Consideration – Chapter Notes
CA Foundation Business Laws Chapter 2 Unit 2 notes on Consideration under the Indian Contract Act, 1872: Section 2(d), legal rules, no consideration no contract, exceptions and privity of contract.
Contents
Consideration is one of the most important essentials of a valid contract. In simple language, consideration means something in return. If one party makes a promise, the other party must give, do, suffer, abstain from doing, or promise something in return. Without this exchange, a promise generally remains a bare promise and cannot be enforced as a contract.
- Meaning and definition of consideration
- Legal rules for valid consideration
- Past, present and future consideration
- When contracts are valid without consideration
- Doctrine of privity of contract and exceptions
- They write only the rule and skip application
- They confuse stranger to consideration with stranger to contract
- They forget Section 25 exceptions
- They do not conclude clearly whether the contract is valid or void
Consideration is the price agreed to be paid by the promisee for the obligation of the promisor.
In contract law, a promise becomes enforceable only when something is given in return. This something may be money, goods, services, a promise to do something, or a promise not to do something. It need not always be monetary.
Valuable consideration may consist of some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility suffered or undertaken by the other party.
| Term | Literal Meaning | Contract Meaning |
|---|---|---|
| Right | Legal entitlement | Giving up or transferring a legal right |
| Interest | Stake or ownership | Transfer of ownership or claim |
| Profit | Financial gain | Opportunity to earn money |
| Benefit | Any advantage | Anything valuable received |
| Forbearance | Refraining from action | Not exercising a legal right |
| Detriment | Burden or sacrifice | Undertaking a legal obligation |
| Loss | Surrender of value | Giving up property, money or rights |
| Responsibility | Duty or liability | Accepting legal obligations |
The Story
Lizardi & Co. sold four bills of exchange to Mr. Misa. Under the trade practice, Misa had to pay for those bills on the next foreign post day. At the same time, Lizardi & Co. owed money to Currie’s banking firm, and the bank was pressing them to reduce their outstanding balance.
To reduce that debt, Lizardi & Co. gave Currie’s bank an order directing Misa to pay the amount of the bills to the bank. Misa’s manager first gave a cheque for the amount. But later, when he came to know that Lizardi & Co. had stopped payment and were in financial trouble, he instructed his bankers not to honour the cheque. Currie’s bank then sued Misa for the amount.
Legal Problem
Was the bank’s position supported by consideration, even though the consideration was not a simple cash payment directly from the bank to Misa?
Court's Reasoning
The court looked at the legal value exchanged between the parties. It explained that consideration is not restricted to money. It may be a benefit to one party, or a detriment, loss, responsibility, or forbearance undertaken by the other party.
Principle Established
Consideration means something of legal value exchanged between the parties. It may be a benefit to one side or a legal detriment to the other.
Exam Application
Use this case when the question asks to define consideration or explain its meaning with reference to case law.
Memory Trigger
Look for legal value, not only money.
"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 or abstinence or promise is called a consideration for the promise."
Breaking Section 2(d) into Exam-Friendly Parts
| Phrase in Section 2(d) | Meaning | Exam Relevance |
|---|---|---|
| At the desire of the promisor | The act must be done because the promisor wanted it. | Voluntary acts are not consideration. |
| Promisee or any other person | Consideration may move from the promisee or a third party. | Indian law allows stranger to consideration. |
| Has done or abstained | Past act or past abstinence. | Past consideration is valid if done at promisor's request. |
| Does or abstains | Present act or present abstinence. | Example: cash sale. |
| Promises to do or abstain | Future promise. | Executory consideration. |
Doing something is consideration. Example: B delivers goods to C at A's request. The delivery of goods is consideration for A's promise.
Not doing something can also be consideration. Example: A promises not to file a suit if B pays ₹1,00,000.
A promise to do or not do something in future is consideration. Example: A pays now and B promises to deliver goods next month.
Provision → Meaning → Example → Exam Application
The legal rules of consideration are the heart of this chapter. In descriptive questions, ICAI usually tests whether consideration is valid or not by giving a practical case.
Rule 1: Consideration Must Move at the Desire of the Promisor
The Story
Durga Prasad constructed shops in a market. But the important fact was that he did not construct those shops because Baldeo or the shopkeepers had asked him to do so. The construction was carried out at the request of the Collector.
After the shops were built, the market became more useful and the shopkeepers benefited from the improved business activity. Because they were getting benefit from the market, they later promised to pay Durga Prasad a commission on goods sold through the market. When they refused to pay the commission, Durga Prasad sued them to enforce the promise.
Legal Problem
Can a promise be enforced when the act claimed as consideration was done at the request of a third party and not at the request of the promisor?
Court's Reasoning
The court held that the promise was not enforceable. Mere benefit to the promisor is not enough. The act must be done at the desire or request of the promisor.
Principle Established
An act done at the desire of a third party is not valid consideration for the promisor’s promise.
Exam Application
If A repairs B’s property without B’s request, or at the request of a government officer, and B later promises to pay, the promise may not be enforceable.
Memory Trigger
Collector requested, not shopkeepers. Therefore, no valid consideration.
Many students ask: Durga Prasad built the market first and the shopkeepers promised commission later, so why was it not valid past consideration?
The answer is that a past act does not automatically become consideration merely because a promise comes later. First ask whether the act was done at the desire of the promisor. Here, the market was constructed at the desire of the Collector, not at the desire of Baldeo or the shopkeepers. Therefore, Section 2(d) failed.
Section 25(2) also could not save the promise. That exception applies when a person voluntarily does something for the promisor and the promisor later promises to compensate him. Durga Prasad had not voluntarily constructed the market for the shopkeepers; he had acted because of the Collector's direction.
Exam takeaway: Past act + later promise is not enough. Check whether the act was done at the desire of the promisor, or whether it clearly falls under voluntary services under Section 25(2).
Rule 2: Consideration May Move from Promisee or Any Other Person
The Story
An old lady owned certain property and decided to gift it to her daughter. While making the gift, she imposed a condition that her daughter should pay a fixed annuity to the old lady’s brother. In simple terms, the daughter was getting the property, but she also had to support the uncle by making regular payments.
The daughter accepted the property and also executed a written agreement in favour of the uncle, promising to pay him the annuity. Later, after receiving the benefit of the gift, she refused to make the payment. The uncle sued her. The daughter argued that the uncle himself had given her nothing, because the property had come from the mother and not from him.
Legal Problem
Was the uncle barred from enforcing the promise merely because consideration moved from the mother and not from him?
Court's Reasoning
The court held that the uncle could recover the amount. Section 2(d) says consideration may move from the promisee or any other person. Therefore, it was not necessary that the uncle himself should have provided consideration.
Principle Established
In India, consideration may move from the promisee or any other person. There can be a stranger to consideration, but generally not a stranger to contract.
Exam Application
Use this when A gives consideration but the promise benefits B, especially where the arrangement gives B enforceable rights.
Memory Trigger
Mother gave property, daughter promised annuity, uncle could sue.
Rule 3: Consideration May Be Executed or Executory
| Type | Meaning | Example |
|---|---|---|
| Executed Consideration | Consideration already performed. | A pays ₹5,000 immediately. |
| Executory Consideration | Consideration is a promise to be performed later. | B promises to deliver wheat after one month. |
Indian law recognises past, present and future consideration. This is clear from the words "has done", "does", and "promises to do" in Section 2(d).
An act was done before the promise, but it must have been done at the previous request of the promisor.
Consideration is given simultaneously with the promise. Example: cash sale of goods.
Consideration will be performed later. Example: advance payment today and delivery after one month.
Past Consideration — Important Condition
Rule 4: Consideration Need Not Be Adequate
The Story
Two parties entered into an agreement where one party promised to subscribe money to a charitable object, and the other side promised to vote in a particular manner connected with that object. The value exchanged between the parties was not equal in a commercial sense.
The dispute reached the court because one side argued that the consideration was not sufficient or adequate. The court had to consider whether a bargain can fail merely because the value given by one party appears small, unequal, or not commercially equivalent to the promise received.
Legal Problem
Can a contract be challenged only because the consideration appears inadequate or unequal?
Court's Reasoning
The court recognised that consideration must have some legal value, but it need not be equal in value to the promise. Courts normally do not rewrite a freely made bargain merely because the value appears inadequate.
Principle Established
Consideration must exist, but it need not be adequate. Inadequacy may matter only as evidence of coercion, fraud, undue influence or absence of free consent.
Exam Application
If A sells a house worth ₹60 lakh for ₹10 lakh, the agreement is not void merely because the price is low. But the low price may support an allegation of undue influence if facts show pressure.
Memory Trigger
Court checks presence of consideration, not fairness of bargain.
Rule 5: Performance of Existing Legal Duty Is Not Consideration
If a person is already legally bound to perform an act, doing that act again cannot be fresh consideration for a new promise.
The Story
Godefroy was involved in a legal case and wanted Collins to attend court as a witness. Collins had already been subpoenaed, which means he was legally required to attend court. His attendance was not a voluntary favour; it was a duty imposed by law.
To make sure Collins attended, Godefroy promised to pay him one guinea for every day he remained in court. Collins attended for six days, although he was not actually called to give evidence. After that, he demanded payment for the six days. Godefroy refused, and Collins sued to recover the promised amount.
Legal Problem
Can a person claim payment for doing something which he was already legally bound to do?
Court's Reasoning
The court held that Collins had given no fresh consideration. He was already bound by law to attend court because of the subpoena. Doing what the law already required him to do could not support a new promise of payment.
Principle Established
Performance of an existing legal duty is not valid consideration for a fresh promise.
Exam Application
If a public officer, witness, or legal duty-holder is promised extra money for doing what the law already requires, the promise is generally not enforceable.
Memory Trigger
Already bound by law means no fresh consideration.
Rule 6: Consideration Must Be Real and Not Illusory
Consideration must have some value in the eyes of law. It must not be physically impossible, legally impossible or imaginary.
The Story
A son owed money to his father. The son frequently complained that his father had not distributed family property fairly among the children. The father, tired of these complaints, told the son that if he stopped complaining, the father would forgive or not enforce the debt.
After the father’s death, the executors of the estate demanded repayment of the debt from the son. The son argued that he did not have to pay because he had kept his side of the arrangement by not troubling his father with complaints. The court had to decide whether stopping complaints was something of legal value.
Legal Problem
Does a promise to stop complaining amount to real consideration in law?
Court's Reasoning
The court held that the son had not given valid consideration. His promise to stop complaining had no real legal value. It was too vague and did not involve giving up a legal right or undertaking a legal burden recognised by law.
Principle Established
Consideration must be real and have legal value. Vague personal behaviour without legal value is not enough.
Exam Application
Use this when the alleged consideration is something vague, sentimental, imaginary, or not recognised by law.
Memory Trigger
Stopping complaints is not legal consideration.
Rule 7: Consideration Must Be Lawful
Consideration must not be unlawful, immoral or opposed to public policy. Merely having consideration is not enough; it must also be legal.
The Story
Two highway robbers had worked together in committing robberies and collecting stolen money. After some time, a dispute arose between them regarding the division of the stolen proceeds. One robber claimed that the other had not given him his proper share.
Instead of settling the matter privately, he approached the court and filed a claim for an account of the robbery profits. In effect, one criminal was asking the court to enforce an agreement to share the gains of crime. The case became famous because it showed the court’s refusal to assist a party whose claim is founded on illegality.
Legal Problem
Can a court enforce an agreement whose object or consideration is illegal?
Court's Reasoning
The court refused to enforce the claim. The agreement was based on criminal activity, and the court would not help either party recover benefits arising from an illegal arrangement.
Principle Established
Consideration and object must be lawful. An agreement based on illegal consideration is void and unenforceable.
Exam Application
Use this when the facts involve payment for crime, bribery, smuggling, illegal influence, or any unlawful object.
Memory Trigger
A robber cannot sue another robber for robbery profits.
The civil court did not punish the highwaymen for robbery in that suit because the case before it was a civil claim. But the lawsuit exposed the criminal background of the parties and made the court furious that it was being used to settle a dispute over robbery profits.
Joseph Williams was later arrested, tried for robbery and executed by hanging. John Everet avoided capture for some time, but later returned to robbery, was caught, convicted and executed. The lawyers involved also faced serious consequences because the court treated the filing of such a claim as an abuse of judicial process.
Why students remember this case: Most contract cases involve ordinary business disputes. This one involved two criminals asking the court to divide the profits of crime. The legal message is unforgettable: the law will not help a person whose claim is founded on an illegal transaction.
An agreement made without consideration is void.
The law does not enforce bare promises. If A casually promises to give B ₹10,000 and B gives nothing in return, B generally cannot sue A for that amount. Contract law requires exchange, not merely emotion or generosity.
Exception 1: Natural Love and Affection
The Story
A husband and wife were not living together peacefully. Serious differences had arisen between them, and they were living separately. During this period of separation, the husband executed a registered agreement promising to pay a separate allowance to his wife.
Later, when the payment was not made, the wife tried to enforce the promise. She argued that the agreement was between near relatives and was registered, so it should fall within the exception for natural love and affection. The husband’s side argued that the circumstances showed absence of natural love and affection because the parties were already separated due to disputes.
Legal Problem
Does near relationship alone prove natural love and affection under Section 25(1)?
Court's Reasoning
The court held that the promise was not enforceable merely because the parties were husband and wife. The facts showed quarrel and separation, so natural love and affection could not be presumed.
Principle Established
For Section 25(1), near relation, writing, registration and natural love and affection must all exist together.
Exam Application
Use this when a question says the parties are related but the facts show dispute, separation or absence of affection.
Memory Trigger
Relation alone is not affection.
Exception 2: Compensation for Past Voluntary Services
The Story
Services were rendered to a person while he was still a minor. Since a minor is not competent to contract, any promise made during minority could not create an ordinary enforceable contract. The services, however, were not treated as completely irrelevant after the minor became major.
After attaining majority, the same person continued to receive the benefit of the services and later promised to pay for them. When payment was disputed, the court had to consider whether the later promise could be connected with the services already rendered and continued after majority.
Legal Problem
Can services rendered earlier, especially where they continued after the promisor became competent to contract, support a later promise to pay?
Court's Reasoning
The court treated the services continued after majority, and the later promise to pay for them, as capable of supporting enforceability. The case is used to explain how past services and later compensation may operate under Indian law when the statutory conditions are satisfied.
Principle Established
A promise to compensate a person who has already voluntarily done something for the promisor may be enforceable under Section 25(2).
Exam Application
Use this when services were already rendered and the promisor later promises compensation for those services.
Memory Trigger
Past voluntary service can support later compensation.
Exception 3: Written Promise to Pay Time-Barred Debt
The Story
Money had been advanced several years before the dispute. When recovery was later sought, the defence was that the claim related to an old debt and was therefore barred by limitation. The matter also involved documentary material showing acknowledgment of liability, including entries relied upon to show that the debt had not simply disappeared in law.
The lower court had treated the limitation point as sufficient to reject the claim at the threshold. The Supreme Court held that this was not the correct approach where there was material suggesting acknowledgment or a legally relevant promise. The limitation issue had to be examined properly on evidence instead of being dismissed mechanically.
Legal Problem
Can liability connected with an old debt still become legally relevant where there is written acknowledgment or a promise satisfying legal requirements?
Court's Reasoning
The court recognised that limitation and acknowledgment are factual and legal questions. For Section 25(3), the key rule remains simple: a written and signed promise to pay a time-barred debt is enforceable even without fresh consideration.
Principle Established
A written and signed promise to pay a time-barred debt is enforceable under Section 25(3).
Exam Application
Use this when the debtor orally promises payment versus when the debtor gives a written and signed promise. Only the written and signed promise satisfies Section 25(3).
Memory Trigger
Old debt plus written signed promise equals enforceable.
Exception 4: Agency
No consideration is necessary to create an agency. A person may appoint another as agent even without payment.
Exception 5: Completed Gift
A completed gift is valid even without consideration. Once a gift is actually made and accepted, absence of consideration does not invalidate it.
Exception 6: Bailment
Under bailment, delivery of goods by one person to another for a specific purpose can create legal obligations even where no consideration is separately present.
Exception 7: Charity
A promise to contribute to charity may become enforceable where the promisee, on the faith of the promise, has undertaken liability or incurred expenditure.
The Story
A proposal was made to construct a town hall. For this public purpose, several persons promised to contribute money by way of subscription. Kedarnath was one of the subscribers who promised to pay a certain amount.
The organisers did not merely keep the promises on paper. Acting on the faith of these subscriptions, they proceeded with the project and incurred liabilities for construction. Later, Kedarnath refused to pay the amount he had promised. The organisers sued him, arguing that they had changed their position and taken financial responsibility because of the promised subscriptions.
Legal Problem
Is a charitable promise enforceable when the promisee has acted upon it and incurred liability?
Court's Reasoning
The court held that the promise was enforceable. Once the organisers incurred liability on the faith of the promised subscription, the promise was no longer a bare promise.
Principle Established
A charitable subscription can become enforceable when the promisee acts on the promise and incurs liability.
Exam Application
If A promises ₹1 lakh for a school building fund and the trustees enter into a construction contract relying on it, A may be bound to pay.
Memory Trigger
Charity promise plus liability incurred equals enforceable.
| Exception | Key Condition | Common Exam Trap |
|---|---|---|
| Natural love and affection | Writing + registration + near relation + natural love | Students mention only near relation. |
| Past voluntary service | Service must be for promisor | Confused with past consideration. |
| Time-barred debt | Written and signed promise | Oral promise is treated as enforceable incorrectly. |
| Agency | No consideration required | Students try to find payment to agent. |
| Completed gift | Gift must be completed | Future promise to gift is not the same. |
| Charity | Liability incurred on faith of promise | Mere promise to donate may not be enough. |
A stranger to a contract cannot sue upon the contract.
Only a person who is a party to the contract can sue on it. This is called the doctrine of privity of contract. Indian law permits consideration to move from a third person, but it does not generally permit a person who is not a party to the contract to sue.
| Concept | Rule | Position in India |
|---|---|---|
| Stranger to Consideration | Person who has not provided consideration | May be valid because consideration can move from promisee or any other person. |
| Stranger to Contract | Person who is not a party to the contract | Generally cannot sue, subject to exceptions. |
The Story
A marriage was arranged between a bride and a groom. The fathers of both sides entered into an agreement with each other that each father would pay a sum of money to the groom after the marriage. The groom was clearly the person who was supposed to receive the benefit.
However, the groom himself was not a party to the agreement between the two fathers. After the marriage, the promised amount was not paid. The groom then sued to recover the money, arguing that the contract had been made for his benefit.
Legal Problem
Can a person sue on a contract merely because it was made for his benefit, even though he was not a party to it?
Court's Reasoning
The court held that the groom could not sue. Benefit under a contract is not enough. The person must be a party to the contract unless a recognised exception applies.
Principle Established
A stranger to a contract cannot sue, even if the contract is made for his benefit, unless the case falls within a recognised exception.
Exam Application
Use this when a third-party beneficiary tries to enforce a contract made between two other persons.
Memory Trigger
Benefit is not enough. Party to contract is necessary.
The Story
Dunlop manufactured tyres and sold them to dealers on a condition that the tyres should not be resold below a fixed price. This condition was meant to protect Dunlop’s price structure in the market.
One dealer sold tyres to Selfridge & Co. Selfridge also agreed with that dealer not to sell below the fixed price. Later, Selfridge sold the tyres at a lower price. Dunlop wanted to sue Selfridge for breaking the resale-price condition, but Dunlop had no direct contract with Selfridge. The direct agreement was between the dealer and Selfridge.
Legal Problem
Could Dunlop sue Selfridge even though Dunlop had no direct contract with Selfridge?
Court's Reasoning
The court held that Dunlop could not sue Selfridge. Dunlop was not a party to the contract between the dealer and Selfridge, and no consideration had moved from Dunlop to Selfridge in that contract.
Principle Established
A person who is not a party to a contract cannot enforce it. This reinforces the doctrine of privity of contract.
Exam Application
Use this where A contracts with B, B makes a related contract with C, and A tries to sue C directly.
Memory Trigger
No direct contract with Selfridge, so Dunlop could not sue.
A beneficiary can enforce rights under a trust even though he was not party to the contract between settlor and trustee.
Family members for whose benefit a written family arrangement is made may enforce it.
A person benefiting from a marriage arrangement may sue to enforce the provision.
Assignee can sue where contractual benefit is assigned, provided personal skill is not involved.
Where a person acknowledges liability to a third party, he may be stopped from denying it later.
Successor of land may enforce or be bound by certain covenants attached to land.
Provision → Meaning → Example → Exam Application
The Story
A charterparty agreement was made for the use of a ship. The agreement contained a clause that commission would be paid to Walford, the broker who had helped bring about the transaction. Walford was not himself one of the main contracting parties to the charterparty.
When the commission was not paid, Walford claimed it. The objection was that he was a stranger to the contract because the promise to pay commission appeared inside a contract between other parties. The case therefore raised a practical question: if a contract clearly provides a benefit for a third person, can that person enforce it through the trust exception?
Legal Problem
Can a third-party beneficiary enforce a promise where the contract shows that the promise was meant to be held for his benefit?
Court's Reasoning
The court treated the promise as one where the contracting party could be regarded as holding the benefit for the broker. This allowed the beneficiary to enforce the promise through the recognised trust exception to privity.
Principle Established
A beneficiary may enforce a contractual benefit where the arrangement creates a trust or trust-like obligation in his favour.
Exam Application
Use this under the trust exception where a contract clearly sets aside a benefit for a named third person.
Memory Trigger
Benefit held for a person can be enforced as trust.
The Story
Hussaini Begum’s marriage was arranged with the son of Khwaja Muhammad Khan. As part of the marriage arrangement, Khwaja Muhammad Khan executed an agreement promising to pay Hussaini Begum a monthly allowance for her personal expenses after she was received into her husband’s household.
The allowance was not a casual oral promise. It was connected with the marriage arrangement and was charged on specific immovable properties. Later, when the payment was not made, Hussaini Begum sued to recover the allowance. The objection raised was that she was not a direct party to the original arrangement in the strict contractual sense.
Legal Problem
Can a beneficiary under a family or marriage arrangement enforce the promise despite the general rule of privity?
Court's Reasoning
The court allowed enforcement because family and marriage arrangements are often made by elders for the benefit of a specific family member. Denying enforcement would defeat the purpose of such arrangements.
Principle Established
A beneficiary under a marriage settlement or family arrangement may enforce the promise even though he or she is not a direct party in the strict technical sense.
Exam Application
Use this when a promise is made under a family settlement, marriage settlement, or arrangement for the benefit of a specific family member.
Memory Trigger
Marriage settlement beneficiary can sue.
Tweddle v. Atkinson: The fathers of the bride and groom agreed to pay money to the groom. The groom was intended to benefit, but he was not a party to the contract. English law applied privity strictly, so he could not sue.
Khwaja Muhammad Khan v. Hussaini Begum: The marriage arrangement provided a monthly allowance for the bride. She was the intended beneficiary under a family and marriage settlement. Indian courts recognised this as an exception to strict privity and allowed her to enforce the promise.
Exam insight: Do not conclude that every third-party beneficiary loses. Always ask whether the case falls within a recognised exception such as family settlement, marriage arrangement, trust, assignment, acknowledgement or covenant running with land.
Memory trigger: Tweddle = strict privity, beneficiary lost. Hussaini Begum = family settlement exception, beneficiary won.
The Story
Humble managed a public house, but the business actually belonged to Fenwick. Humble appeared to outsiders as if he was carrying on the business, and goods were purchased from Watteau for the business. Watteau supplied the goods believing he was dealing with Humble.
When payment was not made, Watteau discovered that Fenwick was the real owner behind the business and sued Fenwick. Fenwick argued that he had not personally dealt with Watteau and that Humble had acted beyond the limits placed on him privately. The dispute showed how agency can connect a principal with contracts made through an agent.
Legal Problem
Can a principal be connected with a contract made through an agent, even though the principal did not personally negotiate with the third party?
Court's Reasoning
The court held the principal liable because the transaction was of a kind ordinarily connected with the agent’s position. In agency, the agent’s authorised acts are treated as acts of the principal.
Principle Established
A principal may sue or be sued on contracts made by an agent acting within actual or apparent authority.
Exam Application
Use this when a contract is made through an agent and the question asks whether the principal gets rights and liabilities.
Memory Trigger
Agent acts; principal is legally connected.
The Story
Tulk owned a piece of land in Leicester Square, London. He sold the land to another person under a covenant that the land would be maintained as an open garden and would not be built upon. The object was to preserve the open character of the square.
The land later passed through different hands and eventually came to Moxhay. Moxhay had notice of the original restriction, but he still wanted to build on the land. Tulk sued to stop him, even though Moxhay was not a party to the original contract between Tulk and the first purchaser.
Legal Problem
Can a later purchaser of land be bound by a restrictive covenant when he bought the land with notice of that restriction?
Court's Reasoning
The court restrained Moxhay from building. It held that a purchaser who takes land with notice of an obligation attached to it cannot ignore that obligation merely because he was not a party to the original contract.
Principle Established
A covenant running with land may be enforced against a later purchaser who takes the land with notice of the obligation.
Exam Application
Use this when land is sold subject to a condition and the subsequent purchaser knew of that condition.
Memory Trigger
Garden must remain a garden.
How to Write Case-Based Answers
- State the provision — Mention Section 2(d), Section 25, or doctrine of privity as applicable.
- Explain the rule — Write the principle in simple words.
- Apply facts — Connect the names and facts from the question to the rule.
- Give conclusion — Clearly state whether the contract is valid, void, enforceable or not enforceable.
Most Expected Descriptive Questions
- Define consideration under Section 2(d).
- Explain legal rules regarding valid consideration.
- Explain exceptions to the rule "No consideration, no contract".
- Distinguish between stranger to consideration and stranger to contract.
- Explain doctrine of privity of contract with exceptions.
- Act done voluntarily and later reward promised.
- Promise to pay time-barred debt.
- Inadequate consideration and allegation of undue influence.
- Third party beneficiary trying to sue.
- Family settlement or marriage arrangement beneficiary.
Answer Writing Templates
As per Section 2(d), consideration must be an act, abstinence or promise made at the desire of the promisor. In the given case, ______ was done at the desire of ______. Therefore, valid consideration exists and the agreement is enforceable, provided other essentials of contract are satisfied.
The general rule is that an agreement without consideration is void. In the given case, ______ has not given anything in return for the promise of ______. Further, the case does not fall under any exception to Section 25. Therefore, the promise is not enforceable.
Under the doctrine of privity of contract, only a party to the contract can sue. In the given case, ______ is not a party to the contract between ______ and ______. Hence, ______ cannot sue unless the case falls under a recognised exception such as trust, family settlement, marriage arrangement, assignment, acknowledgement or covenant running with land.
| Point | Remember |
|---|---|
| Meaning | Something in return; price of promise. |
| At desire of promisor | Voluntary act is not consideration. |
| Third party consideration | Allowed in India. |
| Past consideration | Valid if done at previous request of promisor. |
| Adequacy | Need not be adequate; must have some value. |
| Existing duty | Doing what one is already legally bound to do is not consideration. |
| Reality | Must be real, not illusory. |
| Lawfulness | Must not be unlawful, immoral or opposed to public policy. |
| No consideration | Generally void, subject to exceptions. |
| Privity | Stranger to contract cannot sue, subject to exceptions. |