CONSIDERATION AND RULES FOR A VALID CONSIDERATION--------WHAT CONSIDERATION AND OBJECTS ARE LAWFUL AND WHAT ARE NOT.

PRELIMINARY NOTE:

An agreement made without consideration is void. Therefore, consideration is an essential element of a valid contract. Without it, a promise is generally not enforceable in a court of law unless it falls under specific exceptions.

RELEVANT LAW AND PROVISIONS:

• Chapter II of the Contract Act, 1872

• Section 2(d) – Meaning of Consideration

• Section 23 – What considerations and objects are lawful and what are not

• Section 25 – Agreement without consideration

• Section 185 – No consideration is necessary to create an agency

MEANING OF CONSIDERATION:

According to Section 2(d) of the Contract Act, 1872:

“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 from doing, something, such act or abstinence or promise is called a consideration for the promise.”

LEGAL RULES FOR A VALID CONSIDERATION:

• a) Consideration must move at the desire of the promisor
• b) Consideration may move from the promisee or any other person
• c) It may be past, present or future
• d) Consideration must not be illusory, but real and competent
• e) Consideration need not be adequate
• f) There must be a pre-existing legal obligation
• g) Consideration must be legal or lawful

WHAT CONSIDERATION AND OBJECTS ARE LAWFUL AND WHAT ARE NOT:

As defined under Section 23 of the Contract Act:

The consideration or object of an agreement is lawful, unless:

1. It is forbidden by law; or

2. Is of such a nature that, if permitted, it would defeat the provisions of any law; or

3. Is fraudulent; or

4. Involves or implies injury to the person or property of another; or

5. The court regards it as immoral or opposed to public policy

In all the above cases, the consideration or object is unlawful, and every agreement based on such consideration or object is void.

AGREEMENT MADE WITHOUT CONSIDERATION:

As per Section 25 of the Contract Act:

General Rule:

An agreement made without consideration is void.

Exceptions to the General Rule:

1. Natural Love and Affection – Section 25(1):
   A written and registered agreement, made on account of natural love and affection between parties standing in a near relation to each other, is valid even without consideration.

2. Past Voluntary Services – Section 25(2):
   A promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor or done something the promisor was legally bound to do, is valid.

3. Time-Barred Debt – Section 25(3):
   A promise made in writing and signed to pay a debt that is barred by limitation is valid, even without fresh consideration.

4. Contract of Agency – Section 185:
   No consideration is required to create an agency.

INADEQUATE CONSIDERATION DOES NOT INVALIDATE A CONTRACT IF GIVEN WITH FREE CONSENT:

As per Explanation 2 to Section 25:

“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 whether the consent was freely given.”

CONCLUSION:

Consideration is the cornerstone of a valid contract. Without it, a promise is usually not enforceable. However, certain exceptions under Section 25 and Section 185 of the Contract Act allow enforceability even without consideration, such as agreements made out of natural love, for past voluntary services, time-barred debts, and agency contracts. It is also important to note that while inadequate consideration does not invalidate a contract, it may be used by the court to evaluate free consent.

Thus, every valid contract must be supported by lawful consideration, unless it falls within the defined statutory exceptions.