CHANAKYA NATIONAL LAW UNIVERSITY

TOPIC: PAST CONSIDERATION UNDER SECTION 2(d) AND SECTION 25(2)

OF INDIAN CONTRACT ACT 1872
SUBMITTED TO:
MRS. SUSHMITA SINGH
FACULTY OF LAW OF CONTRACT-I
SUBMITTED BY:
KARTIKAY TRIVEDI
ROLL NO. 1532
B.A.LLB
2nd SEMESTER

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 CONTENTS

Contents
ACKNOWLEDGEMENT ............................................................................................................................ 3
RESEARCH METHODOLOGY .................................................................................................................. 4
CHAPTER 1-INTRODUCTION .................................................................................................................. 6
CHAPTER 2 – PAST CONSIDERATION .................................................................................................. 8
2.1 ENGLISH LAW ..................................................................................................................................... 8
2.2 INDIAN LAW ...................................................................................................................................... 10
CHAPTER 3- SECTION 25(2) OF INDIAN CONTRACT ACT, 1872 .................................................... 12
CHAPTER 4-CONCLUSION .................................................................................................................... 15

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 ACKNOWLEDGEMENT

I would like to thank my faculty Mrs. Sushmita Singh without the kind and support
of whom the completion of the project would have been a herculean task for me.
She took out time from his busy schedule to help me to complete this project and
suggested me from where and how to collect data.

Acknowledges are also due to my friends who gave their valuable and meticulous
advice which was very useful in writing the project.

I would also like to express my gratitude towards the library staff for working long
hours to facilitate us with required material going a long way in quenching our
thirst for education.

I would also like to express my gratitude towards my parents and all those unseen
hands who helped me out at every stage of my project.

KARTIKAY TRIVEDI

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 RESEARCH METHODOLOGY

AIMS AND OBJECTIVES:

 The researcher will do the research to understand the concept of
Past Consideration

HYPOTHESIS:
Ambit of past consideration in section 25 (2) of ICA, 1872 is wider than past
consideration given in section 2(d) of ICA, 1872.

METHOD OF RESEARCH:
 The methodology adopted for this research work is traditional i.e., doctrinal
and non-doctrinal too.

SOURCES OF DATA:
 The researcher focuses on obtaining information from both the available
sources i.e., primary sources of data as well as secondary sources of data.
 Primary sources of data include first-hand information available like field
work and legal sources and secondary sources include articles, books,
journals, newspaper, magazines and online materials.

METHODS OF DATA COLLECTION:

 For the purpose of research work, the researcher has done doctrinal and non-
doctrinal research methods. In doctrinal research method, the researcher has

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 collected information through library study, books and through surfing the
web.

METHOD OF WRITING:
 The method of writing followed in the course of this project is primarily
analytical.

MODE OF CITATION:
 The researcher has followed a uniform mode of citation throughout the
course of this project.

REVIEW OF LITERATURE

 The project entitled “Difference between Illegal and Void Agreement” provides for the
differences between Illegal and Void Agreement under the various provisions provided
for in The Law of the Contracts, 1872.

 For various sources of data collection the researcher derived material from the Law of
Contracts-I by Dr. R. K. Bangia, which deals with the important sections of the Indian
Contract Act, 1872. The researcher derived some materials from The Contract and
Specific Relief Acts by Pollock & Mulla and The Law of Contracts by J. I. Clark Hare.
These books proved to be very helpful for the research project.

 Most of the research work was carried out with the help of Law of Contracts-I by R.K.
Bangia which provided for the detailed analysis of the sections concerned as well as the
important case laws and illustrations regarding the project topic and the remaining
research was possible with the help of internet resources and e-resources.

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 CHAPTER 1-INTRODUCTION

Consideration is the concept of legal value in connection with contracts. It is anything of value
promised to another when making a contract.In common law it is a prerequisite that both parties
offer consideration before a contract can be thought of as binding. The doctrine of consideration
is irrelevant in many jurisdictions, although contemporary commercial litigant relations have
held the relationship between a promise and a deed is a reflection of the nature of contractual
considerations. If there is no element of consideration found, there is thus no contract formed.1
However, even if a court decides there is no contract, there might be a possible recovery
under quantum meruit (sometimes referred to as a quasi-contract) or promissory estoppel.
If A signs a contract to buy a car from B for $5,000, A's consideration is the $5,000, and B's
consideration is the car.
Additionally, if A signs a contract with B such that A will paint B's house for $500, A's
consideration is the service of painting B's house, and B's consideration is $500 paid to A.
Further, if A signs a contract with B such that A will not repaint his own house in any other color
than white, and B will pay A $500 per year to keep this deal up, there is also consideration.
Although A did not promise to affirmatively do anything, A did promise not to do something that
he was allowed to do, and so A did pass consideration. A's consideration to B is
the forbearance in painting his own house in a color other than white, and B's consideration to A
is $500 per year.
Conversely, if A signs a contract to buy a car from B for $0, B's consideration is still the car, but
A is giving no consideration, and so there is no valid contract. However, if B still gives the title
to the car to A, then B cannot take the car back, since, while it may not be a valid contract, it is a
valid gift.

According to Blackstone2:

“Consideration is the recompense given by a party contracting to the other.”Or the price of the
promise.Sir Fredrik Pollock summarized the position of words adopted by the House of Lords
in1915: “An act of forbearance of one party or the promise thereof is the price for whichthe
promise of the other is bought, and the promise thus given for value is enforceable.”3

The definition given in

Curre v Misa4 by Lush J is widely accepter and stated onthe next page:“A valuable consideration
in the sense of the law may consist either in some right,interest, profit or benefit accruing to the

1
Bangia R.K.: Law of Contracts
2
Commentaries
3
Pollock On Contracts (13thEd.) p. 133
4
(1875) LR 10 Ex 153, 162

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one party, or some forbearance,determent, loss, or responsibility given, suffered or undertaken
by the other…”

Definitions of Consideration under Section 2(d)

Section 2 (d), The Indian Contract Act, 1872 defines consideration as given under:“When, at the
desire of the promisor, the promise or any other person has done or abstained from doing, or
does or abstains from doing or promises to do or abstain fromdoing something, such act or
abstinence or promise is called a consideration for the promise.”

Essentials of Consideration

The definition of consideration highlights the following essentials to be fulfilled for the presence
of a valid consideration:

1) Consideration to be given “at the desire of the promisor”

2) Consideration to be given “by the promise or any other person”

3) Consideration may be past, present or future, in so far as definition says that the
promisee:a)Has done or abstained from doing, or b)Does or abstains from doing, or c)Promises
to do or to abstain from doing, something.

4) There should be some act, abstinence or promise by the promisee, which

constitutesconsideration for the promise5.

The term consideration must be distinguished from the act of agreed price.The act of payment of
price (or its non payment) is the performance of a promise already agreed.Consideration can
exist or non-exist , and must be reconed ,with reference to the making of a contract.If a promise
to pay the price is the consideration for the promise, payment of price is performance of that
promise and not its consideration. Not paying price agreed is non-performance or breach, and not
lack of consideration6.

Consideration is of three types i.e. past , present and future.In the following topic we will deal
with past consideration.

5
Supra note 1
6
Pollock and mulla 14th edition

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 CHAPTER 2 – PAST CONSIDERATION

Past consideration means that the consideration for the promise had been given earlier and the
promise has been made afterwards. It is, of course, necessary that at the time
theact constituting consideration was done, must have been done at the desire of the promisor7.

For example in lost or found cases if A looses his watch and puts out a noticethat whoever finds
it will get Rs.500 as reward. The person who finds it has already donethe consideration. This
amounts to valid (past) consideration under Section 2(d), and the promise is enforceable. The
words “has done and abstained from doing”, in Section 2(d)of the Indian Contract Act, 1872,
according to Pollock and Mulla8 “declare the law to bethat an act done by A at B’s request,
without any contemporaneous promise from B, may be consideration for a subsequent promise
from B to A.”

Generally, past consideration is not a valid consideration and has no legal value. Past
consideration is consideration that has already flowed from the promisee to the promisor. That is,
the promisee's act or forbearance predates the promisor's promise. Past consideration therefore
cannot be used as a basis when claiming damages9.

An exception to this rule is where there is a duty owed to a third party. An act done before the
giving of a promise to make a payment or to confer some other benefit can sometimes be
consideration for the promise. For this to hold, three conditions must be satisfied:
1. The act must have been done at the promisor’s request
2. The parties must have understood the act was to be remunerated either by a payment or
the conferment of some other benefit
3. Payment/conferment of the benefit must have been legally enforceable had it been
promised in advance

2.1 ENGLISH LAW

If the act or forebearance alleged to constitute the consideration has already been done before,
and independently of the giving of promise, it is said to amount to a past consideration .For eg, a
thing guaranteed by the seller after it has been sold. Executed consideration is not a past
consideration. In the case of executed consideration, the promise and the act constituting the
consideration are both integral and co-related parts of the same transaction10.In the case of past
consideration, the promise is subsequent to the act and independent of it.It is merely an act or
forebearance given in the past by which a person has benefited without incurring any legal
liability.

7
See Section 2(d)
8
Indian Contract and Specific Relief Acts, 14th Ed. (1972) p.41
9
see Roscorla v Thomas (1842) 114 ER 496
10
Westminster City Council v. Duke of Westminster , [1991] 4 All ER 136

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The general principle of the common law is that in the formation of a contract ,the consideration
is given and accepted in exchange for the promise.Hence, the acceptance of the consideration
and the giving of the promise must be simultaneous and in order to have the effect of binding the
party making it, a request must be the offer of the promise in return of some consideration, which
offer will become a promise11, if and when the consideration is furnished as requested.In many
common circumstances, the fact of service being rendered on request is ample evidence of an
understanding that it was to be paid for according to the usual course.

Under the English law, past consideration is no consideration. A promise to pay compensation
for something already done is past consideration and is no consideration12,This rule under
English law , subject to exceptions.

Consideration given at the request of the promisor-

In Pau On v. Lau Yiu13, the plaintiffs agreed with a company to sell certain shares in return for
allotment of some shares of the company, and further agreed not to sell the newly alloted shares
for some period of time. Later the plaintiffs refused to complete the agreement unless they had
an indemnity against any fall in the fall in the new alloted shares during this period and the
defendants gave this guarantee.The price of the shares fell and the plaintiffs claimed the amount
of indemnity. The defendants pleaded that there was no Pau On v. Lau Yiu. It was held that since
the Pau On v. Lau Yiu expressed by incorporation in the guarantee, the plaintiffs promise is the
main greement not to sell the shares for a year , the defendants immediately would not be treated
as independent of the antecedent promise of the plaintiff not to sell because the parties had
understood the restriction on the sale to be within the price of the shares. The plaintiffs’ promise
was made at the request of the defendant and the promise of indemnity was given to fulfill that
intention. Hence the promise, although antecedent to the guarantee , was a good consideration
and the indemnity was enforceable. The conditions in which this exception applied were stated
by the privy council in the above case as follows:

An act done before giving of a promise to make a payment or to confer some other benefit can
sometimes be consideration for the promise.The act must have been done at the promisor’s
request , the parties must have understood that the act was to be remunerated either by payment
or the conferment of some other benefits and payment or the conferment of a benefit , must have
been legally enforceable had it been promised in advance14.

Payment for antecedent debt-

The existence of an existing debt is sufficient consideration for a later promise to pay that debt15;
and there will be good consideration if there has been forbearance on the part of the creditors.16

11
Section 5 of Indian Contract Act,1872
12
Re Mc Ardle ,[1951] All ER 905
13
Pau On v. Lau Yiu, [1980]AC 614
14
(1979) 3 ALL ER 65 (PC) at 74
15
Slade’s case, (1602) 4 Co. Rep 91a
16
Wigan v. English and Scottish Law Life Assurance Association, [1909] All ER Rep 449

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Negotiable instruments under the Bills of Exchange Act, 1882-

Under section 27 (1)(b) of the Bills of Exchange Act ,1882 an antecedent debt or liability
constitutes valid consideration for a bill of exchange.The consideration usually consists in, that
the creditor forbears from suing for the debt, or treats the bill as conditional payment17.

2.2 INDIAN LAW

The words ‘has done or abstained from doing’ in the definition given in the act provide that an
act done by A at B’s request , without any contemporaneous promise from B , may be a
consideration for a subsequent promise from B to A. Consideration may consist in performance
which is known as executed consideration18.An executed consideration consists in an act already
done by one as consideration for a promise of the other and the liability is outstanding on one
side only.This is present, as opposed to future consideration.19

The use of the perfect tense in the clause ‘has done or promised to do…’ embodies in the law of
india the exception to the general rule laid down in Lampleigh v. Brathwaite 20.There it was
allowed that in general , a service rendered without any agreement for reward at the time will not
support a subsequent promise of reward – “a mere voluntary courtesy will not have21 a
consideration to uphold an assumpsit’ – but it was said that if the service was ‘moved by a suit or
request’ of the promisor, the promise ‘couples itself with the suit before,’ or, as we should now
say, is held to relate back to the original request and accordingly is deemed to be made on good
consideration.

Old debts from good consideration for mortgage or transfer of property22.A power of attorney
given by a company to a bank enabling it to sell the properties with the bank was for good
consideration relatable to the loan advanced earlier by the bank; 23 so was a promissory note
executed as security for repayment of a loan already received by the debtor 24,or a promisory note
executedin favour of a person for services rendered by him25. (1895)

Services previously rendered at the desire of a promisor are good consideration .In Sindha v.
Abraham26, the plaintiff rendered services to the defendant at his desire expressed during his
minority and continued those services after his majority at his request again.The question arose

17
Misa v. Currie ,(1875)LR 10 Ex 153
18
Fazaladdin Mandai v. Panchanan Das , AIR 1957 Cal 92
19
Union of india v. Cham Lal Loona and co. , AIR 1957 SC 652 at 655
20
Hob 105, 1 Sm LC 148
21
Sic one would expect ‘make’
22
Kunj Behari Lal Rastogi v. Madhsodan Lal , AIR 1919 All 348
23
Board of Revenue Madras v. Annamalai & co. Ltd. AIR 1968
24
Central Bank of India v. Tarseema Compress Wood Manufacturing Company, AIR 1997 Bom225
25
Dungarmull Kissenlal v. Sambh Charan Pandey. AIR 1951 Cal 55
26
Sindha shri v. Abraham (1895) 20 Bom 755

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whether such services constituted a good consideration for a subsequent express promise by the
defendant to pay an annuity to the plaintiff.It would seem that, under the act, the decision must
have been the same on this ground even if the services were rendered at the time, though at the
desire of the defendant. It was also said that if the services had been rendered voluntarily, i.e.,
without the desire of the defendant , the case would be within Section 25 of the act 27.However,
neither that section nor the present clause will enable a person who has purported to bind himself
when not competent to contract (Section 11), to repayment of loan, to bind himself to it by a new
promise when he is competent.28But where mortgage bonds were executed without authority of
the collector and after his regime, fresh bonds were executed in lieu of earilier bonds, these were
not without consideration29.

A promissory note is without consideration, if the debt to which the creditor had no legal right is
being assigned to him in spite of prohibition of law30.

27
Indian contract act, 1872
28
Suraj Narain Dube v. Sukhu Aheer, 1928 All 164
29
Lala Babu Ram v. Ganga Devi, AIR 1959 All 788 at 798
30
RK Sundaram Asari v. TR Abdul, AIR 1956 Mad 692 at 693

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 CHAPTER 3- SECTION 25(2) OF INDIAN CONTRACT ACT, 1872

Agreement without consideration, void, unless it is in writing and registered or is a promise

to compensate for something done or is a promise to pay a debt barred by limitation law.—
An agreement made without consideration is void, unless— —An agreement made without
consideration is void, unless31—"

(1) it is expressed in writing and registered under the law for the time being in force for the
registration of 1[documents], and is made on account of natural love and affection between
parties standing in a near relation to each other; or unless

(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily
done something for the promisor, or something which the promisor was legally compellable
to do; or unless.

(3) It is a promise, made in writing and signed by the person to be charged therewith, or by
his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of
which the creditor might have enforced payment but for the law for the limitation of suits.
In any of these cases, such an agreement is a contract.

Explanation 1.—Nothing in this section shall affect the validity, as between the donor and
donee, of any gift actually made.

Explanation 2.—An Agreement to which the consent of the promisor is freely given is not
void merely because the consideration is inadequate; but the inadequacy of the
consideration may be taken into account by the Court in determining the question whether
the consent of the promisor was freely given. Illustrations

(a) A promises, for no consideration, to give to B Rs. 1,000. This is a void agreement. (a) A
promises, for no consideration, to give to B Rs. 1,000. This is a void agreement."

(b) A, for natural love and affection, promises to give his son, B, Rs. 1,000. A puts his
promise to B into writing and registers it. This is a contract. (b) A, for natural love and
affection, promises to give his son, B, Rs. 1,000. A puts his promise to B into writing and
registers it. This is a contract."

(c) A finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract. (c) A
finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract."

(d) A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract.
(d) A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract."

31
https://indiankanoon.org/doc/1903729

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(e) A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written
promise to pay B Rs. 500 on account of the debt. This is a contract. (e) A owes B Rs. 1,000,
but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on
account of the debt. This is a contract."

(f) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A’s consent to the agreement was
freely given. The agreement is a contract notwithstanding the inadequacy of the
consideration. (f) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A’s consent to the
agreement was freely given. The agreement is a contract notwithstanding the inadequacy of
the consideration."

(g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies that his consent to the
agreement was freely given. (g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies
that his consent to the agreement was freely given." The inadequacy of the consideration is a
fact which the Court should take into account in considering whether or not A’s consent was
freely given.

Sec 25(2) Compensation for past voluntary services

A promise to compensate wholly or in part, a person who has already voluntarily done something
for the promisor, is enforceable, even though it is without consideration. In simple words, a
promise to pay for a past voluntary service is binding. In order to pay forpast voluntary services,
the following factors must exist32:

 The service should be rendered voluntarily

 The service must have been rendered for the promisor
 The promisor must be in existence at the time when the services were rendered
 The promisor must have intended to compensate the promisee
 The services rendered should be lawful

Example-

Sunil finds Anil’s purse and gives it to him. Anil promises to give ₹ 500 to Sunil. This is a valid
contract even though the consideration did not move at the desire of Anil, the promisor. Thus it
can be enforced in the court of law and Sunil can recover
the amount promised from Anil.

CASE LAWS:

32
http://gradestack.com

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1 .Durga prasad v. Baldeo33

Facts :

The plaintiff, baldeo, at the desire and requset of the elecotr of the town expanded money in the
construcvtion of a marjet in the town. Subsequently the defendants, Durga Prasad & Ors.
Occupied the shops in the market. Since the plaintff had spent money for the constructoin of the
market, the defendants in consideratoin thereof, promised to pay to plaintiff, a commission on
the articles ssold throuhg their (defendants) shops in that market. Defendants however, failed to
pay the promised commission, the plaintiff brought an action to recover the promised
commission.

Held:

The plaintiff will not succeed since the agreement was void for the want of consideration.

It was observed in this case that the consideration of the promisre to pay the commission was the
construction of market by the plaintiff. But the expenses incuurred by the plaintiff in
construction of the market was not there in the desire of the defendants (promisors) but at the
instance/ request of the 3rd party ie, contractor of the town.

It was therefore, held that since the consideraion for the construction of markeet did not move at
the desire of the defendants., that is, the promisor ( D & Ors.). It did not constitute a valid / good
consideration. Hence the defendants were not liable in respect of the promise made by them,
following the first legal rule.

2 .Raja of Venkatagiri v. Sri Krishnayya Rao Bhadur Zamindar34

A privy council case, B agreed to give his son in adoption if A agreed to advance money to
defray the expense of defending any suit challenging the adoption.There was litigation and A
advanced money towards the cost.Thereafter A died and A’s son advanced money to the adopted
son. While the adoption suit was pending before the privy council, the adopted son passed a
promissory note in favour ao A’s son, who agreed that if the adopted son was unsuccessful
before the privy council, the promissory note would not be enforced. The adopted son was
successful and A’s son filed a suit on the promissory note.It was held s.25(2) was not successful
because to invoke the aid of that provision, it has to be proved that the payment had been made
voluntarily and this had not been established.

33
(1881) ILR 3 All 221
34
AIR 1948 PC 150

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 CHAPTER 4-CONCLUSION

Consideration is the concept of legal value in connection with contracts. It is anything of value
promised to another when making a contract.In common law it is a prerequisite that both parties
offer consideration before a contract can be thought of as binding. The doctrine of consideration
is irrelevant in many jurisdictions, although contemporary commercial litigant relations have
held the relationship between a promise and a deed is a reflection of the nature of contractual
considerations. If there is no element of consideration found, there is thus no contract formed.
However, even if a court decides there is no contract, there might be a possible recovery
under quantum meruit (sometimes referred to as a quasi-contract) or promissory estoppel.

Past consideration means that the consideration for the promise had been given earlier and the
promise has been made afterwards. It is, of course, necessary that at the time
theact constituting consideration was done, must have been done at the desire of the promisor.

Agreement without consideration, void, unless it is in writing and registered or is a promise

to compensate for something done or is a promise to pay a debt barred by limitation law.—
An agreement made without consideration is void, unless— —An agreement made without
consideration is void, unless—"

(1) it is expressed in writing and registered under the law for the time being in force for the
registration of 1[documents], and is made on account of natural love and affection between
parties standing in a near relation to each other; or unless

(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily
done something for the promisor, or something which the promisor was legally compellable
to do; or unless.

(3) It is a promise, made in writing and signed by the person to be charged therewith, or by
his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of
which the creditor might have enforced payment but for the law for the limitation of suits.
In any of these cases, such an agreement is a contract.

The researcher found his hypothesis to be true and hence Ambit of past consideration in
section 25 (2) of ICA, 1872 is wider than past consideration given in section 2(d) of ICA,
1872. Section 25 (2) gives importance to the voluntary act done in the past whereas section 2
(d) does not.

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 BIBLIOGRAPHY

 BOOKS :

1. R.K.Bangia, Law of Contract-I

2. Avatar Singh, Law of Contract
3. Pollock and mulla , The Indian Contract Act and self Relief Act

 WEBSITES :

1. https://www.scribd.com
2. https://nationalparalegal.edu
3. http://gradestack.com
4. https://indiankanoon.org

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