Consideration under Indian Contract Act, 1872 (2026): Meaning, Essentials & Landmark Cases
Reviewed by Lawsection.in Editorial Team | May 22, 2026
Consideration under Indian Contract Act is one of the most important concepts under the Indian Contract Act, 1872 because no valid contract can generally exist without lawful consideration. For Judiciary, CLAT PG, AIBE, and UGC NET Law exams, understanding the meaning, essentials, exceptions, and landmark cases on consideration is extremely important.
For law students, judiciary aspirants, CLAT PG candidates, AIBE aspirants, and young legal professionals, understanding consideration is extremely important because questions from this topic are repeatedly asked in examinations and also frequently arise in litigation involving contracts, promises, family settlements, guarantees, agency, and commercial transactions.
This comprehensive guide explains:
- Meaning of consideration
- Definition under Section 2(d)
- Essential ingredients
- Legal rules regarding consideration
- Exceptions under Section 25
- Landmark judgments
- Important distinctions
- Practical illustrations
- Exam-oriented notes and FAQs
This article is part of our “Law Notes” Hub covering the complete Indian Contract Act, 1872 in a simplified and exam-oriented manner.
What is Consideration under Indian Contract Act?
Consideration refers to something in return for a promise. It is the price paid for the promise of another.
In simple words:
“No consideration, no contract.”
Under Indian contract law, both parties must generally exchange something of value for an agreement to become legally enforceable.
Best LLDefinition of Consideration under Section 2(d)
Section 2(d) of the Indian Contract Act, 1872 defines consideration 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 abstain from doing something, such act, abstinence or promise is called consideration for the promise.
Simplified Meaning of Section 2(d)
A valid consideration exists when:
- Something is done,
- Something is not done,
- Or something is promised to be done,
- At the desire of the promisor.
Consideration may include:
- An act
- An abstinence
- A promise
Example of Consideration
A agrees to sell his laptop to B for ₹50,000.
- A’s consideration → Laptop
- B’s consideration → ₹50,000
Both parties give something in return. Therefore, there is valid consideration.
Essential Elements of Valid Consideration
1. Consideration Must Move at the Desire of the Promisor
The act must be done at the request or desire of the promisor.
If a person voluntarily does something without the promisor’s request, it is not valid consideration.
Illustration
A sees B’s house on fire and helps extinguish it voluntarily. Later, B promises to pay ₹10,000.
This promise is generally unenforceable because A acted voluntarily and not at B’s request.
2. Consideration May Move from Promisee or Any Other Person
Indian law differs from English law here.
Under Indian law, consideration can move from:
- Promisee, or
- Any third person.
This principle recognizes the concept of “stranger to consideration.”
Landmark Case: Chinnaya v. Ramaya (1882)
Facts
An old woman transferred property to her daughter on the condition that the daughter would pay annuity to the woman’s brother.
The daughter failed to pay.
Held
The brother could sue even though consideration did not move from him.
Principle
Under Indian law, consideration may move from any person.
This remains one of the most important cases on consideration under Indian contract law.
3. Consideration May Be Past, Present or Future
Indian law recognizes all three forms of consideration.
(a) Past Consideration
An act already done before the promise is made.
Example
A helps B in recovering goods. Later B promises to pay ₹5,000.
This is valid under Indian law if done at B’s request.
(b) Present or Executed Consideration
Consideration moves simultaneously with the promise.
Example
Cash purchase of goods.
(c) Future or Executory Consideration
Promise to do something in future.
Example
A promises to deliver goods next month and B promises to pay later.
Types of Consideration
| Type | Meaning | Example |
|---|---|---|
| Past Consideration | Act already done | Reward promised later |
| Present Consideration | Simultaneous exchange | Cash sale |
| Future Consideration | Promise for future act | Delivery next month |
4. Consideration Must Be Real and Not Illusory
The consideration should have some value in the eyes of law.
Invalid consideration includes:
- Impossible acts
- Physically impossible promises
- Legally impossible acts
5. Consideration Need Not Be Adequate
Indian law does not require equal consideration.
Courts generally do not examine adequacy if consent is free.
However, inadequacy may be evidence of:
- Coercion
- Fraud
- Undue influence
Section 25 and Inadequacy of Consideration
Section 25 clarifies that:
- Inadequate consideration does not make agreement void,
- But it may help court determine whether consent was freely given.
Landmark Case: Kedarnath Bhattacharji v. Gorie Mohamed (1886)
Principle
A promise is enforceable where the promisee undertakes liability based on the promisor’s assurance.
This case is often cited regarding enforceability of subscriptions and reliance-based promises.
6. Consideration Must Be Lawful
Under Section 23, consideration must not:
- Be illegal,
- Immoral,
- Fraudulent,
- Opposed to public policy.
Unlawful consideration makes the agreement void.
Example of Unlawful Consideration
A promises to pay B ₹1 lakh for smuggling goods.
This agreement is void because consideration is unlawful.
Doctrine of Privity and Consideration
Two connected concepts often confuse students:
| Concept | Indian Law Position |
|---|---|
| Stranger to Consideration | Can sue in certain situations |
| Stranger to Contract | Cannot sue generally |
Thus:
- Consideration may move from third person,
- But only parties to contract generally can sue.
Landmark Case: Tweddle v. Atkinson
This English case established:
Stranger to contract cannot sue.
Indian law follows this doctrine with recognized exceptions.
Exceptions to “No Consideration No Contract” Rule (Section 25)
Although consideration is essential, Section 25 provides important exceptions.
1. Agreement Made out of Natural Love and Affection
Requirements:
- Written agreement
- Registered agreement
- Between near relatives
- Based on natural love and affection
Example
A father promises through registered document to transfer property to son out of love and affection.
This agreement can be valid even without consideration.
Landmark Case: Rajlukhy Dabee v. Bhootnath Mukherjee
Court held:
Mere relationship is not enough; genuine love and affection must exist.
2. Promise to Compensate for Past Voluntary Services
A promise to compensate a person who voluntarily did something for promisor is enforceable.
Example
A finds B’s lost purse and returns it. B later promises ₹5,000 reward.
Promise is valid.
3. Promise to Pay Time-Barred Debt
Requirements:
- Debt must be time-barred,
- Promise must be in writing,
- Signed by debtor.
Such promise becomes enforceable even without fresh consideration.
Example
A owes B ₹50,000 but limitation period expires. Later A signs written promise to pay.
This becomes enforceable.
Other Exceptions to Consideration Requirement
(a) Completed Gifts
Gift once completed is valid without consideration.
(b) Agency
No consideration needed to create agency relationship.
(c) Charitable Subscriptions
In certain cases, enforceable when promisee acts upon promise.
Landmark Supreme Court Cases on Consideration
1. Abdul Aziz v. Masum Ali
Principle
A promise without consideration is void.
Court refused enforcement of charitable subscription because promisee had not undertaken liability.
2. Currie v. Misa
Though an English case, it is frequently cited in Indian courts.
Definition
Consideration means:
- some detriment suffered
- Some right,
- Interest,
- Profit,
- Benefit,
3. Kedar Nath v. Gorie Mohamed
Principle
Where liability is incurred on faith of promise, promise may become enforceable.
4. Chinnaya v. Ramaya
Principle
Consideration may move from third person.
Extremely important for judiciary and CLAT PG exams.
Essentials of Consideration: Quick Revision Table
| Essential | Explanation |
|---|---|
| At desire of promisor | Must be requested by promisor |
| May move from any person | Third-party consideration valid |
| Can be past, present or future | Indian law recognizes all |
| Must be real | Not illusory/impossible |
| Need not be adequate | But must be lawful |
| Must be lawful | Illegal consideration invalid |
Important Exam-Oriented Notes
Most Asked Judiciary Questions
Q1. Is past consideration valid in India?
Yes, if done at desire of promisor.
Q2. Can stranger to consideration sue?
Yes, in India consideration may move from third person.
Q3. Is inadequate consideration void?
No.
Q4. Which section defines consideration?
Section 2(d).
Q5. Which section contains exceptions?
Section 25.
Difference Between Indian Law and English Law on Consideration
| Basis | Indian Law | English Law |
|---|---|---|
| Third-party consideration | Allowed | Not allowed |
| Past consideration | Valid | Generally invalid |
| Definition | Broad under Section 2(d) | Narrower approach |
Flowchart: Understanding Consideration
Promise
↓
Something in return?
↓
YES → Consideration exists
↓
Lawful + Real + At promisor’s desire?
↓
YES → Valid ContractFeatured Snippet: What are the Essentials of Valid Consideration?
A valid consideration under the Indian Contract Act, 1872 must:
- Move at the desire of the promisor,
- Be lawful and real,
- May move from promisee or any other person,
- May be past, present or future,
- Need not be adequate,
- Must not be illegal or opposed to public policy.
Featured Snippet: What is Consideration under Section 2(d)?
Under Section 2(d) of the Indian Contract Act, consideration means something done, abstained from doing, or promised to be done at the desire of the promisor in exchange for a promise.
People Also Ask
Practical Examples for Law Students
| Situation | Valid Consideration? |
|---|---|
| Promise to pay for illegal act | No |
| Promise after voluntary rescue | Usually no |
| Reward promised for requested act | Yes |
| Registered family settlement without consideration | Yes in some cases |
| Promise to pay time-barred debt in writing | Yes |
Common Mistakes Students Make
- Confusing consideration with motive
- Confusing stranger to contract with stranger to consideration
- Assuming consideration must be adequate
- Forgetting Section 25 exceptions
- Ignoring requirement of promisor’s desir
Difference Between Consideration and Motive
| Consideration | Motive |
|---|---|
| Essential for contract | Personal reason |
| Legal value | Emotional purpose |
| Enforceable concept | Not enforceable |
Conclusion
The doctrine of consideration forms the backbone of contractual obligations under the Indian Contract Act, 1872. Section 2(d) gives a wide and flexible definition that differs significantly from English law. Indian law recognizes past consideration and third-party consideration, making the doctrine broader and more practical.
For judiciary exams, CLAT PG, AIBE, and UGC NET LAW, this topic is highly important because it combines:
- Core statutory interpretation,
- Landmark judgments,
- Conceptual clarity,
- Practical application.
A strong understanding of consideration also helps in mastering:
- Free consent,
- Void agreements,
- Privity of contract,
- Quasi-contracts,
- Commercial agreements.
Students should especially focus on:
- Section 2(d),
- Section 25,
- Chinnaya v. Ramaya,
- Kedar Nath v. Gorie Mohamed,
- Exceptions to consideration
