The essentials or legal rules of a valid consideration are as under:
1. Desire of Promisor:
For a valid consideration, the act or absitinence which forms the consideration must be done at the desire of the promisor. It means that any act performed at the desire of third party or without the desire of promisor can not be a consideration. Similarly, the act done voluntarily does not create a valid consideration. The promisor need not necessarily get any benefit; the third party may also get benefit from the contract.
Examples:
a. A saved B's house from fire. B did not ask for help. A cannot demand payment for his services because he acted voluntarily.
b. B promised to pay a commission on goods sold in his market if D constructed a market in that area. Later, the collector requested D to construct the market and D constructed the market on his request. D demanded commission from B. Held, the promise was not enforceable because the market was not constructed at the desire of B.(Durga Prassad vs.Baldeo).
2. Promisee or other person:
A consideration may move from the promisee or any other person. It means a person can sue on a contract; even if the consideration for the promise moved from a third party.
Example:
A gifted property to her daughter R on the condition that she would pay certain amount annually to A's brother C. R promised to pay the amount to her uncle C. Later, R refused to pay. C sued. Held, C could recover the amount as the consideration had moved from A to C. (Chinnaya vs. Ramayya).
3. Act, Abstinence or Promise:
The consideration may be a positive or a negative act. some times a return promise also forms consideration.
a. Act:
A consideration may be an act, i.e.doing of something. In this sense, consideration is in positive form.
Example:
P agrees to construct A's house for Rs. 12 Lac. A's promise to pay Rs. 12 Lac is the consideration for P's promise of constructing the house.
b. abstinence
Abstinence means refraining from doing something. In this sense consideration is in negative form.
Example:
A promises not to sue B if B pays him additional Rs 5,000. The abstinence of A is the consideration for B’s payment.
Promise:
For a valid consideration, there must be a promise from both sides. It means that there must be a promise by one pary against the promise of other party.
Example:
A agree to sell his horse to B for Rs. 30,000. B’s promise to pay Rs. 30,000 is the consideration for A’s promise. A’s promise to sell the horse is the consideration for B’s promise.
4.Past, present or Future:
the consideration may be past, present or future. It means that consideration is an act which has been done or is in progress or is promised o be done in future.
a. Past consideration:
When the consideration is given before the formation of agreement, it is called a past consideration. It is not a valid consideration. When an act is done voluntarily without any promise for compensation, it is a past consideration and the person doing the act gets no compensation. But if promise is made to compensation a person who has rendered some services, then past consideration is a valid consideration.
Examples:
a.B found A’s lost purse and gave it to them. B cannot demand payment for his services due to past consideration.
b.A teaches B at his request in January, and in February B promises to pay A Rs. 2,000 for his services. The service of A is past consideration.
c.A lawyer gave up his practice and served s manager at the request of landlord. The landlord promised to pay pension. It was held that there was valid past consideration. (Shiv Saran vs. Kesho Prasad).
b. Present Consideration:
When consideration is given immediately by one party to another at the time of contact, it is called present consideration. The act creating the consideration is completely performed.
Example:
A sells a book to B and B pays price immediately. It is a case of present consideration.
c. Future Consideration
When the consideration on both sides is to move at a future date, it is called future consideration. It consists of promises and each promise is a consideration for the other party. In future consideration, the liability is outstanding on both sides.
Example:
X promises to deliver a car to Y after a week, and Y promises to pay the price at the time of delivery. The consideration is future.
5. Not necessarily Adequate:
It is not necessary that the consideration is equal in value to the promise. The law insists on the presence of consideration and not on its adequacy. The parties are free to decide the value of consideration. However, inadequate consideration may create a doubt about the free consent of the parties. But if the consent is proved to be free, inadequate consideration is valid.
Example:
A agrees to sell his car worth Rs. 2 lac for Rs. 50.000 and his consent is free. The contract is valid.
6. Real and Competent:
It is necessary that the consideration is real and competent. When consideration is physically impossible, illegal, uncertain or unreal, it is not a valid consideration.
a.Physically Impossible:
A promise to do something which is phiscally impossible.
Example:
A promise to put life in B’s dead brother and B promises to pay him Rs. 2 Lac.
b. Legally Impossible:
A promise to do something which is illegal.
Example:
A promises to pay Rs. 1 Lac to B on his promise to beat C.
c. Uncertain Consideration:
A promise to do something which is uncertain.
Example:
A employs B for a certain work and promises to pay a reasonable amount.
d. Ureal Consideation:
Consideration is unreal if is consist of a promise to perform a duty which a person is already responsible to perform under a law.
Example:
C was summoned to give evidence in court for G. G promised to pay some amount. G refused to pay. C sued. Held, that consideration was unreal as it was C’s duty to give evidence. (Collins vs. Godefroy).