Types of Consideration in a Contract Law
Types of consideration in a Contract Law are not expressly not provided. Now we will discuss some different kinds of consideration in Indian Contract Law. We already covered consideration meaning and all the essential elements of consideration. What is consideration in contract law?
Consideration is one of the essentials element of a valid contract. Generally, consideration refers to something paid to a person to get back for something else. Consideration is mandatory for the formation of a valid contract and consideration means “something in return”. It is the price paid for the contract. It must be Lawful. Therefore, a contract without consideration is void.
The definition of Consideration and consideration meaning in law has been provided under section 2(d) of the Indian Contract Act, 1872. Mainly, there are three types of consideration in contract law as defined under the definition of consideration. But, we can see there are more kinds of considerations in the common law. So, in this article, we cover all kinds of considerations.
There are six kinds of consideration in contract law. These are;
- Executory (Future) Consideration
- Executed (Present) Consideration
- Past Consideration
- Conditional Consideration
- Unreal Consideration
- Illegal Consideration
Executory Consideration (Future Consideration)
The executory consideration or future consideration is the consideration where one or more parties make a promise that the consideration is to be performed in the future.
In simple words, in the executory consideration, the party is yet to perform his contractual obligations and also makes a promise that he/she will perform that consideration on a future date, this is called executory/future consideration.
Illustration: A wants to gift it to his brother on his birthday. A purchased bike from B and asked to deliver it on his brother’s birthday. Here, the delivery bike is to be performed in the future. This is an executory/future consideration example.
Executed Consideration (Present Consideration)
The executed consideration or present consideration is the consideration where the parties are performed their promises. It means, the parties to the contract are performed their contractual obligations or promises then it is known as “executed consideration” or “present consideration.”
In other words, the parties to the contract performed their contractual obligations and the performance of the contract is completed, this is called an executed consideration.
Illustration: A goes to a stationery shop and purchased a pen for the cost of Rs. 20/-. Here, A pays Rs. 20 which is the consideration to the shop owner and A got the pen which is the consideration to A. Both considerations are completed. This is called executed/present consideration.
Past Consideration
In a general contract, then consideration should be with the contract, but in the past consideration the act has been done already before making any promise then it is known as Past Consideration in the contract law.
According to Anson, the past consideration is no consideration and it is unenforceable in English Law. So, in Common Law, past consideration has no value or past consideration is does not consider and the past consideration is not good consideration.
Illustration: A has found a purse on the road and he searched for the true owner of that purse i.e. B. A returns the purse to B. Then B gives him Rs. 500/- as a reward. This is a past consideration example.
In the above example, A acted voluntarily and returns B’s Purse. This is Past Consideration.
Conditional Consideration
Conditional consideration is the consideration where one party imposes a request or a condition with the offeree. This is called conditional consideration.
In simple words, the offeror imposes a condition on the offeree while making an offer with the offeree to get his/her acceptance. Such a condition or request imposed on the offeree is conditional consideration.
Similarly, when the offeree imposes any condition or request before giving his acceptance is called a conditional consideration to the offeror. Let’s take an example for better understanding;
Illustration: A makes an offer to B to buy B’s house for Rs. 50 Lacs. But, imposes a condition that he will pay the amount (consideration) in instalments. This is called conditional consideration.
Unreal or Illusionary Consideration
When the consideration is impossible to perform or the consideration is illusionary or imaginary, then the consideration is called unreal or illusionary consideration.
And, the consideration in the agreement is only in words and has no value in the eye of the law is also considered an unreal consideration. Therefore, unreal or illusionary consideration has no value in the eye of the law.
Unlawful Consideration
The unlawful consideration in the Indian Contract Act, 1872, is when the parties make an agreement with unlawful or illegal consideration, the contract is an illegal contract or void contract and the consideration is unlawful or illegal.
The consideration in the agreement is the unlawful consideration when;
- The consideration is forbidden by law
- The consideration defeats any provisions of the law
- The consideration is fraudulent
- The consideration causes injury to other persons or property.
- The consideration is immoral and opposed to public policies.
Illustration: A and B entered into an agreement to buy and sell the smuggled goods. Here, buying and selling smuggled goods is illegal in the eye of the law. So, the consideration in the agreement is unlawful consideration.
Frequently Asked Questions
What are the 6 types of consideration?
There are six kinds of consideration in contract law. These are;
1) Executory (Future) Consideration, 2) Executed (Present) Consideration, 3) Past Consideration, 4) Conditional Consideration, 5) Unreal Consideration, 6) Illegal Consideration.
What are the four basic types of consideration?
Consideration could be a promise, performance, forbearance, or property with legal value, but economic benefit is not required. These are the four basic types of consideration.
What is the most common form of consideration?
Generally, the most common form of consideration is Money.
Conclusion
Types of consideration in a Contract Law are not expressly not provided. Now we will discuss some different kinds of consideration in Indian Contract Law. In the Indian Contract Act, 1872, the definition of the consideration provided under section 2(d), itself gives three kinds of consideration. But, we have discussed all six kinds of consideration in this article and all these six kinds of consideration are covered under this article.
Referred Books:
- Law of Contract – Bare Act 2021 Edition Professional
- The Indian Contract Act 1872 Bare Act 2021 Edition
- Law of Contract & Specific Relief Dr Avtar Singh Latest Edition-2020
- Pollock & Mulla – The Indian Contract Act, 1872
- CONTRACT Paper I – By R.K. Bangia [Edtion 2019 – 2020]
- CONTRACT Paper-II – By R. K. Bangia
- NOTES ON INDIAN CONTRACT ACT 1872: BEST NOTES FOR LAW STUDENTS
