Contract Law
Consideration: Definition, Kinds and Essentials
Learn what consideration means under Section 2(d), how past, present and future consideration work, and when a promise without consideration can still be enforced.
The short answer
Consideration is the legally recognized price of a promise, given at the desire of the promisor.
The Section 2(d) rule
An act, abstinence or promise is consideration when it is done at the desire of the promisor in return for the promise.
Section 2(d) focuses on the exchange that supports the promise. The court identifies what was done, not done or promised, asks who desired it, and then connects it to the promise sought to be enforced. A benefit to the promisor may be evidence of an exchange, but benefit alone is not the statutory test.
The definition uses the words "has done", "does" and "promises to do". Indian law can therefore recognize past, executed and executory consideration, provided the other statutory conditions are satisfied.
At the promisor's desire
A voluntary act or an act done only at a third person's request is not consideration for the promisor's later promise.
May move from another person
Indian law permits consideration to move from the promisee or any other person, though only a party to the contract can ordinarily sue.
Must be real and lawful
It need not be financially adequate, but it cannot be illusory, impossible or unlawful.
Need not be adequate
Courts generally do not measure whether the bargain was equal, but gross inadequacy may help show that consent was not free.
Past, present and future consideration
The wording of Section 2(d) recognizes three times at which consideration may operate.
Past
The act has already been done at the promisor's desire before the promise is made.
Present or executed
The act is performed in exchange for the promise, as in a reward offer accepted by performance.
Future or executory
Each side promises a later performance.
Reality, adequacy and existing duties
A court does not rewrite a poor bargain, but it still asks whether the alleged consideration has legal reality.
Consideration must not be physically impossible, legally impossible, uncertain or merely illusory. A promise to do what the promisor is already legally bound to do may require careful analysis because it may add no fresh legal value. A different performance, an additional burden or a compromise of a genuine disputed claim may supply consideration.
Explanation 2 to Section 25 states that inadequate consideration does not by itself make an agreement void. If consent is disputed, however, marked inadequacy is a relevant circumstance when the court decides whether consent was freely given.
When an agreement without consideration is enforceable
Section 25 begins with the general rule that an agreement without consideration is void, then preserves specific categories.
Natural love and affection
The promise must be in writing, registered, made between parties standing in near relation, and based on natural love and affection. Relationship alone is insufficient.
Past voluntary service
A promise to compensate a person who has already voluntarily done something for the promisor, or something the promisor was legally compellable to do, may be enforceable.
Time-barred debt
A written and signed promise to pay wholly or partly a debt barred by limitation is enforceable to the extent promised.
Completed gifts
Section 25 does not disturb the validity of a gift that has already been completed between donor and donee.
Agency
Under Section 185, no consideration is necessary to create an agency.
Leading cases and what they establish
Read each authority for the proposition it proves, the legal question it answers and the reasoning that supports the result.
Kedarnath Bhattacharji v. Gorie Mahomed
(1886) ILR 14 Cal 64
Held: A subscription became enforceable when liability was incurred on the faith of the promise.
Why it matters: Use it where the promisee changed position or incurred obligations because of a promised contribution.
Read the judgmentChinnaya v. Ramayya
(1882) ILR 4 Mad 137
Held: Consideration may move from a person other than the promisee under the Indian statutory definition.
Why it matters: Use it to distinguish consideration moving from a third person from the separate rule of privity of contract.
Durga Prasad v. Baldeo
(1880) ILR 3 All 221
Held: An act done at the direction of a public authority, and not at the defendant promisor's desire, did not support the defendant's later promise.
Why it matters: Use it to show why benefit to the promisor is not enough without the statutory requirement of the promisor's desire.
Abdul Aziz v. Masum Ali
AIR 1914 All 22
Held: A bare promise to make a charitable contribution was not enforceable where no liability had been incurred on the faith of it.
Why it matters: Contrast it with Kedarnath to show when reliance on a subscription supplies consideration.
Using this topic in a legal answer
A clear answer sequence
- Quote the substance of Section 2(d).
- Identify the act, abstinence or promise and connect it to the promisor's desire.
- Classify the consideration by time.
- Test reality, lawfulness and any Section 25 exception.
- Apply one relevant case and conclude.
Points that are often confused
- Writing that consideration must always move from the promisee.
- Confusing inadequacy with absence of consideration.
- Calling every earlier act valid past consideration.
Open the revision and self-check sheet
Rules to retain
- Consideration may be an act, abstinence or promise.
- It must be at the promisor's desire.
- It may move from the promisee or any other person.
- No consideration generally means no contract, subject to Section 25.
- Inadequacy is not the same as absence of consideration.
- Section 185 separately provides that agency needs no consideration.
Questions to test understanding
- Can consideration move from a stranger under Indian law?
- When does an earlier act count as past consideration?
- What are the three principal Section 25 exceptions?
Questions students ask
Must consideration be equal in value to the promise?
No. It must be real and lawful, but it need not be adequate. Inadequacy can still be relevant when the court examines free consent.
Is a promise without consideration always void?
Usually, but Section 25 contains specific exceptions and other statutory rules may also apply.
Is past consideration valid in India?
Yes, when the earlier act was done at the promisor's desire and the requirements of Section 2(d) are satisfied. A merely voluntary act done without that desire does not automatically become consideration.
Can consideration move from someone other than the promisee?
Yes. Section 2(d) expressly permits consideration to move from the promisee or any other person. This does not mean that every stranger to the contract can sue.
Does creating an agency require consideration?
No. Section 185 expressly states that no consideration is necessary to create an agency.
Primary sources and further reading
This article is written for legal education. Verify the governing provision, applicable amendments and complete judgment before relying on a proposition in practice.