Types of Consideration - Law of Contract - Lecture Slides, Slides for Law of Contract. Aligarh Muslim University

Law of Contract

Description: Types of Consideration, Dunlop V Selfridge, House of Lords, Executed Consideration, Future Consideration, Rules of Consideration, Loss Suffered, Promise to a Stranger, Public Policy, Natural Love and Affection are some points from this lecture. This lecture is part of lecture series on Law of Contract course. I have full series of lectures on this subject. I am sharing this with my friends on docsity. Enjoy.
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X promises not to file a suit against Y if Y pays him $100 by a fixed date. The forbearance of X

is the consideration for Y's Payment.

A promise given in a contract is only binding on the promisor if

(i) it is supported by consideration; or

(ii) the promise is in the form of a deed.

Currie v Misa: consideration is either an advantage to the promisor or a detriment incurred by the


A better definition adopted by the House of Lords in Dunlop v Selfridge is an act or forbearance

of one party, or the promise thereof, is the price for which the promise of the other is bought, and

the promise thus given for value is enforceable.

Types of Consideration

1. Present consideration:

•Consideration which moves simultaneously with the promise is called Present Consideration or

Executed Consideration.

2. Future consideration:

•When the consideration is to move at a future date, it is called Future Consideration or

Executory Consideration.

3. Past consideration:

When the consideration of one party was given before the date of the promise, it is said to be



In three cases past consideration for a promise does suffice to make the promise binding.

(a) Bill of exchange

(b) Recovery of a debt

(c)Service made on request

Rules of Consideration:

As well as determining whether consideration is valid on the grounds of being executed or

executory, the court will also seek to ensure that:

 1. desire (or request) of the promisor is essential : The act done or loss suffered by the

promisee must have been done or suffered at the desire of the promisor. Ex: P sees Q's house

on fire and helps in extinguishing it. Q did not ask for his help. P cannot demand payment for

his services.

 2. The consideration must be real :

 The consideration must have some value in the eye of taw.

 The impossible' acts and illusory or non-existing goods cannot support a contract. Ex: X promises to supply Y one tola of gold brought from the sun. The consideration is sham and illusory and there is no contract.

 A contribution to charity is without consideration. It is not real consideration.

3. public duty :

 Where the promise is already under an existing public duty, an express promise to perform, or

performance of that duty will not amount to consideration. Ex: A contract to pay money to a

witness who has received a subpoena to appear at a trial.


4. Promise to a stranger: X wrote to his nephew B, promising to pay him an annuity of £150 in consideration of his marrying C. B was already engaged to marry C. Held, the fulfillment of B's contract with C was consideration to support X's promise to pay the annuity. 5. Consideration need not be adequate: P agrees to sell a horse worth $1000 for $. 10. P's consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration. If the consideration is inadequate, the Court may hold that consent of the promisor was not freely given and the agreement may become void. 6. The consideration must not be illegal, immoral, or opposed to public policy: if the consideration of the object of the agreement is illegal, the agreement cannot be enforced. 7. The consideration may be present, past, or future : This follows from the definition of consideration given in the Act. 8. Consideration may move from the promisee or from any other person : A person granted some properties to his wife C directing her at the same time to pay an annual allowance to his brother R. C also entered into an agreement with R promising to pay the allowance to R. This agreement can be enforced by R even though no part of the consideration received by C moved from R.


 What is good consideration? :

The rules or the necessary factors for consideration can be summed up as follows:

(1) there must be desire of the promisor;

(2) it must be real;

(3) reasonable;

(4) not illegal, immoral or opposed to public policy;

(5) present, past or future ; and

(6) from the promisee or any person.

Subject to the above essential factors, a good consideration can be any of the following:

(1) physical goods;

(2) services;

(3) forbearance (for example not to sue);

(4) arbitration or the compromise of disputed claims, and

(5) settlement or composition with creditors.


A promise without consideration is a gratuitous undertaking and cannot create a legal obligation.

 Exceptions:

There are exceptional cases where a contract is enforceable even though there is no consideration. They are as follows :


I. Natural love and affection: An agreement without consideration is valid only if the following requirements are

complied with: (i) The agreement is made by a written document. (ii) The document is to be registered. (iii) The agreement is made on account of natural love and affection. Ex: A for natural love and affection, promises to give his son B, $.1, 000. A puts his promise to B in writing and registered it. This is a contract. (iv)The parties to the agreement stand in a near relation to each other. 2. Voluntary Compensation :  D finds B's purse and gives it to him. B promises to give D $. 50. This is a contract.  D supports B's infant son. B promises to pay D's expenses in so doing. This is a contract. 3. time-barred debt: D woes B $ 1000 but the debt is barred by the Limitation Act. D signs a written promise to pay B $.500 on account of the debt. This is a contract. 4. Agency: No consideration is required to create an agency. 5. Completed gift: If a person gives certain properties to another according to the provisions of the Transfer of Property Act (i.e., by a written and registered document) he cannot subsequently demand the property back on the ground that there was no consideration.


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