Consideration in Contract Law

Principle: Under Section 25(1) of the Indian Contract Act, an agreement made without consideration is nonetheless valid if it is expressed in writing, registered under the law for registration of documents, and made on account of natural love and affection between parties standing in a near relation to each other. Facts: A father, out of affection, executes a registered written document promising to transfer his ancestral house to his daughter. No money or service is exchanged for this promise.

Is the father's promise enforceable despite the absence of consideration?

Answer: D. Yes, because it satisfies all three requirements of Section 25(1): writing, registration, and natural love and affection between near relations.

The facts satisfy all conditions of Section 25(1) - a written, registered document, natural love and affection, and a near relation (father-daughter) - so the promise is enforceable despite lacking ordinary consideration. Option C wrongly narrows the exception to spouses only, when it covers near relations generally.

Principle: Consideration under Section 2(d) may move from the promisee or from any other person, at the desire of the promisor; Indian law does not require that consideration move exclusively from the person seeking to enforce the promise. Facts: A mother, while gifting property to her daughter, directs the daughter to pay an annuity to the mother's sister for life. The daughter accepts the property on this condition and executes a document agreeing to pay the annuity, but later stops paying.

Can the mother's sister, who provided no consideration herself, argue that the daughter's promise was nonetheless supported by valid consideration?

Answer: A. Yes, because the consideration for the daughter's promise moved from the mother (who transferred the property at her own desire), and Indian law permits consideration to move from a person other than the promisee.

Since consideration (the property) moved from the mother at whose desire the daughter promised to pay the annuity, the promise is supported by valid consideration even though it did not move from the sister herself, reflecting the Indian departure from strict privity of consideration. Option C applies the stricter English rule, which does not represent Indian law.

Principle: Section 25(3) validates a promise to pay, wholly or in part, a debt that the creditor could have enforced but for the law of limitation, provided the promise is in writing and signed by the debtor or their authorised agent. Facts: Vishal owed Rs. 1 lakh to a friend, but the three-year limitation period to sue for recovery had already expired. Vishal later signs a written note acknowledging the debt and promising to repay it within six months.

Is Vishal's promise enforceable?

Answer: B. Yes, because it is a written and signed promise to pay a time-barred debt, which is a valid exception under Section 25(3).

This scenario squarely fits Section 25(3): a written, signed promise to pay a time-barred debt is enforceable without fresh consideration. Option A incorrectly imports the registration requirement, which applies to Section 25(1) (love and affection) but not to Section 25(3).

Principle: Under Section 25(2), a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor is enforceable even without fresh consideration, since the past voluntary act itself serves as valid consideration. Facts: While Meera was away, her neighbour Sanjay, acting entirely on his own initiative, repaired a burst water pipe in her house to prevent flooding, without any prior request from Meera. On returning and learning of this, Meera promises to pay Sanjay Rs. 5,000 for his trouble.

Is Meera's promise to pay Sanjay enforceable?

Answer: B. Yes, because it falls within Section 25(2) as a promise to compensate a person for a voluntary act already done for the promisor.

Section 25(2) specifically covers promises to compensate for past voluntary acts done for the promisor, even without a prior request, making Meera's promise enforceable. Option A wrongly applies the ordinary Section 2(d) 'desire of promisor' requirement, which Section 25(2) exists precisely to override for past voluntary acts.

Principle: Under Explanation 2 to Section 25, an agreement is not void merely because the consideration is inadequate, though inadequacy may be considered by a court in determining whether consent was freely given. Facts: Owing to their close friendship, Rakesh sells his motorcycle, market value Rs. 60,000, to Tanya for Rs. 5,000. Tanya later insists the sale is invalid because the price was far below the motorcycle's real value.

Is Tanya correct that the sale is void for inadequate consideration?

Answer: D. No, because mere inadequacy of consideration does not void an agreement, absent evidence of fraud, coercion, or undue influence.

Explanation 2 to Section 25 makes clear that inadequacy of consideration alone does not invalidate a contract; the low price here, arising from friendship, does not by itself void the sale. Option A incorrectly imposes a requirement of rough value-equivalence that Indian contract law does not recognise.

Principle: Privity of contract generally prevents a person who is not a party to a contract from suing to enforce it, even if the contract was intended to benefit that person, subject to limited exceptions such as trusts and family settlements. Facts: A and B enter into a contract under which B agrees to pay a sum of money to C, a friend of A who is not a party to the agreement and provided no consideration. B later refuses to pay C, and C sues B directly to enforce the promise, without any trust or family settlement being involved.

Can C succeed in a direct suit against B?

Answer: A. No, because C is a stranger to the contract, and privity of contract generally bars a non-party from suing to enforce it in the absence of a recognised exception like trust or family settlement.

This tests the distinction between privity of consideration and privity of contract: even though Indian law permits consideration to move from a third party, C, as a stranger to the contract itself with no trust or family settlement to rely on, generally cannot sue B directly. Option B commits the classic error of collapsing the two doctrines into one.

Principle: A promise to perform an act one is already legally bound to do under an existing contract with the same promisor does not, by itself, furnish fresh consideration for a new promise of additional payment for the same performance. Facts: A contractor already bound by contract to complete a building by a fixed date, without any change in scope of work, later demands and receives a promise of extra payment from the client merely for finishing the work on the originally agreed date.

Is the client's promise to pay extra enforceable?

Answer: B. No, because completing an act one is already legally bound to do under the existing contract is not fresh consideration for a new promise.

Since the contractor merely promised to do what was already contractually required, there is no fresh consideration moving to the client's new promise of extra payment, so it is generally unenforceable for want of consideration. Option D is wrong because contracts can validly be modified; the issue here is the absence of consideration, not an inherent bar on modification.

Principle: Forbearance to sue - that is, a promise to refrain from enforcing a valid legal claim - can itself constitute good consideration for a promise made in return. Facts: Owing money to Deepa, Irfan is on the verge of being sued. Deepa agrees not to file the suit for one year if Irfan's brother, Kabir, promises to pay the debt if Irfan defaults. Kabir makes this promise, and Deepa refrains from suing for the year.

Is Kabir's promise to pay supported by valid consideration?

Answer: B. Yes, because Deepa's forbearance from suing Irfan, a valid legal claim she possessed, constitutes good consideration for Kabir's promise.

Deepa's act of abstaining from suing - something she was otherwise entitled to do - is a valid abstinence under Section 2(d) and thus good consideration for Kabir's promise. Option D is incorrect because consideration need not directly benefit the promisor personally; it is enough that the promisee did or abstained from doing something at the promisor's desire.

Principle: An agreement made without consideration is void unless it falls within one of the specific exceptions recognised under Section 25. Facts: Purely as a gesture of generosity and without any of the circumstances of near relation, past voluntary service, or time-barred debt being present, Naveen promises his acquaintance Ritu Rs. 20,000 'for no particular reason,' with no writing or registration involved. Naveen later refuses to pay.

Can Ritu enforce Naveen's promise?

Answer: A. No, because the promise is a bare gratuitous promise without consideration, and none of the Section 25 exceptions apply on these facts.

With no near relation, registered writing, past voluntary act, or time-barred debt in the picture, this is a plain gratuitous promise without consideration and is void under Section 25. Option D is wrong because failing to honour a gratuitous promise is not a criminal matter; it simply produces no enforceable civil obligation.

Principle: Under Section 23, consideration or an object is unlawful, among other reasons, if it is forbidden by law, defeats the provisions of any law, or is fraudulent; an agreement with unlawful consideration is void even if both parties freely agreed to it. Facts: Two neighbours agree that one will pay the other Rs. 15,000 in exchange for trespassing onto and damaging a rival's fence out of personal spite.

Is this agreement enforceable as a valid contract?

Answer: D. No, because the consideration involves an unlawful act (trespass and damage to property), rendering the agreement void under Section 23.

Since the consideration involves committing an unlawful act, the agreement is void under Section 23 regardless of free consent between the parties. Option A is incorrect because free consent cannot cure an agreement whose object or consideration is itself unlawful.