Definition of Consideration Economics
Definition of Consideration Economics
In ordinary language, the term ‘consideration’ means anything given in exchange (specially the money) for procuring some other thing. Hence, it is so believed that the measurement of consideration is mostly in ‘money`.
Consideration is an important element of a valid contract: It means ‘quid pro quo’, i.e., something in return or in lieu of. When a person is giving or promising to give something, must get something in return too. That ‘something’ which is agreed to be received, is known as ‘consideration”.
Pollock has defined consideration’ as, “Consideration is the price for which the promise of the other is bought, and the promise thus given for value is enforceable”.
Section 2 (d) of Indian Contract Act- 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 abstain from doing something, such act or abstinence or promise is called a consideration for the promise”. T From the above definitions, it can be concluded that consideration is a promise done by the promisee which must be something that have some value in the eye of law.
Example. Manohar agrees to sell his house to Deewan for a sum of Rs. 50,000. Here for the Manohar’s promise, the consideration is Rs. 50,000 and for Dcewan’s promise, the consideration is the house.
On analysing the definition of ‘consideration’, as given by the Indian Contract Act mentioned above, it is clear that a consideration may be :
(1) An Act. The promiser promises to do some act in favour of the promisee.
(2) An Abstinence. The consideration may include even an abstinence, i.e., not doing certain act.
(3) A Return Promise. The consideration is based on the principle of mutuality, i.e., an act or abstinence on the part of one party is consideration for the other in return.
(4) Consideration may be Past, Present or Future.The act or abstinence which forms consideration may be present, past or future one.
Rules Pertaining to
Following are the rules (essentials) pertaining to the ‘consideration’
(1) At the Desire of the Promiser. A consideration which involves an act or abstinence, would be valid only when it is offered at the desire of the promiser. When an act is done at the instance of the third party and not at the will of the promiser, it shall not be a valid consideration. For example, A saves B’s house from fire at the instance of C. A cannot demand any payment or consideration from B for this act of saving his house from fire.
(2) Consideration from the Promisee or Any Other Person. The consideration may move from the promise to any other person. Under the Indian Contract Act, the consideration may not necessarily come from the promisee; i may be furnished even by a stranger. For example, A gifted a house to B on the condition that B will remit a sum of Rs.200 per month to C, out of the rental income, so long as C is alive. In this case, C is not passing on any consideration to B. Even then C can sue B if the latter refuses to pay the sumof Rs. 200 per month to him.
(3) Consideration Includes Any Act or Abstinence, Which May Be Past, Present or Future. The consideration may include any act or abstinence which has already been. executed or may be executed in future. The act of abstinence may go simultaneously with the promise of the other party.
(4) Consideration must be Real and Not Imaginary or Illusionary. The consideration must be real and should have some value in the eyes of law. Any act which cannot be performed or checked tangibly, cannot constitute a legal and valid consideration. Uncertain and physically impossible considerations are not valid considerations..
(5) Consideration must be Something which the Promiser is Not Legally Bound To Do. Any act which the promiser is legally or otherwise bound to do, cannot constitute a valid consideration.
(6) Adequacy of Considerations is Immaterial. For a valid contract, barring few exceptions, there must be at least some consideration. It is not necessary that the consideration should be adequate. Adequacy of consideration is not material. For example, X promises to donate his house to Y.But later on, X refuses to donate his house to Y. Y cannot bring any action against X because Y is not offering any consideration to X.
The point could further be illustrated by another example. A promises to sell his house to B for Rs. 50,000 whereas the market value of the house is about Rs. 5,000,000. A’s promise is valid provided he has accorded free consent to B and he is competent to enter into contract.
(7) Consideration Must Not be Illegal, Immoral and Against the Public Policy. The consideration offered for an agreement must be legal and not opposed to the public policy. In case the consideration is unlawful, immoral and opposed to public policy, the agreement cannot be enforced by law.