Consideration

Consideration : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 1 Consideration Definition Section 2(d) of the Indian Contract Act 1872:

Section 2(d) : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 2 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 to do or to abstain form doing something, such act or abstinence or promise is called a consideration for the promise”.

Consideration : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 3 Consideration At the desire of the promisor Promisee or any other person Past, present or future Such act, abstinence or promise is called consideration

At the desire of the promisor Durga Prasad V. Baldeo 1880 : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 4 At the desire of the promisor Durga Prasad V. Baldeo 1880 Facts: The plaintiff on the order of the collector of a town, built at his own expense, certain shops in a bazar. 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 on commission on articles sold through their agency in the bazar. The plaintiffs action to recover the commission was rejected. The act was the result not of the promise but of the collector’s order.

Promisee or any other person : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 5 Promisee or any other person 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

Privity of Contract and Privity of Consideration : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 6 Privity of Contract and Privity of Consideration English Law 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. A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it, consideration must have been given by him.

English Law : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 7 English Law 1. Consideration must move from the promisee and the promisee only. If it be furnished by any other person, the promisee becomes a stranger to the consideration and, therefore, can not enforce the promise. 2. A contract can not be enforced by a person who is not a party to it even though it is made for his benefit. He is stranger to the contract and can claim no rights under it.

Tweddle v.Atkinson 30 LJ QB218 1861 : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 8 Tweddle v.Atkinson 30 LJ QB218 1861 The court of Queens Bench refused to allow a beneficiary who is not a party to a contract to enforce the contract. Fact: The plaintiff who was to be married to the daughter of one G and in consideration of this intended marriage G and the plaintiffs father entered into a written agreement by which it was agreed that each would pay the plaintiff a sum of the money. G failed to do so and the plaintiff sued his executors. Whiteman judge considered it to be an established principle “ that no stranger to the consideration can take advantage of a contract, although made for his benefit”.

Tweddle v.Atkinson 30 LJ QB218 1861 : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 9 Tweddle v.Atkinson 30 LJ QB218 1861 Judgment 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. The case laid the foundation of what subsequently came to be known as the doctrine of “ privity of contract”. This principle was affirmed by the House of Lords in Dunlop Pneumatic Tyre Co. V. Selfridge & Co.

Dunlop pneumatic tyre Co., Plaintiff V. Selfridge & Co., Defendant, 1915 : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 10 Dunlop pneumatic tyre Co., Plaintiff V. Selfridge & Co., Defendant, 1915 Facts: Plaintiffs sold certain goods to one 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 tyres to the defendants who agreed not to sell the tyres to any private customer at less than the list prices. The plaintiff sued the defendant for breach of this contract.

Dunlop pneumatic tyre Co., Plaintiff V. Selfridge & Co., Defendant, 1915 : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 11 Dunlop pneumatic tyre Co., Plaintiff V. Selfridge & Co., Defendant, 1915 Judgment: It was held by Lord Viscount HALDANE that assuming that the plaintiffs were undisclosed principals no consideration moved from them to the defendants and that the contract was unenforceable by them

Sec 25. An agreement without consideration is void unless : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 12 Sec 25. An agreement without consideration is void unless Clause (i) It is in writing and registered. It is expressed in writing and registered under the law for the time being in force for registration of [documents], and is made on account of natural love and affection between parties standing in a near relation to each other;

Sec 25. An agreement without consideration is void unless : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 13 Sec 25. An agreement without consideration is void unless Clause(ii) or is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which which the promisor was legally compellable to do ;

Sec 25. An agreement without consideration is void unless : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 14 Sec 25. An agreement without consideration is void unless Clause (iii) or is a promise to pay a debt barred by limitation- It is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorised in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of the suits

Explanations : 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 15 Explanations 1. Nothing in section 25 shall affect the validity, as between the donor and donee, of any gift actually made 2. 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 taken into account by the court in determining the question whether the consent to the promisor was freely given.

Slide 16: 

10/15/2009 Dr. Tabrez Ahmad, KLS KIIT 16