Essentials or legal requirement of a valid consideration are listed below:
Essentials or Legal Requirement
1. Consideration must move at the desire of the promisor:
The act constituting consideration must have been done at the desire or request of the promisor. If it is done on the instance of a third party or without the desire of the promisor, it will not amount to consideration.
Image Source: i.ytimg.com
2. Consideration may move from the promisee or any other party:
Consideration generally moves from the promisee, but it may also move from a third party, even a stranger, i.e., it may move from a person, who is not a party to the contract. It means that there must be consideration and it is immaterial who furnishes it. Thus, consideration must be offered by the promisee or the third party on the desire of the promisor.
3. Consideration may be Past, Present, or Future:
Section 2(d) defining consideration clearly makes it clear that it may either be past, present or future as it states:” Has done or abstained from doing (Past), or does or abstains from doing (Present), or promises to do or abstain from doing (Future) something”.
Thus,
(i) Past consideration is that consideration, which has already been done for a present promise.
(ii) When the consideration is given simultaneously by both the parties, i.e., with the promise is called as present consideration. Cash sale is its best example.
ADVERTISEMENTS:
(iii) When the consideration from one party to the other is to pass subsequently to the making of the contract, it will be ‘future or executory consideration.
4. Consideration need not be adequate:
Consideration is something in return. This ‘something in return’ need not necessarily be equal in value with “something given”. The law simply requires consideration. It does not state how much consideration must be there.
The courts are concerned with the consideration and not their adequacy, provided it is of some value.
As per Explanation 2 of Sec. 25, an agreement to which the consent of the promise is freely given, is not void merely because consideration is inadequate.
5. Consideration must be real and not illusory:
The consideration, although it need not be adequate, must be real, competent and of some value. Sentiments for making a promise cannot bind the promise. It must also not be illegal or impossible or illusory or sham. The consideration may not be real because of :-
ADVERTISEMENTS:
i) Physical impossibility,
ii) Legal Impossibility,
iii) Uncertainty,
iv) Illusory consideration.
6. Consideration must be something which the promisor is not already bound to do:
It is because the performance of a pre-existing obligation is no consideration.
However, the following are good considerations to a contract:-
(i) Forbearance to sue,
(ii) Compromise of disputed claims, and
7. Consideration must be lawful:
The consideration to a promise must be lawful. If the consideration is unlawful, the courts do not allow an action on the contract. The consideration to an agreement is unlawful, if:-
(i) It is forbidden by law; or
(ii) It is of such a nature that, if permitted, it would defeat the provisions of any law; or
(iii) It is fraudulent; or
(iv) It involves or implies injury to a person or property of another; or
(v) The court regards it as immoral or opposed to public policy every agreement of which the consideration is unlawful is void.