Consideration is the "quid pro quo"—something in return. Under Section 2(d) of the Act, it is defined as: "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."
1. Essentials of a Valid Consideration
- Must move at the "Desire of the Promisor": An act done at the desire or request of a third party is not valid consideration.
📜 Landmark Case: Durga Prasad v. Baldeo (1880)
A builder constructed a market at the request of the local District Collector. The shopkeepers promised to pay the builder a commission on sales made in the market. When they failed to pay, the builder sued. The court held that the market was built at the Collector's desire, not the shopkeepers' desire. Therefore, there was no consideration moving at the desire of the shopkeepers, and their promise was void. - May move from the promisee or "any other person": In India, a stranger to consideration can sue. This is called Privity of Consideration (Chinnaya v. Ramaya).
- Need not be adequate: The law does not protect parties against bad business deals. If A consents to sell his Rs. 1,00,000 car for Rs. 1000, the contract is perfectly valid, provided his consent was free.
2. "No Consideration, No Contract" and Exceptions (Section 25)
The general rule is that an agreement without consideration is a Nudum Pactum and is completely void. However, Section 25 lists three critical exceptions where a contract is valid without consideration:
- Natural Love and Affection: Must be made out of natural love, between near relatives, in writing, and registered under the law.
- Past Voluntary Service: A promise to compensate someone who has already voluntarily done something for the promisor.
- Time-Barred Debt: A written, signed promise to pay a debt that is legally unrecoverable due to the law of limitation.