What is a Consideration?

The Indian Contract Act, 1872 defines consideration under Section 2(d) of the act. As per the act, the definition of consideration is “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”.

In a contract, the consideration can differ for both parties; i.e., If two parties A and B, enter into a contract for buying a car, A has to sell the car, and B has to pay a certain sum, then the consideration of A is the sum, and for B the consideration is the sum in this agreement. A consideration will be only treated as a lawful consideration when it has some value in the eyes of the law. The consideration doesn’t need to have the same/equal value. It must be real and must not be an uncertain event that is impossible to perform. Any immoral consideration is not a good consideration and is considered to be illegal.

Consideration is one of the essentials of a valid and lawful contract and without it, we cannot create a legally binding agreement. It creates an obligation on the parties within the contract. Any contract that is not supported by consideration is generally made by people in a rash and hurry, and because of that, these agreements are not treated as valid as per the law. In general terms, we can define consideration as the thing we give to another person when he/she fulfills the promise. In a contract, it is essential that the promise must be backed by a consideration otherwise there is no liability on the party to execute their duties.

Geeky Takeaways:

• Consideration can be called as the price that a party pays to another party for the promise.
• The promisee or any other person who is part of the contract can provide consideration but the condition that is needed to be satisfied for a valid consideration is that it must only be moved at the desire of the promisor.
• Only the parties to the contract can initiate any legal proceedings against each other, and no other person is allowed to do the same. This is known as the Doctrine of Privity of Contract.
• According to Section 10 of the Indian Contract Act of 1872, a contract without consideration is void.