48925975 consideration
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Consideration
Section 10Essentials of a valid contractSection 23What considerations and objects are lawful and whatnot
Section 24Agreements void if consideration and object arelawful in part
Section 25Agreement without considerationSection 2 (d)Definition
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Consideration English Law
Speciality contracts
Parol contracts
Quid pro quo
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Indian Law Consideration
Ex nudo pacto non oritur actio.
No action arises from a nude agreement.
Nudum Pactum.
Agreement without consideration.
Nudum pactum ex quo non oritur actioA bare agreement from which no action
arises.
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Mere writing not sufficient
Pillans v. Van Mierop (1765)
Rann v. Hughes (1778)
High Trees House Case (1947)
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Moral obligation is not sufficient
Lee v. Muggeridge (1813)
Eastwood v Kenyon (1840)
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Currie v. Misa
Avaluable consideration in the sense of law,
may consist either in some right, interest,profit or benefit to the one party, or someforbearance, detriment, loss or responsibility
given, suffered or undertaken by the other.
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Consideration Under ICA
Sec. 10 of ICA lays down essential of valid contract. One ofwhich is consideration.
Sec. 23 lays down that the agreements considerations andobjects of which are unlawful are void.
Sec. 24 lays down that the agreements are void ifconsideration and object are unlawful in part.
Sec. 25 opens with the wordings; An agreement withoutconsideration is void ab initio.
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Privity of Consideration
A stranger to a consideration cannot sue.
Dutton v. Poole (constructive
consideration).
Tweedle v. Atkinson.
Under ICA a consideration may move fromthe promisee or any other person.
Chinnayya v. Ramayya.
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Privity of Contract
A stranger to a contract cannot sue.
No jus quaesitum tertio (rights acquired
for a third party)
Dunlop Pneumatic Tire co. V. Selfridge &Co.
Beswick v. Beswick
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Exceptions to privity rule
Beneficiary to contract can sue for itsenforcement (i.E. Beneficiary under trust
or a charge on property). Khwaja Muhamad v. Husaini begum.
Acknowledgment or estoppel.
Devaraja Urs v. Ram Krishnaiah
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Privity of Contract
Family arrangements, marriagesettlements etc.
Rose Fernandez v. Joseph Gonsalves.
Daropti v. Jaspat Rai.
Covenants running with land.
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Definition
Sec. 2 (d) when, at the desire of thepromisor, the promisee or any other
person has done or abstained from doing,or does or abstains from doing, orpromises to do or to abstain from doing,
something, such act or abstinence orpromise is called a consideration for thepromise.
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Promissory Estoppel
Acts done at the request of the promisor
Kedarnath v. Gorie Mohamed
Doraswami Iyer v. Arunachala Iyer
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Kinds of Consideration
Executorypromise for a promise
Executedan act for a promise
Pastpromise independent andunconnected with an act already done.
Under English law such a pastconsideration is not valid and enforceable
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Exceptions to Past
Consideration.Act done at the request of the promisor
Lampleigh v. Brathwait (1615)
Kennedy v. Brown (1863)
Precedent debt
Negotiable instrument
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Past Consideration Under Indian
Law S. 2(d) clearly lays down the words has done
which suggest that past act done by the
promisee at the desire of the promisor is validand enforceable.
S. 25 (2) lays down that if a person has donesomething for another voluntarily and that other
has promised to pay him an amount for thesame, the promise is enforceable against such apromisor.
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Agreements Without
Consideration S. 10 & S. 25 Ex nudo pacto non oritur actio.
Out of a bare pact no action arises.
Promise to contribute money to acharitable purpose.
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Exceptions Under S. 25
Agreement without consideration is valid andenforceable if
It is in writing and registered, It is out of natural love and affection of parties,
Parties are in near relationship.
For example, a promise by a person in writingand registered to pay all the debts of hisbrother.
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Promise to compensate
Promise to compensate wholly or in partto a person who has already done
somethingVoluntarily for the promisor, or
Something which the promisor was legally
bound to do.
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Promise to pay a time barred
debtA promise to pay a time barred debt is
enforceable by law.
Such a promise is an acknowledgment ofthe debt which gives rise to a new cause
of action.
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Adequacy of consideration
Laesio enormisprice to be fair andserious.
Bailmentno consideration is required.Adequacy may be used to determine the
free consent of the parties.
Consideration to be real and not illusory ormere moral obligation.
Consideration to be certain and lawful.
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Forbearance to sue and
compromise A forbearance to to sue for a time period is a
good consideration. As it is a detriment to the
creditor and a benefit to the debtor. Alliance Bank v. Broom (1864)
A compromise of a doubtful claim is similar tothe forbearance to sue and therefore is a good
consideration.
Callisher v. Bischoffsheim (1870)
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Pre existing obligations
Duty imposed by law not a goodconsideration.
Collins v. Godefroy (1831). Duty owed to the promisor not a good
consideration.
Stilk v. Myrick (1809). Contractual duty to third party.
Shadwell v. Shadwell (1860).
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Accord and Satisfaction
If the party bound performed something otherthan that which was required by the originalpromise and the promisee consented to that,
that will act as a valid discharge for thepromisors obligation.
No executory consideration was allowed but nowit is allowed.
Pinnels case rule that a part payment of a debtcannot operate as a satisfaction of the wholedebt.
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Modern Trend
London Property Trusts Ltd. v. High Trees HouseLtd. (1947)
Principle of accord and satisfaction applies onlywhere the
Promise is intended to create legal relations;
Promise is intended to be acted upon bypromisee;
Promise is in fact acted upon.
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Accord and Satisfaction
Under English law to remit theperformance in the original contract a
satisfaction (consideration) must be given.
S. 63 of ICA does not accept the rule and
it requires no consideration for remittingthe performance by the promisee.
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Exceptions to Pinnels Case
Composition with the creditors.
Part payment by a third party.
Welby v. Drek
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Incapacity to Contract
Political Professional Artifiacial Married
Status
Minority Idiocy Lunacy Drunkenness
Mental Deficiency
Incapacity to contract may arise
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Political Status
Foreign Sovereign Alien Enemy Felons
Political status
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Political Status
Foreign Sovereigns and Ambassadors.
Mighell v. Sultan of Johore (1894).
Three principles are laid down in the case: A foreign sovereign cannot be sued,
This privilege may be waived by him, if he sochooses,
The time for waiving this privilege is after theserving of summons i.e. when he is called uponin the court.
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Diplomatic Privileges Act, 1964
It repealed the earlier Act of 1708.
Immunity under this Act is available to
Diplomatic Agents,
Administrative and technical staff,
Service staff, i.e. members of mission indomestic service.
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Diplomatic Privileges Act, 1964
The conclusive proof of the status of aperson is a certificate issued by or under
the authority of the Secretary of State. In India, Section 86 of C.P.C. lays down
that if a suit is to be instituted against a
foreign sovereign, the consent of theCentral Government is required.
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Alien Enemy
If, however, the war continues for a longperiod of time, such a right is lost on the
ground of impossibility of performance. If the alien enemy is registered and
permitted to stay under Aliens Restrictions
Act, in England, he will be entitled to sueand be sued in the court of law.
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Indian Position
Sec. 83 of C.P.C. Alien enemies residing inIndia with the permission of the Central
Govt. can sue and be sued in the court ofLaw. However if they are not residing withsuch permission they will not be entitled
to sue or be sued.
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Professional Capacity
Barristers were not entitled to sue for theenforcement of the contract. Their
services were considered to be purelyhonorary in nature.
With the enactment of Bar Councils Act,
1927, they were held to be entitled to suefor the fees for the services rendered bythem.
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Artificial StatusCorporations
Physical impossibility i.e. natural ornecessary limitationsContracts of
personal nature cannot be entered into bythe corporations. For example, marriage.
Legal limitationsUltra-vires acts, not
within the power of the company i.e. notmentioned in the memorandum ofassociation.
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Married Woman
Before 1883, in England, a marriedwoman was not entitled to sue or be sued
for contracts or even torts. But now there is no such restriction in
England or even in India.
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Mental Deficiency
S. 10 parties must be competent to enter into acontract.
S. 11 competent means Major according to the law to which he is
subjected;
Who is sound mind;
Not disqualified from entering into a contract.
S. 12 what amounts to unsoundness of mind.
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Minority
Infants Relief Act, 1874.
Family Reforms Act, 1969.
Minors Contracts Act, 1987.
Contract with a minor cannot be enforcedagainst him.
Indian Majority Act, 1875, Sec. 3.
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Contracts for Necessaries
Ryder v. Wombwell (1867).
Nash v. Inman (1908).
Sec. 2 of SOGA, 1893, defines necessariesgoods suitable to the condition in life of suchinfant or minor or other person and to his actualrequirements at the time of sale and delivery.
Executory contract for purchase of goods.
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Contract for Minors Benefit
Roberts v. Gray (1913).
Contracts of apprenticeship and of theemployment for the minor are held to bevalid and binding on the minor.
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Contracts Valid until Avoided
Contracts of continuing or recurringliability.
For example, partnership agreements.
The repudiation of a contract must bedone within a reasonable time period.
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Ratification of Contracts
Contracts entered into by the minor canbe ratified by him after attaining the
majority. However, under Indian law no such
ratification is allowed and minors
agreement is void ab initio.
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Restitution under Void
AgreementValentini v. Canali (1889).
Restitution is possible only when there is
total failure of consideration on the part ofother party.
Steinberg v. Scala (Leeds Ltd.) (1923).
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Liability of Minor in Tort
Ballett v. Mingay (1799). Tort of Detinue
Jennings v. Rundall (1863).
Burnard v. Haggis (1863). Tort ofTrespass as if no hiring.
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Indian Law on Minors
Indian Majority Act, 1875.
Mohoribibi v. Dharmodas Ghosh, (1903)
Raj Rani v. Prem Adib (1949)
S. 68 contracts for necessaries.
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Indian Law on Minors
Specific performance of contract is allowedonly if it is entered into by the guardian,
having competence to do so, for thebenefit of minor.
No estoppel can be pleaded against the
minor, i.e. against the statute. Sadik Ali Khan v. Jai Kishore (1928)
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Restitution
Infants are no more entitled than adultsto gain benefits to themselves by fraud.
Leslie v. Sheill,
Restitution stops where repayment begins.
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Indian Law
S. 31 to S. 33 of Specific Relief Act.
Khan Gul v. Lakha Singh(1928 Lahore)
Ajudhia Prasad v. Chandan Lal (1937 All.)
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Lunatic
A contract is voidable only if
The person pleading insanity proves that
he was insane at the time of entering intocontract so as not in a position tounderstand the effect of the contract, and
That the other party had a knowledge ofhis insanity at the time of entering into thecontract.
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Indian Law
Sec. 12 defines who is of unsound mind,as a person incapable of understanding
the contract at the time of entering intocontract and who is incapable of forming arational judgment as to its effects on his
interest. Such a contract entered into by a lunatic is
void ab initio.
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Insanity
A subsequent insanity of a party does notaffect the contract except in certain
contracts e.g. marriage contract.
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Drunkenness
Under English law a contract is merelyvoidable at the option of the person who
pleads the drunkenness as a defense if hecan prove
His incapacity at the time of entering intocontract,
Knowledge of the other party about hisincapacity.
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Indian Law
A contract by a drunken person is void.
Illustration (b) to S. 12 of ICA.
In American law, a drunken person isdeemed to have ratified the contract, if hedoes not disaffirm it within a reasonable
time.
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