Consideration and the legal rules for a valid consideration

Definition. Under section 2(d) of the Indian Contract Act, 1872, “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”. It is the price of the promise: a benefit to one party or a detriment to the other.

Legal rules regarding consideration:

1. It must move at the desire of the promisor. An act done at the desire of a third party, or voluntarily, is not consideration. In Durga Prasad v. Baldeo, a market built at the Collector's desire was no consideration for the defendant's promise of commission; and a person who saves another's goods from fire unasked cannot claim a reward.
2. It may move from the promisee or any other person. In India there can be a stranger to the consideration, though not a stranger to the contract (Chinnayya v. Ramayya: the uncle could recover the annuity the daughter promised).
3. It may be executed or executory, and past, present or future. Past consideration is good if the act was done at the promisor's request.
4. It need not be adequate. Inadequacy does not make the agreement void if consent was free.
5. It must be real, not illusory, and something the promisor is not already legally bound to do.
6. It must not be unlawful, immoral or opposed to public policy.

The general rule is "no consideration, no contract" (s. 25), subject to the exceptions such as natural love and affection, past voluntary service, a time-barred debt, agency, completed gifts, bailment and charity.