Page 48 - DCOM103_COMMERCIAL_LAW

Unit 4: Consideration

4.5 Summary Notes

Section 2 (d) defi nes consideration as: “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”.
A promise without consideration is valid if it is a promise to compensate wholly or in part
a person who has already voluntarily done something for the promisor or something the
promisor was legally compellable to do. Thus, where A finds B’s purse and gives it to him,

and B promises to give A ` 100, this a valid contract.
A promise to pay wholly or in part a debt which is barred by the Limitation Act can be
enforced if it is in writing and is signed by the debtor or his authorised agent. A debt
barred by limitation cannot be recovered. Therefore, a promise to pay such a debt is, strictly
speaking, without any consideration. But if a written promise to pay is made by the debtor
then the same is enforceable by the creditor.
Consideration must move at the desire of the promisor and therefore an act done by the
promise at the desire of a third party is not a consideration.
The Act declares certain agreements to be void. Some of them (such as the following)
have already been explained: (i) agreements entered into through a mutual mistake of fact
between the parties (S. 20); (ii) agreements, the object or consideration of which is unlawful
(S. 23); (iii) agreements, part of consideration of which is unlawful (S. 24); (iv) agreements
made without consideration (S. 25).

The seller of the goodwill of a business may agree with the buyer to refrain from carrying
on a similar business, within specified local limits, so long as the buyer or any one deriving

title to the goodwill from him carries on a like business, provided that such limits are
reasonable (s.27).
Every person has a right to have recourse to the usual legal proceedings. Therefore, s.28
renders void an agreement by which a party is restricted absolutely from enforcing his legal
rights arising under a contract by the usual legal proceedings in the ordinary tribunals.

4.6 Keywords

Consideration: “A valuable consideration in the sense of the law may consist either in some

right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or

responsibility given, suffered or undertaken by the other. “But to this definition there should be

added that “the benefit accruing or the detriment sustained was in return for a promise given or
received.”
Illegal Consideration: Renders a contact void.
4.7 Self Assessment

Fill in the blanks:
1. ............................. renders a contract void.
2. An agreement which ............................. with morals of the time and contravenes any
established interest of society is void as being against public policy.
3. ............................. provides that “every agreement by which any one is restrained from
exercising a lawful profession, trade or business of any kind is, to that extent, void”.

LOVELY PROFESSIONAL UNIVERSITY 41