Define consideration. Discuss that consideration and objects are unlawful under the Indian Contract Act, 1872?

Question: Define consideration. Discuss that consideration and objects are unlawful under the Indian Contract Act, 1872? [HJS 1984]

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Answer

Section 2 (d) of the Indian Contract Act 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 to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.

The definition of consideration in Section 2(d) requires, in the first place, that:

1. the act or abstinence, which is to be a consideration for the promise, should be done at the desire of the promisor,
2. secondly, that it should be done by promisee or any other person and,
3. lastly, that the act or abstinence may have been already executed or is in the process of being done or may be still executory, that is to say, it is promised to be done.

Section 25 of the Indian Contract Act opens with the declaration that “an agreement made without consideration is void…” In the words of Pollock, “Consideration is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.”

By section 10, an agreement is enforceable only if it is made for a lawful consideration and with a lawful object. Section 23 declares what kinds of considerations and objects are not lawful.

A contract for an unlawful consideration or object is void. The consideration or object is unlawful if it is:

1. forbidden by law;
2. is of such a nature that it would defeat the provisions of law;
3. is fraudulent;
4. involves or implies injury to the person or property of another; or
5. if the court regards it as immoral or opposed to public policy.

A transfer of property for an unlawful object or consideration is void.

For example, consideration is lawful where there is a contract for the sale of a house for a specified sum of money; where there is a promise to grant time to a debtor to pay, in consideration of a third party promise to pay the creditor in case of the failure of the debtor to pay within the specified time; where there is a promise to make good any loss suffered due to damage to property, in consideration of the payment of a sum of money; where there is a promise to pay a sum in consideration of agreeing to maintain one's child.

The consideration in an agreement is unlawful if it is to share the gains acquired by fraud; to pay a bribe to obtain employment; by an agent to obtain a lease of land from the principal without his knowledge for a third party; to drop a prosecution for robbery in consideration of repayment of what was stolen; between a defaulter and a third party for the latter to purchase on behalf of the defaulter, property sold for non-payment of land revenue which he is prohibited from purchasing; to exercise influence by a mukhtar in favour of a person who agrees to pay a certain amount to the client; to let on hire a daughter for concubinage.

An agreement is void for unlawfulness if its object or consideration is unlawful at the time it is made.

In the case of Surasaibalini Debi v. Phanindra Mohan Majumdar AIR 1965 SC 1364, where an employee of the Court of Wards started a business in the name of another with the object of circumventing non-statutory service rules and did not disclose his income from that business to the income tax authorities, the agreement was not unlawful because evasion of tax was not the object of the transaction.

Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
2. Law of Contract Mains Questions Series Part-II
3. Law of Contract Mains Questions Series Part-III
4. Law of Contract Mains Questions Series Part-IV
5. Law of Contract Mains Questions Series Part-V
6. Law of Contract Mains Questions Series Part-VI
7. Law of Contract Mains Questions Series Part-VII
8. Law of Contract Mains Questions Series Part-VIII
9. Law of Contract Mains Questions Series Part-IX
10. Law of Contract Mains Questions Series Part-X