Consideration in Contract Law
No consideration, no contract - except when the Indian Contract Act says otherwise, and those exceptions are exactly where CLAT tries to catch aspirants off guard.
10 questions · 5 minutes · instant scoring
What this topic actually tests
Section 2(d) of the Indian Contract Act, 1872 defines consideration broadly: 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 abstain from doing something, such act or abstinence is called consideration. Two features distinguish Indian law from English common law here. First, consideration need not move from the promisee alone - it may move from a third person, so long as it moves at the promisor's desire; this is why a stranger to the consideration can, in Indian law, sometimes enforce a promise, unlike under strict English privity rules. Second, and separately, is the doctrine of privity of contract, which generally still prevents a person who is not a party to the contract from suing on it, subject to recognised exceptions such as trusts, family arrangements creating a charge in favour of a beneficiary, and assignment of contractual benefits. Section 10 requires lawful consideration (and a lawful object) for an agreement to be a contract, and Section 23 voids agreements whose consideration or object is unlawful. Section 25 lays down the general rule that an agreement without consideration is void, but carves out three important exceptions: (1) a written and registered agreement made on account of natural love and affection between parties standing in a near relation to each other; (2) 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; and (3) a written and signed promise to pay a debt barred by limitation. Explanation 2 to Section 25 further clarifies that an agreement is not void merely because the consideration is inadequate, though inadequacy may be relevant evidence of fraud, coercion, or undue influence. CLAT questions on this topic typically present a fact pattern and ask whether it falls within one of these Section 25 exceptions or fails for want of consideration.
The common trap on this topic
Aspirants frequently apply the blanket rule 'no consideration, no contract' without checking whether the fact pattern fits one of the three specific Section 25 exceptions - natural love and affection (with the added requirements of writing, registration, and near relation), past voluntary service, or a written promise to pay a time-barred debt - all of which validate an agreement despite the absence of ordinary consideration. A second, subtler trap is conflating privity of consideration with privity of contract: Indian law departs from the English rule by allowing consideration to move from a person other than the promisee, but this does not automatically mean that a total stranger to the contract can sue upon it - the separate doctrine of privity of contract still generally bars strangers from suing, subject to narrow exceptions like trusts and family settlements. Students also wrongly assume that unequal or token consideration invalidates a contract; inadequacy of consideration alone does not void an agreement, though it may be a relevant factor if fraud or undue influence is separately alleged.
Take the micro-test
Is the father's promise enforceable despite the absence of consideration?
Can the mother's sister, who provided no consideration herself, argue that the daughter's promise was nonetheless supported by valid consideration?
Is Vishal's promise enforceable?
Is Meera's promise to pay Sanjay enforceable?
Is Tanya correct that the sale is void for inadequate consideration?
Can C succeed in a direct suit against B?
Is the client's promise to pay extra enforceable?
Is Kabir's promise to pay supported by valid consideration?
Can Ritu enforce Naveen's promise?
Is this agreement enforceable as a valid contract?
FAQ
Does a promise made purely out of love and affection require consideration to be enforceable?
It can be enforceable without ordinary consideration if it satisfies Section 25(1): the promise must be in writing, registered, and made between parties standing in a near relation to each other, expressed on account of natural love and affection.
Can a person who is not a party to a contract but for whose benefit it was made sue upon it?
Generally, privity of contract bars strangers from suing, but Indian courts recognise exceptions such as trusts, marriage or family settlements creating a beneficial interest, and assignment of contractual rights, allowing the beneficiary to enforce the promise in those specific situations.
Is a contract void just because one party got a much better bargain than the other?
No. Mere inadequacy of consideration does not by itself void an agreement under Explanation 2 to Section 25, though a court may consider it as evidence when deciding a separate claim of fraud, coercion, or undue influence.
Keep practising
- → Offer and Acceptance in Contract Law
- → Breach of Contract and Remedies
- → Negligence in the Law of Torts
- → All Legal Reasoning practice
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