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Promise, Consideration, Agreement in Indian Contracts Act

Promise (S.2 (b), 2(c)):

When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.

The person making the proposal is called the “promisor”, and the person accepting the proposal is called the “promisee .

Express & Implied Promise (S.9): In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied. 

Alternative Promise: When the promisee is given an alternative or choice of one of two things, the promise is said to be alternative. According to S.58, In the case of an alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced.

Reciprocal Promise (S. 2(f)): Promises which form the consideration or part of the consideration for each other are called reciprocal promises. 

Consideration (S. 2(d)): The Indian Contract Act,defines consideration as. When at a desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing something. suchact or abstinence or promise is called a consideration or promise.” The definition therefore requires the following essentials to be satisfied in order that there is valid consideration:

1. Consideration to be given at the desire of the promisor”. 2. Consideration to be given by the promisee or any other person. 3. The consideration may be past, present or future, so far as the definition says that the promisee:• Has done or abstained from doing or, • Does or abstains from doing, or • Promises to do or to abstain from doing, something.4. There should be some act, abstinence or promise by the promisee, which constitutes consideration for the promise.

Ex nudo pacto non oritur action: Out of a naked pact no cause of action arises. So the law will not enforce a promise given for nothing.

Essential elements of a valid consideration:

1. ‘At the desire of the promisor” The consideration must move at the desire of the promisor. An act done voluntarily by the promisee or at the desire of a third party will not constitute a valid contract.

Example: A voluntarily rescues B’s daughter from a river. A cannot claim remuneration from B as it was not done at B’s request.

2. The consideration can be furnished by any person, even one who is not party to the contract. Consideration may be given by the promisee or any other person. In India, the position is that consideration for the promise may move from a third person, who is not a party to the contract.

Example: Sreemoyee promises to give her mobile phone to Rahul and a consideration of Rs 5000 for the same is given to Sreemoyee by Nikita and not by Rahul. Such a contract will be valid in India.

3. The consideration must be something of value. It must be real and competent and should not be physically impossible, legally impossible, uncertain or illusory.

Example: Asaram tell Baparam that if Baparam gives him Rs. 10,000/- then Asaram shall communicate with Baparam’s deceased ancestors and ensure the Baparam goes into heaven on dying. Baparam agrees. This agreement cannot be called a contract. Because while Baparam’sconsideration of Rs. 10,000/- is real and has value in the eyes of the law, Asaram’s consideration of communicating with deceased persons, etc. cannot be said to be real and having value in the eyes of the law.

4. Also, the consideration should not be illegal. Example: The contract for killing an Individual is void, since involves murder, an illegal act.

5. Consideration need not be adequate. A contract which is supported by consideration is valid irrespective of the fact that the consideration is inadequate.

Example: A agrees to sell a mobile worth Rs. 8000 for Rs. 500. A’s consent to the agreement was freely given. The agreement is a contract, notwithstanding the inadequacy of consideration.

There are some exceptions:

1. Case of natural love and affection. If an agreement is made without consideration, it can be valid if

a. Parties are very closely related

b. Due to love and affection

c. Registered

d. In writing

Example: (Venkataswamy Vs Rangaswamy)

In love and affection the elder brother, promised to clear the debts of his younger brother. The agreement was in writing and it was registered. It was held by the court that the elder one was liable to the creditors.

Example: (Bhiwa Vs Shivaram)

A sued B. his brother for a share in certain lands but the suit was dismissed as B solemnly affirmed that the property was not ancestral B then agreed by registered writing to give A one half of the same property. The present suit was brought to obtain that share.

In the above case the plaintiff admitted that he and his brother had long been on bad terms but in spite of the strained relationship the court held, “that this is just the case to which the defendant had such natural love and affection for his brother that in order to be reconciled to him, he was willing to give him his property.”

2. Past voluntary service

A promise to compensate wholly or in part a person who has already voluntarily done some thing for the promisor is enforceable. In other words a promise to pay for a past voluntary service is binding.

Example: A finds B’s purse and gives it to her and B promises to pay A Rs. 100. In so doing, there is a valid contract in such cases, although A’s act was voluntary.

3. Payment of a time-barred debt

A promise to pay a time barred debt is enforceable. The promise should be in writing. It should be signed by the promisor or by his agent generally or specially authorized in that behalf. The promise may be to pay the whole or any part of the debt. The debt must be such of which the creditor might have enforced payment but for the law for the limitation of suits.

4. Gift actually made

For validity of a gift, which is not an agreement, does not require a consideration. The provision as to consideration does not affect, as between donor and the donce, the validity of any gift, which has actually been made.

Privity of Contract:

The doctrine of privity of contracts creates a bond which is personal to the contracting parties. Other parties are neither bound by the contract, nor are they entitled under it. This doctrine prevents a third party from enforcing the contract.

Thus, a contract between A and B can not be imposed by C and nor can C be held liable under this contract. The same was held in Shiv Dayal v. Union of India. 

Contracts are enforceable by a beneficiary though not a party to the contract. In India, a person not a party to an agreement can sue under the agreement if such a person is a beneficiary and the contract is for his benefit. 

Agreement and Contract:

Agreement (S. 2(e))Every promise and every set of promises, forming the consideration for each other, is an agreement.

Unenforceable Agreements: An otherwise valid contract may be unenforceable at law if some rule renders it incapable of proof due to some technical defects.

Void Agreements (S. 2(g): An agreement not enforceable by law is said to be void. Thus, agreements where the object or consideration is unlawful, or there is no consideration at all are void. Only agreements can be void not contracts. No legal rights flow from void agreements and they are void ab initio.

Illegal Agreements: These are agreements that are void because they are against the law. Thus, an agreement to buy smuggled opium would be void as it is illegal. Illegal is a narrower term than void.

Contracts (S.2(h)): An agreement enforceable by law is a contract. A Contract is an agreement which is legally enforceable. All Contracts are Agreements but not all agreements are contracts. A contract is an agreement with the objective to create an obligation. 

Valid Contract: Such agreements are in accordance with the intention of the parties and law. They satisfy the conditions of valid contract under S.10 of the act. 

Voidable Contract (S. 2(i)): An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract. It is a contract that may be dissolved at the will of one party of the contract. Generally, agreements made under coercion, undue influence etc are voidable.

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