Types of Consideration under Indian Contract Law
Consideration under Indian Contract Law
1. What is Consideration?
Consideration means something in return for a promise in a contract.
It is the price for which the promise of the other is bought.
Without consideration, most agreements are not enforceable (with some exceptions under Indian law).
2. Section 2(d) of the Indian Contract Act, 1872
Defines 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 abstain from doing something, such act or abstinence or promise is called a consideration for the promise.”
3. Types of Consideration
Consideration can be classified based on different criteria:
A. Past, Present, and Future Consideration
| Type | Explanation | Validity under Indian Law | Case Law Example |
|---|---|---|---|
| Past Consideration | Something already done before the promise is made. | Valid in India (unlike English law) | Chinnaya v. Ramayya (1882): Past consideration is valid if the act was done at the desire of the promisor. |
| Present Consideration | Something done simultaneously with the promise. | Valid | Common in contracts where consideration and promise happen together. |
| Future Consideration | Promise to do something in the future. | Valid | Most common in contracts involving mutual promises. |
B. Executed and Executory Consideration
| Type | Explanation | Example |
|---|---|---|
| Executed Consideration | When consideration is already performed (act done). | Buying goods and paying immediately. |
| Executory Consideration | When consideration is promised to be done in the future. | Promise to deliver goods next week in return for payment. |
C. Adequacy and Sufficiency of Consideration
Sufficient Consideration: The law requires consideration to be something of value in the eyes of the law, but it need not be equal in value to the promise.
Adequate Consideration: There is no requirement that the consideration must be adequate or equal; courts do not generally assess fairness.
4. Important Case Laws
a. Chinnaya v. Ramayya (1882)
The Supreme Court held that past consideration is valid in India.
If an act was done at the desire of the promisor, even if before the promise, it counts as valid consideration.
b. Thomas v. Thomas (1842) (English case often cited)
Established that consideration must be something of value, but does not need to be adequate.
Indian law follows a similar principle about sufficiency.
c. Currie v. Misa (1875) (English case)
Defines consideration as some right, interest, profit, or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered, or undertaken by the other.
5. Summary Table
| Type of Consideration | Validity under Indian Law | Key Point | Example |
|---|---|---|---|
| Past | Valid | Must be done at promisor’s desire | Helped promisor before promise |
| Present | Valid | Done at the time of contract | Exchange of goods and payment |
| Future | Valid | Promise to act in the future | Promise to deliver goods later |
| Executed | Valid | Act already performed | Paid for goods received |
| Executory | Valid | Promise to perform | Promise to pay later |
| Adequacy | Not necessary | Courts don’t check fairness | Exchange of unequal values |
6. In Simple Words
Consideration is what you give or promise to give in exchange for a promise.
It can be something done in the past, now, or in the future.
Indian law is flexible — past consideration counts if done at the request of the other party.
The law doesn’t force you to give equal value, just something legally recognized.
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