45:
1. A owes B 5,000 rupees. A pays to B, and B accepts, in satisfaction of the whole debt,
2,000 rupees paid at the time and place at which 5,000 rupees were payable. The
whole debt is discharged.
2. A owes B 5,000 rupees. C pays to B 1,000 rupees, and B accepts them in satisfaction
of claim on A. this payment is a discharge of the whole claim.
3. A owes B under a contract, a sum of money, the amount of which has not been
ascertained. A, without ascertaining the amount gives to B, and B, in satisfaction
thereof, accepts the sum of 2,000 rupees. This is a discharge of the whole debt,
whatever may be its amount.
4. A owes B 2,000 rupees, and is also indebted to other creditors. A makes an
arrangement with his creditors, including B, to pay them a compensation of eight
annas in a rupee (i.e. 50%) upon their respective demands. Payment to B of 1,000
rupees is a discharge of B’s demand.

Chapter-5
Forbearance to Sue is Consideration

45
Illustrations (b), (c), (d) & (e) respectively, to Section 63

16
Forbearing i.e. abstaining from enforcing the claim is a good consideration for a promise to
pay or do some other act.46 Forbearance to sue only constitutes consideration only so far as
the delay in the proceedings is a benefit to the person intended to be sued. Promise to forbear
may be implied and it may be forbearance only for unspecified time.

Exceptions when the Agreement is Valid without Consideration

English Law
In the English law a contact under seal is enforceable without consideration while the simple
contracts need the presence of consideration. In the words of Anson: “English law recognizes
only two kinds of contract, the contract made by deed that is under seal, which is called deed
or specialty, and the simple contract.” 47 A contract under seal means which is in writing and
which id “signed, sealed and delivered.” The English law says that there is no liability upon a
contract, unless the contract fulfils on of the two conditions, namely, either that it should be
without “consideration’ or that it is a deed under seal.48

Indian Law
Section 25 of the Indian Contract Act, 1872, generally declares that an agreement without
consideration is void. The Section, however, provides exceptions to the rule stated as under:

“25. An agreement made without consideration is void unless –

1. It is expressed in writing and registered under the law for the time being in force for
the registration of documents and is made on account of natural love and affection
between parties standing near relation to each other, or unless
2. It is promise to compensate, wholly or in part, a person who has already voluntarily
done something for the promisor, or something which the promisor who legally
compellable to do; or unless
3. It is a promise, made in writing and signed by the person to be charged therewith, or
by his agent generally or specially authorized in that behalf, to pay wholly or in part a
debt of which the creditor might have enforced but for the law for the limitation of
suits.
In any case of these cases, such an agreement is a contract.”

Promise due to natural love and affection

[Section 25(1)]

If a promise is made in favor of a person of a near relation on account of nearness, love or

affection, the same is valid even though there is no consideration. The following conditions
need to be satisfied in order to cover this exception:
1. The parties to the agreement must be standing in a near relationship to each other.
2. The promise should be made to one party out of natural love and affection for the
other.
3. The promise should be in writing and registered.
The near relationship has not been defined by act or any judicial pronouncement. But, from
the various decisions we can see that it covers blood relations 49 and relations made through
46
See Morton v Burn, (1837) 7 A.&E. 19; Coles v Pack (1869) L.R. 5 C.P. 65
47
A.G. Guest, Principles of the Law of Contract, 22nd Ed. (1964), p. 65
48
Markby’s Elements of Law, 5th Ed., 1896, p. 311
49
Bhiva v Shivram, (1899) 1 Bom. L.R. 495

17
matrimony50, but would not include such relations which are not near, but remotely entitled to
inherit.51 But in a relation where there is no love and affection the exception does not apply.
Like in Rajlucky Dabee v Boothnath Mookerjee,52 after a lot of quarrels and disagreements
between the parties who were Hindu husband and wife decided to live apart. Later the
husband executed a document giving the wife separate residence and maintenance. The
agreement also included mention of the quarrels and disagreements between the two. It was
held that the document was not executed because of love and affection but the absence of the
same, therefore, the wife could not recover the sums mentioned in the document. It is also
necessary for the document to be in writing and the writing be registered under the law
relating to registration of documents.

Consideration for Past Voluntary Services

[Section25 (2)]

When something’s done at the desire of the promisor it constitutes a valid consideration in
the same respect a subsequent promise to compensate for whatever has already been done is
also good. In other words promise to pay for a past voluntary service is binding. In Sindha v
Abraham53 the Bombay High Court said that “services rendered at the desire of the minor
expressed during majority and continued at the same request after his majority form a good
consideration for a subsequent express promise by him in favor of the person who rendered
the services.”

Promise to Pay Time Barred Debt

In another condition if a party agrees to pay a time barred debt it is considered to be valid
contract. Section 25(3) required the following essentials to be satisfied in such a case:
1. The promise must be to pay wholly or in part a time barred debt, i.e., a debt which the
creditor might have enforced payment but for the law the limitation of suits.
2. The promise must be in writing and signed by the person to be charged therewith, or
his duly authorized agent.
The English law on the point is also same. It was established in England as way back as
160154 that a precedent debt is good consideration for a subsequent promise. This also
includes time barred debts.55

Wholly or in Part
Section 25(3) permits a promisee to pay the time barred debt wholly or in part. If the person
promises to pay only a part of the time barred debt then he cone only be made liable for the
part promised and not the whole amount.56

There should be Express Promise

The promise to pay a time barred debt must be an express one 57 and cannot be held sufficient
if the intention has to be gathered from large number of circumstances. 58 In Tulsi Ram v
50
Gopal Saran v Sita Devi, (1932) 36 C.W.N. 392
51
Jafar Ali v Amhad Ali, (1868) 5 B.H.C. 37
52
(1900) 4 C.W.N. 488
53
(1895) 20 Bom. 755
54
Slad’s case, (1602) 2 Co. Rep. 91a.
55
Hyelling v Hastings, (1699) 1 Ld. Ray. 389, Also see Section 23(4) (English) Limitation Act, 1939
56
Govinda Niar v Achutan Niar, A.I.R. 1940 Mad. 678 at p. 679
57
Bachu Kamalamma v Srinivasa Oil Mill, A.I.R. 1980 N.O.C. 41 (A.P.)
58
Govinda Niar v Achutan Niar, A.I.R. 1940 Mad. 678 at p. 679

18
Same Singh59 after three years of expiry period of a promissory note the defendant made the
statement “I accept this pronote and it is valid for the next three years” (translated to
English). Here the Delhi High Court held that the mere acknowledgment of presence of debt
did not give the promise of payment and the defendant could not be made liable.

Admission to Pay in Court Proceedings

In State Bank of India v Dilip Chandra Singh Deo 60 it has been held that if the legal heir of
deceased makes an admission in court indicting his willingness to pay the sum borrowed by
the deceased, he can be held liable on the basis of his admission, even though the recovery
for the same is barred by limitation.

Promise to Pay must be Unconditional

Promise to pay time barred debt within the meaning of clause (3) of Section 25must be
expressed and unconditional. In K. Jeyaraman v M/s Sundaram Industries Ltd.,61 the
appellant made a formal recognition of the fact that in a document he had agreed to pay the
amount only after receiving the amount from the State Electricity Board. It was held by the
Madras High Court that the document conveyed a conditional promise and was not covered
by Section 23(3) as the cause of action of filing suit would only arise after amount was
received from the State Electricity Board.

Conclusion
Consideration means something in return of a promise which may either be benefit gained by
one party or something lost by the other.

59
A.I.R. 1981 Delhi 165
60
A.I.R. 1998 Orissa 129
61
A.I.R. 2008 (NOC) 2532 (Mad.)

19
The presence of consideration is essential for a contract to be valid. Promises without
consideration are not enforced because they are gratuitous. An agreement without
consideration is void.

Following essentials to be fulfilled for the presence of a valid consideration:

1-Consideration to be given “at the desire of the promisor”
2-Consideration to be given “by the promise or an other person”
3-Consideration may be past, present or future, in so far as definition says that the promisee:
a) Has done or abstained from doing, or
b) Does or abstains from doing, or
c) Promises to do or to abstain from doing, something.
4-There should be some act, abstinence or promise by the promisee, which constitutes
consideration for the promise.

Consideration may be Past, Present or Future (Executory)

Section 2(d) of the Indian Contract Act, 1872, recognizes three types of consideration,
namely, Past, Executed and Executory. It says that when at the desire of the promisor, the
promisee or any other person:
1. Has done or abstained from doing, (the consideration is Past.)
2. Does or abstains from doing, (the consideration is Executed or present.)
3. Promises to do or abstain from doing, (the consideration is Executory or future.)

20
 Bibliography

Books referred

Singh, Avtar
Contract & Specific Relief, 10th Ed.
Eastern Book Company (Lucknow), 2008

Bangia, R.K.
Law of Contract Part I, 6th Ed.
Allahabad Law Agency (Faridabad), 2009

Furmston, Michael
Cheshire, Fifoot & Furmston’s Law of Contract, 14th Ed.
Lexis Nexis Butterwoths, 2006

Kumar, P.N.
Sanjiva Row’s Commentary on The Indian Contract Act, 1872 and Tenders, 10th Ed.
Delhi Law House, 2007

Websites referred

http://en.wikipedia.org/wiki/Currie_v_Misa

http://www.thefreedictionary.com/

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