Page 23 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes 2. Consideration may move either from the promisee or any other person. It is not necessary
that the consideration must move from the promisee. It may move from any other
person. In such a situation, the promisee can maintain a suit even if he is a stranger to the
consideration. But he must not be a stranger to the contract.
Capacity of a stranger to consideration to file a suit: We have seen earlier that a stranger to

a contract cannot maintain a suit. However, a stranger to consideration can maintain a suit.
Consideration may be supplied either by promisee or any other person.

Example: A, a lady, by a deed of gift, transferred certain property to her daughter with a
direction that the daughter should pay an annuity to A’s brother as had been done by A. On the
same day, the daughter executed a writing in favour of A’s brother agreeing to pay the annuity

of ` 653. Afterwards, she declined to fulfill her promise saying that no consideration had moved
from A’s brother to her. A’s brother was held entitled to recover the money (Chinnayya v. Ramayya,
4 Mad 137).

3. Consideration need not be adequate. How much consideration or payment must there be
for a contract to be valid, is always the lookout of the promisor. Courts do not see whether a
person making the promise has recovered full return for the promise. Thus, if A promises to
sell his pen worth ` 80 for ` 20 only the inadequacy of the price in itself shall not render the

contract void. But where A pleads coercion, undue influence or fraud, then the inadequacy
of consideration will also be a piece of evidence to be looked into.
4. Consideration must be real and competent. A consideration for a contract must be real and
not illusory. Also, the consideration must be competent, i.e., it must be something to which
law attaches some value.

Example: (i) A promises to discover treasure by magic. The agreement is void, being
illusory. (ii) A received summons to appear as a witness at a trial. B, a party to the suit, promises
to pay An ` 1000 in addition to A’s expenses. The promise of B is not enforceable as A was
under a legal duty to appear and give evidence. The agreement is void as it is without competent
consideration. (iii) A promises to pay an existing debt punctually if B, the creditor, gives him
discount. B agrees to give discount. The promise to give discount is without consideration and
cannot be enforced.
5. Consideration must be legal. Illegal consideration renders a contract void.

6. A consideration may be present, past or future. A consideration which moves simultaneously
with the promise is called present (or executed) consideration. ‘Cash Sales’ provides an
excellent example of the present consideration. Where the consideration is to move at a
future date it is called future or executory consideration. It takes the form of a promise to
be performed in the future.

Example: A, a shopkeeper, promises B, a household lady, to deliver certain items of
grocery after three days. B promises to pay for it on delivery.
A past consideration is something wholly done, forborne or suffered before the making of the
contract.

Example: A saves B’s life. B promises to pay A ` 10,000 out of gratitude. The consideration
for B’s promise is a past consideration, something done before making of the promise.

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