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Consideration Section 2d: Nudum Pactum A Nude or Bare Agreement Is Void

According to Section 2(d) of the Indian Contract Act 1872, consideration is defined as an act or abstinence done or promised to be done at the desire of the promisor. Section 25 states that an agreement made without consideration is void. Consideration must move from or at the desire of the promisee, can be in the past, present or future, and must have some value but does not need to be adequate. It cannot be past obligations of the promisor or unlawful.

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265 views17 pages

Consideration Section 2d: Nudum Pactum A Nude or Bare Agreement Is Void

According to Section 2(d) of the Indian Contract Act 1872, consideration is defined as an act or abstinence done or promised to be done at the desire of the promisor. Section 25 states that an agreement made without consideration is void. Consideration must move from or at the desire of the promisee, can be in the past, present or future, and must have some value but does not need to be adequate. It cannot be past obligations of the promisor or unlawful.

Uploaded by

Pranay Bhardwaj
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Consideration section 2d

nudum pactum a nude or bare agreement is void


According to Section 2(d) of the Indian Contract Act, 1872, consideration is defined as
follows:
“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 is called a consideration for the promisee.”
Section 25of this act opens with the declaration that an agreement made without
consideration is void…
the most influential definition is given in
Currie v Misa (1875) LR 10 Ex 153; (1875-76) LR 1 App Cas 554
A valuable consideration may consist either in some right, interest, profit, or benefit
accruing to the one party, or some forbearance, detriment, loss, or responsibility, given,
suffered, or undertaken by the other.

At the desire of the promisor if the promisee either


•Does something (in the past, present or future) OR
•Abstains from doing something (in the past, present or future)
Then, this act of doing or abstinence is called Consideration. Now, it has two aspects,
either doing some act or abstaining from doing something
According to Section 2(d) of the Indian Contract Act, 1872, the follows features are
essential for a valid consideration:
(i) Consideration must move at the desire of the promisor
Consideration can be offered by the promisee or a third-party only at the request or
desire of the promisor. If an action is initiated at the desire of the third-party, it is not a
consideration.
Durgaprasad v Baldeo, ILR 1881 3 All 221
At the request and promises of charitable nature
KEDARNATH BHATTACHARJI V. GORIE MAHOMED, (1887) ILR 14 CAL 64

Unilateral promises
Masum Ali And Ors. vs Abdul Aziz And Ors. on 11 March, 1914 (1914) ILR 36 All
268
Promissory estoppel
Section 115 of the Indian Evidence Act, 1872 incorporates the meaning of estoppel as when one
person either by his act or omission, or by declaration, has made another person believe
something to be true and persuaded that person to act upon it, then in no case can he or his
representative deny the truth of that thing later in the suit or in the proceedings.
Applicable to government agencies
Pournami oil mills v State of Kerala, 1986 supp scc 728
(ii) Consideration may move from the promisee to any other person
If you look at the definition of consideration according to section 2 (d) of the Indian Contract
Act. 1872, it explicitly states the phrase ‘promisee or any other person…’ This essentially means
that in India, consideration may move from the promise to any other person. However, it is
important to note that there can be a stranger to consideration but not a stranger to the
contract. Chinnayya v Ramayya,
iii) It can be in the past, present or future
a.      Past
Since consideration is the price of a promise, it is normally given to induce the promise.
However,it can be given before the promise is made by the promisor. This is past
consideration. It is important to note that past consideration is not considered for a new
promise since it is not been given in lieu of the promise. According to Indian law, ‘past
considerations’ is ‘good consideration’ if it was given at the desire of the promisor.
b.      Present
If the promise and consideration take place simultaneously then it is present or executed
consideration. An example is Peter goes to a shop, buys a bag of chips and pays for the
same on-spot.
c.       Future
When the consideration for a promise moves after the contract is formed, it is a future or
executor. It is also valid if it depends on the condition.
Past consideration is no consideration
Rosecarla v Thomas
Exceptions
Services rendered rendered at the request of the promiser
Lampleigh v Braithwaite
Promise to pay Timebarred debt
Negotiable instrument
Indian law
Past consideration is a good consideration
Sindha v Abraham,
(iv) Need not be adequate but It must have value in
the eyes of the law
While the law allows the parties to decide an ‘adequate’
consideration for them, it must be real and have value in the eyes
of law. While the Court will not consider inadequacy, it will look
at it to determine if the consent was given by the party with free-
will or not.
Peter’s wife agrees to withdraw the suit she has filed against him
in return for his promise to pay her a monthly maintenance
amount. This is a good consideration and holds value in the eyes
of law.
Thomas v Thomas,(1842) 2 QB 851; 114 ER 330
v) It should be over and above the Promisors’ existing obligations
If the promisor is already obligated either by his promise or law to perform or
abstain from a certain act, then it is not a good consideration for a promise.
Collins v Godefroy, (1831) 1 B & Ad 950; 109 ER 1040
Ramachandra Chintaman v Kalu Raju(1878) ILR 2 Bom 362

(vi) It cannot be Unlawful


A consideration that is against the law or public policies is not valid.
Privity of consideration the doctrine of privity of consideration states that the consideration must only move
from the promisee and the stranger to the contract, although a beneficiary can enforce the terms of the agreement.

Twiddle v Atkinson
Chinnayya v Ramayya
Privity of contract
The Indian Contract Act. 1872, allows the ‘Consideration‘ for an agreement to proceed from a third-party. However, a
stranger (third-party) to consideration is different from a stranger to a contract. The law does not allow a stranger to
file a suit on the contract. This right is available only to a person who is a party to the contract and is called Doctrine of
Privity of Contract.

Dutton v poole, 1677


Twiddle v AtkinsonWHC J57 (QB), (1861) 1 B&S 393
Dunlop Pneumatic Tyre co v Selfridge & co Ltd, 1915 AC 847
Beswick v Beswick, 1968
Decisions following English Law in India
Jamnadas v Pandit ram Avtar Pande, 1911-12
M.C. Chacko v State Bank of Travencore, 1969

Exceptions to the Doctrine of Privity of Contract


A stranger or a person who is not a party to a contract can sue on a
contract in the following cases:
1.Trust
2.Family Settlement
3.Assignment of a Contract
4.Acknowledgement or Estoppel
5.A covenant running with the land
6.Contract through an agent
Beneficiaries under Trust
If a contract is made between the trustee of a trust and another party, then the beneficiary of
the trust can sue by enforcing his right under the trust, even if he is a stranger to the contract.
Nawab Khwaja Muhammad Khan vs Nawab Husaini Begam on 7 June, 1910 (1910) 12
BOMLR 638
Rana Uma Nath Bakhsh Singh vs Jang Bahadur on 8 July, 1938 (1939) 41 BOMLR 659
Family settlement for marriage partition or other settlement
If a contract is made under a family arrangement to benefit a stranger (person not a
party to the contract), then the stranger can sue in his own right as a beneficiary of the
contract.
Rose Fernandez v joseph Gonsalves
Shappu Ammal v Subrahmaniyam, ILR 1910 33 mad 238
Veeramma v Appayya, 1957
Daropati v Jaspat rai, 1905
Assignment of a Contract
If a contract is made for the benefit of a person, then he can sue upon the contract
even though he is not a party to the agreement. It is important to note here that
nominees of a life insurance policy do not have this right.
Acknowledgment or Estoppel
If a contract requires that a party pays a certain amount to a third-party and he/she
acknowledges it, then it becomes a binding obligation for the party to pay the third-
party. The acknowledgment can also be implied.
N. Devaraju Urs v ramakrishniah, 1952
Kshirodebihari Datta v Mangobinda Panda, 1943

A Covenant Running with the Land


When a person purchases a piece of land with the notice that the owner of the land
will be bound by all duties and liabilities affecting the land, then he can sue upon a
contract between the previous land-owner and a settler even if he was not a party to
the contract.
Smith & snipes Hall Farm Ltd v River Douglas Catchment Board, 1949
Section 25: exceptions to consideration
1)Gift must be in writing and registered
Rajlukhy dabee v Bhootnath Mookerji, 1899
Biswa v Shivram, 1899

2) Past voluntary services


Sindha v Abraham. 1896

3)Time barred debt


It must be real consideration
Unreal considerations
• Physical impossibility
• Legal impossibility
• Uncertain considerations
• Pre-existing legal duties

Real considerations
• Forbearance to sue
Debi Radha Rani v Ramdass, 1941
• Compromise of a disputed claim
• Composition with creditors
Promise to pay less than the amount due
Accord and Satisfaction
The subsequent agreement by which a party is discharged from his obligation under the old
contract

Attempt to satisfy is accord. Execution of accord is satisfaction


Accord executed is valid but not accord executory

Rule in pinnel’s case


Foakes v Beer, 1884 case established the rule that prevents parties from discharging an obligation by
part performance
sec63. Promisee may dispense with or remit performance of promise.—Every promisee may dispense with or remit,
wholly or in part, the performance of the promise made to him, or may extend the time for such performance,1or
may accept instead of it any satisfaction which he thinks fit. —Every promisee may dispense with or remit, wholly or
in part, the performance of the promise made to him, or may extend the time for such performance,1or may accept
instead of it any satisfaction which he thinks fit."

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