Consideration is the price of a promise—essential to create a binding, enforceable contract under Indian Contract Act, 1872.
## Core concept
Definition (Section 2(d), ICA 1872): Consideration is when one party to a contract receives something of value (or confers something of value) in return for a promise made by the other party.
- It is the quid pro quo (something for something) principle
- Both parties must give and receive consideration
- It must flow from the promisee (the person making the promise) or at their direction
- It creates the binding nature of contract; without it, the agreement is gratuitous and generally unenforceable
Key rule: A contract without consideration is void (Section 25, ICA 1872), with limited exceptions.
## Essential elements of valid consideration
Consideration must be:
- Real & tangible – Must have some value in law; not illusory or imaginary
- Lawful – Cannot be illegal, immoral, or against public policy
- From the promisee – Must flow from the person to whom the promise is made, or from someone at their direction (Section 2(d))
- Executed or executory – Can be past, present, or future; not past consideration (unless statutory exception applies)
- Adequate – Must be of real worth; need not be equal in amount (sufficiency is left to parties' judgment)
- Different from existing legal duty – Cannot be performance of duty already owed; consideration must go beyond statutory or contractual obligation
## Formula / rule
Basic structure: Promise A → Consideration → Promise B
*Example:* "I will sell you a pen for ₹10" - A's promise: sell pen (offer) - Consideration: ₹10 (price) - B's promise: pay ₹10 (acceptance)
Exception to past consideration: - Natural love and affection – Where a promise is made in writing and registered, past consideration is valid (Section 25(1)(a)) - Payment of barred debt – Promise to pay a debt barred by limitation is valid without fresh consideration (Section 25(2)(a)) - Services rendered gratuitously – If party later promises payment for prior services, consideration exists (Section 25(2)(b))
## Common exam applications
- Gratuitous promise vs. contract:
- A promises to give ₹1,000 to B without expecting anything in return → No consideration → Not a contract → Unenforceable (unless Section 25 exception applies)
2. Adequacy vs. sufficiency: A sells land worth ₹10 lakhs to B for ₹1,000 → Grossly inadequate but valid if freely agreed → Courts do not question adequacy (Section 2(d) principle)
3. Performance of existing duty: Police officer (existing duty: arrest criminals) arrests a criminal; cannot claim reward → No consideration beyond legal duty
4. Consideration flowing from third party: A promises B ₹500 if C pays the price → Consideration does not flow from B → Unenforceable against C (but valid between A and B)
## Common mistakes
- Confusing consideration with price — price is monetary; consideration is broader (includes goods, services, forbearance, etc.)
- Assuming consideration must be equal — it need only be real and lawful
- Treating past consideration as always invalid — Section 25 exceptions exist
- Overlooking that both parties need consideration — unilateral promises lack bilateral consideration
- Missing the direction test — if consideration flows at X's direction though from Y, it counts as flowing from X
## Worked example
Scenario: Rina offers Karan a pen, and Karan accepts with no promise to pay or give anything. Analysis: No consideration from Karan → Agreement is a gift (gratuitous promise) → Unenforceable against Karan unless Rina proves a registered written promise under Section 25(1)(a).