What is Consideration? — Meaning, Essentials & Exceptions
This article has been authored by Advocate Swati Sharma, LL.B graduate from the Faculty of Law, University of Delhi
Introduction
Have you ever wondered why a simple promise—like “I will give you ₹1,000 tomorrow” is not a contract, but a promise to buy a pen for ₹10 is?
The secret lies in one powerful word: Consideration. Understanding this single concept can help you instantly identify whether an agreement is legally enforceable or just casual talk.
Meaning of Consideration (Section 2(d), Indian Contract Act, 1872)
In simple terms, consideration means something in return. It is the value that each party gives to make an agreement legally binding.
According to Section 2(d):
When, at the desire of the promisor, the promisee or any other person does something, abstains from doing something, or promises to do or not to do something, such act or promise is called consideration.
Essence of Consideration
- It must be given at the request of the promisor.
- It may move from the promisee or even a third person.
- It can be past, present, or future.
- It must have some value in the eyes of law, though it need not be adequate
Why is Consideration Important?
Consideration is the foundation of every valid contract. It ensures that both parties exchange something of value, making the agreement fair, serious, and enforceable.
A bare promise, made without anything in return, is not enforceable.
Example: A promises ₹1,000 to B without receiving anything in return.
But if B gives something in return, even a small value, the law recognizes it.
Example: A buys a pen from B for ₹10.
Types of Consideration
1. Past Consideration
An act already done before the promise is made.
Example: A returns B’s lost purse. Later, B promises to pay A ₹50.
2. Present Consideration
An act done in exchange for a promise.
Example: A hands over goods to B and B pays immediately.
3. Future Consideration
Mutual promises for future acts.
Example: A will deliver goods next week; B will pay on delivery.
General Rule: “No Consideration = No Contract”
Under Section 25, an agreement without consideration is generally void.
But to promote fairness and moral duties, the law provides specific exceptions where a contract is valid even without consideration.
Exceptions to Consideration (Section 25)
Exception 1: Natural Love and Affection
A written and registered agreement made out of natural love and affection between parties in near relation is valid without consideration.
Example:
A father executes a written and registered document promising to give his son ₹1,000.
Exception 2: Past Voluntary Services
If a person voluntarily does something for another, and later the other person promises to compensate, it is a valid contract.
Examples:
- A finds B’s purse. Later, B promises to pay A ₹50.
- A takes care of B’s infant son; B later promises to pay A.
Exception 3: Time-Barred Debt
A written and signed promise to pay a debt that has become unenforceable because of limitation is valid even without fresh consideration.
Example:
- A owes B ₹1,000, but the limitation period has expired. A signs a promise to pay ₹500.
Additional Points Under Section 25
Explanation 1: Gift Actually Made
A gift that is already completed is valid even without consideration. Once delivered, it cannot be invalidated for lack of consideration.
Explanation 2: Inadequate Consideration
The law does not require consideration to be equal in value. A contract is not void only because consideration is small.
Example:
A sells a horse worth ₹1,000 for ₹10, and consents freely.
However, if A claims his consent was not free, the inadequacy becomes an important factor for the court to examine.
Conclusion
Consideration is the heartbeat of every enforceable contract. It ensures seriousness, fairness, and mutual benefit. While the general rule is that no consideration equals no contract, the law wisely allows certain exceptions to uphold morality, relationships, and fairness.
