Is past consideration valid under Indian law?

Yes, past consideration is valid under Indian law. Section 2(d) of the Indian Contract Act explicitly includes past acts. For example, if someone provides a service and a promise to pay is made later, the past service constitutes valid consideration, making the contract enforceable.

Can consideration be non-monetary under Indian law?

Yes, consideration need not be monetary. It can be any act, forbearance, or promise that has value. This includes services, goods, promises to do something, or promises to refrain from doing something. The consideration must be real and lawful, but its form is flexible.

What happens if a contract lacks consideration in India?

A contract without consideration is generally void and unenforceable under Section 25 of the Indian Contract Act. However, exceptions exist for gifts, charitable subscriptions, and certain family arrangements made with intent to create legal relations. For commercial contracts, consideration is mandatory.

What is consideration under India law?

Consideration under Indian Contract Act 1872: definition, how it works, and why it matters for binding commercial contracts in India.

What is consideration under India law?

Definition

Consideration under Indian contract law is defined in Section 2(d) of the Indian Contract Act, 1872, as "when the promisor obtains anything to which he is not otherwise entitled, or when the promisee suffers, does or abstains from doing anything which he is at liberty to do or not to do." In simpler terms, consideration is the value exchanged between parties that makes a contract binding and enforceable. It is the "price" paid by one party for the promise of the other.

How it works

Consideration must move from the promisee (the person to whom the promise is made) but it need not move to the promisor (the person making the promise). Under Indian law, consideration can be:

Executed (already performed at the time of contract)
Executory (to be performed in the future)
Monetary or non-monetary
Past, present, or future

Crucially, past consideration is valid under Indian law (Section 2(d) explicitly includes past acts), unlike in English law. For example, if A renders a service to B, and later B promises to pay A for that service, the past service constitutes valid consideration.

Consideration must be:

Real and not illusory
Lawful (not against public policy)
Definite and certain
Possible to perform

Why it matters in contracts

Consideration is a fundamental requirement for contract formation under Section 10 of the Indian Contract Act. Without consideration, an agreement is generally void and unenforceable, even if all parties consent. This protects parties by ensuring that both sides receive something of value, creating a binding obligation.

However, Indian law recognizes exceptions. Gifts, charitable subscriptions, and certain family arrangements may be enforceable without consideration if made with intent to create legal relations. For commercial contracts, however, consideration is non-negotiable. Courts examine whether consideration is real and adequate, though they do not assess whether it represents a fair bargain between parties.

This is a general explanation, not legal advice. The precise meaning can vary by jurisdiction and context.

Frequently asked questions

Is past consideration valid under Indian law?: Yes, past consideration is valid under Indian law. Section 2(d) of the Indian Contract Act explicitly includes past acts. For example, if someone provides a service and a promise to pay is made later, the past service constitutes valid consideration, making the contract enforceable.
Can consideration be non-monetary under Indian law?: Yes, consideration need not be monetary. It can be any act, forbearance, or promise that has value. This includes services, goods, promises to do something, or promises to refrain from doing something. The consideration must be real and lawful, but its form is flexible.
What happens if a contract lacks consideration in India?: A contract without consideration is generally void and unenforceable under Section 25 of the Indian Contract Act. However, exceptions exist for gifts, charitable subscriptions, and certain family arrangements made with intent to create legal relations. For commercial contracts, consideration is mandatory.

Related in the library

Adira drafts and reviews contracts under the law of the jurisdiction they work in.

See Adira