CPT Paper 2 Mercantile Law Chapter 1

Unit 2 Consideration
Mr. Varughese Thomas

Consideration, Concept, Importance, Double aspect

Consideration from 3rd party to contract

Valid contract without consideration

Stranger cannot sue

Contract
Minus

Unenforceable

Consideration

Promise

Benefit to
promisor
Double aspect of
consideration
Detriment
to promisee

Price agreed to be paid by Promisee

for Obligation of Promisor

At the desire of the Promisor

Promisee or any other person

Gives consideration of past / present /
future

Consideration
(need not be
adequate)

Done or
abstained/
does or
abstained/ to
do or abstained
from doing

1. Promisors desire
2. From promisee or others
3. Executed or executory
4. Past consideration
5. Adequacy
6. Ought to legally perform
7. Not unlawful, immoral or opposed to public policy

Must move at the desire of promisor

Can be from promisee or any person

Types
Executed (consideration consist in
performance)

Executory (Consideration consist in

promise)

Past services
provided not
gratuitous

Cannot be
real for
subsequent
promise

Moved by
previous
request

Has done or
abstained

May be
motive

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Adequacy

Need not be
adequate

Should have
lawfully some
value

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Then that
performance
is no
consideration

And performance
exceeds boundation,
its a good
consideration

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Real

Competent

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Immoral

Unlawful

Opposed
to public
policy

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Consideration
can be from 3rd
party

But 3rd party

cannot sue
(i.e. Doctrine of
privity of contact.)

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TRUST a beneficiary
FAMILY SETTLEMENT terms in writing
MARRIAGE CONTRACT - female under HUF
ASSIGNMENT OF CONTRACT - benefits
ESTOPPEL: by liability acknowledgement
COVENANT TO LAND successor of seller can
CONTRACTS BY AGENTS: in scope of authority & in principals name

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Natural love & Affection

Past voluntary services
compensation

Cases without
consideration valid &
enforceable

Promise to pay time barred

debt
Agency
Completed gift

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Consideration = price for

promise of other party

Benefit
Detriment

Consideration
= promisors desire must

Consideration may be

Executed
Executory

Past consideration =
previous request = valid

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Consideration - not one already legally bound

Consideration may move
Promisee

Third party

Consideration need not adequate

Consideration must legal
No Consideration, No Contract but Exception are
In some case contract may be enforced by third party
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MCQs

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(a) Consideration must result in a benefit to both parties

(b) Past consideration is no consideration in India

(c) Consideration must be adequate

(d) Consideration must be something, which a promisor is not already bound to do

Answer: (d) Consideration must be something, which a promisor is not already bound to
do

(the points as mentioned in (a),(b) & (c) are not necessarily true
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(a) Compensation for involuntary services

(b) Love & Affection

(c) Contract of Agency

(d) Gift
Answer: a) Compensation for involuntary services

(the points as mentioned in (b),(c) & (d) are exception to rule No

consideration, No Contract

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(a) Must move at the desire of promisor

(b) May move from any person

(c) Must be illusory

(d) Must be of some value

Answer: (c) Must be illusory

(points mentioned in (a),(b) & (d) are the legal requirements of consideration

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(a) Promisor

(b) Promisee

(c) Any other person

(d) Any of these

Answer: (a) Promisor

(The definition of consideration lays emphasis that it is upon the desire of

the promisor, the consideration must move.

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(a) Desires

(b) Wishes

(c) Consideration

(d) Promise

Answer: (c) Consideration

(The aspects of doing or not doing .. is contained in the definition

of consideration)
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(a) The services should have been rendered voluntarily

(b) The services must have been rendered for the promisor
(c) They must be in existence at the time when the services were rendered & must
have intended to compensate the promise.
(d) All of the above.

Answer: (d) All of the above.

(past voluntary services when cognized and compensated, the

said service changes to good consideration)

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(a) is expressed in writing

(b) of natural love and affection or the parties to the agreement stand in near relation to
each other
(c) The document is registered under the relevant law
(d) All of the above

Answer: (d) All of the above

(All above stated aspects are must in the case of agreement

made out of natural love and affection, although it is without
consideration)
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(a) Consideration must be at the desire of promisor

(b) Consideration may be past, present or future

(c) Consideration need not be adequate, but real & backed with free consent

(d) Consideration should be always monetary

Answer: (d) Consideration should be always monetary

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(a) Consideration should move at the desire of promisor

(b) Consideration may move from promisee or any other person.

(c) Consideration may be past, present or future

(d) All of the above

Answer: (d) All of the above

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(a) A contract cannot confer any right on one who is not a party to the contract, evens
though the very object of the contract may have been to benefit him

(b) A contract can confer right on one who is not a party to the contract, if the
contract benefits him

(c) A contract always confers right on one who is not a party to the contract

(d) A contract can confer rights on strangers

Answer: (a) A contract cannot confer any right on one who is not a party to the contract,
even though the very object of the contract may have been to benefit him
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