Summary
Three important aspects form a contract.
These are Offer, Acceptance & Consideration.
Legal rules regarding consideration
- Consideration must move at the desire of the promisor.
- Consideration may move at the desire of the promisee or any other person.
- There are different kinds of consideration. They may be past present or future.
- Consideration need not be adequate. Contracts are enforceable when there is some consideration. It may not necessarily be equal to the value of the contract.
- Consideration must be real and not illusory. Consideration is not real due to physical impossibility, legal impossibility, uncertainty in consideration and consideration consisting of a pre existing duty or obligation.
- Consideration must be lawful
- Consideration may be either positive or negative.
Exceptions to consideration
- Contracts without consideration are void except in the following cases:
- If they are based on natural love and affection.
- When compensation is voluntary.
- In the case of a time barred debt.
- When there is a contract of agency.
- In case of a completed gift.
Stranger to contract is called Privity of contract.
- There are exceptions to privity of contract.
- Contracts can be enforced by strangers in the following cases:
- When a trust or charge is created in favour of another.
- When there is a marriage or family settlement.
- By the principle of acknowledgement of payment or estoppe.
- When a contract through agents is involved.
- When agreements are made for land deals.
Stranger to consideration is called Privity of consideration.
- In India, a stranger to consideration can sue and enforce an agreement if he is aparty to the contract.
- Third parties/ strangers do not have any rights or obligations to a contract. Only the parties to a contract can sue or be sued in a contract.