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Introduction:
Consideration is the foundation of every contract. The law enforces only those promise which is made for consideration. Where one party promises to do something it must get something in return. This something in return is called consideration.
Definition:
Section 2 (d) of the Indian Contract Act defines consideration as “when at the desire of the promisor, the promisee or any other person, has done or abstained from doing, or does or abstain from doing, or promises to do or abstain from doing, something, such act or abstinence or promise is called a consideration for the promise".
According to Pollock, “Consideration is the price for which the promise of other is bought and the promise thus given for value enforceable.”
Meaning:
Consideration is something of value which the promise has given, gives or promises to give in return for the promise. It does not mean the payment of money only. It can be past or present or future.
For example: ‘A’ agrees to sell his horse to ‘B’ for Rs 1,000. Here A’s promise to sell his horse is for B’s consideration to pay Rs. 1,000. Similarly, B’s promise to pay Rs 1,000 is for A’s consideration to sell his horse to ‘B’.
For example: ‘A’ sees ‘B’ drawing and saves his life ‘A’ cannot demand payment for his service as it is a voluntary act on his part and ‘B’ never asked him to so.
The leading case on this point is DURGA PRASAD V.S BALDEO (1880)
‘D’ promised to pay ‘P’ a commission on articles sold by him in a bazaar in which he occupied a shop in consideration of ‘P’ having expended money in the construction of such bazaar. The money had not been spent by ‘P’ at the request of ‘D’ but was spent by him at the desire of the “collector of the district”. In a suit by ‘P’, it was held that there was no consideration for the promise made by ‘D’ and hence no contract.
2. It must move from the promisee or any other person: Consideration for the promise may move from the promisee or if the promisor has no objection from any other person.
For example: ‘X’, ‘Y’ and ‘Z’ enter into an agreement under which ‘X’ pays Rs. 4,00,000 to ‘Y’ and ‘Y’ agreed to build a house for ‘Z’. Here ‘Z’ is a party to the contract but a stranger to consideration and can enforce the contract.
3. It must be past, present or future: The words, “has done or abstained from doing, or does or abstain from doing, or promises to do or abstain from doing” indicate that consideration may be past, present or future.
i) Past consideration: when the consideration for a present promise was given before the date of the promise it is said to be past consideration.
For example: A lawyer gave up his practice and serve as a manager of the land owner at the latter request land owner subsequently promised a pension it was held that there was good past consideration.
ii) Present consideration: when the consideration for a promise is given simultaneously with a promise it is called a present consideration.
For example: ‘X’ sells computer to ‘Y’ for Rs 50,000 and ‘Y’ in return gives Rs 50,000 to ‘X’.
iii) Future consideration: Future consideration is a promise to do or give something in return in future for the promise then made.
For example: Mutual promises to marry, a promise to do work in return for the promise of payment.
4. It need not be adequate: Inadequacy of consideration is no ground for refusing the performance of the promise, unless it is evidence of fraud. It should be of some value in the eyes of law.
For example: ‘A’ agrees to sell his house worth Rs. 10, 00,000 to ‘B’ for Rs. 10,000. As consent to the agreement was freely given, the agreement is a contract notwithstanding the inadequacy of the consideration.
5. It must be real: Though consideration need not be adequate, yet it must be real and not illusory. It has also to be competent if it is physically impossible, vague or legally impossible, the contract cannot be enforced.
For example: A promise by a man to make two parallel lines meet is no good consideration.
6. It must be lawful: The consideration of an agreement must be lawful.
i) It should not be forbidden by law or
ii) It should not be fraudulent.
iii) It should not imply injury to person or property.
For example: ‘A’ promise to obtain for ‘B’ an employment in the public service and ‘B’ promises to pay Rs. 1,000 to ‘A’. The agreement is void as the consideration for it is unlawful.
7. It must be something which the promisor is not already bound to do: A promise to do what one is already bound to do, either by general law or under an existing contract, is not a good consideration for a new promise.
For example: ‘A’ promised to pay money to a police officer to investigate into a crime. The agreement was held to be invalid because “the officer is already under the duty to do so by law.” (COLLINS V.S. GODFREY (1834).
Consideration is the foundation of every contract. The law enforces only those promise which is made for consideration. Where one party promises to do something it must get something in return. This something in return is called consideration.
Definition:
Section 2 (d) of the Indian Contract Act defines consideration as “when at the desire of the promisor, the promisee or any other person, has done or abstained from doing, or does or abstain from doing, or promises to do or abstain from doing, something, such act or abstinence or promise is called a consideration for the promise".
According to Pollock, “Consideration is the price for which the promise of other is bought and the promise thus given for value enforceable.”
Meaning:
Consideration is something of value which the promise has given, gives or promises to give in return for the promise. It does not mean the payment of money only. It can be past or present or future.
For example: ‘A’ agrees to sell his horse to ‘B’ for Rs 1,000. Here A’s promise to sell his horse is for B’s consideration to pay Rs. 1,000. Similarly, B’s promise to pay Rs 1,000 is for A’s consideration to sell his horse to ‘B’.
ESSENTIALS OF VALID CONSIDERATION
1. It must move at the desire of the promisor: The first essential characteristic of consideration is that the act or abstinence must have been done at the desire of the promisor. Any act performs at the desire of the third party cannot be a consideration.For example: ‘A’ sees ‘B’ drawing and saves his life ‘A’ cannot demand payment for his service as it is a voluntary act on his part and ‘B’ never asked him to so.
The leading case on this point is DURGA PRASAD V.S BALDEO (1880)
‘D’ promised to pay ‘P’ a commission on articles sold by him in a bazaar in which he occupied a shop in consideration of ‘P’ having expended money in the construction of such bazaar. The money had not been spent by ‘P’ at the request of ‘D’ but was spent by him at the desire of the “collector of the district”. In a suit by ‘P’, it was held that there was no consideration for the promise made by ‘D’ and hence no contract.
2. It must move from the promisee or any other person: Consideration for the promise may move from the promisee or if the promisor has no objection from any other person.
For example: ‘X’, ‘Y’ and ‘Z’ enter into an agreement under which ‘X’ pays Rs. 4,00,000 to ‘Y’ and ‘Y’ agreed to build a house for ‘Z’. Here ‘Z’ is a party to the contract but a stranger to consideration and can enforce the contract.
3. It must be past, present or future: The words, “has done or abstained from doing, or does or abstain from doing, or promises to do or abstain from doing” indicate that consideration may be past, present or future.
i) Past consideration: when the consideration for a present promise was given before the date of the promise it is said to be past consideration.
For example: A lawyer gave up his practice and serve as a manager of the land owner at the latter request land owner subsequently promised a pension it was held that there was good past consideration.
ii) Present consideration: when the consideration for a promise is given simultaneously with a promise it is called a present consideration.
For example: ‘X’ sells computer to ‘Y’ for Rs 50,000 and ‘Y’ in return gives Rs 50,000 to ‘X’.
iii) Future consideration: Future consideration is a promise to do or give something in return in future for the promise then made.
For example: Mutual promises to marry, a promise to do work in return for the promise of payment.
4. It need not be adequate: Inadequacy of consideration is no ground for refusing the performance of the promise, unless it is evidence of fraud. It should be of some value in the eyes of law.
For example: ‘A’ agrees to sell his house worth Rs. 10, 00,000 to ‘B’ for Rs. 10,000. As consent to the agreement was freely given, the agreement is a contract notwithstanding the inadequacy of the consideration.
5. It must be real: Though consideration need not be adequate, yet it must be real and not illusory. It has also to be competent if it is physically impossible, vague or legally impossible, the contract cannot be enforced.
For example: A promise by a man to make two parallel lines meet is no good consideration.
6. It must be lawful: The consideration of an agreement must be lawful.
i) It should not be forbidden by law or
ii) It should not be fraudulent.
iii) It should not imply injury to person or property.
For example: ‘A’ promise to obtain for ‘B’ an employment in the public service and ‘B’ promises to pay Rs. 1,000 to ‘A’. The agreement is void as the consideration for it is unlawful.
7. It must be something which the promisor is not already bound to do: A promise to do what one is already bound to do, either by general law or under an existing contract, is not a good consideration for a new promise.
For example: ‘A’ promised to pay money to a police officer to investigate into a crime. The agreement was held to be invalid because “the officer is already under the duty to do so by law.” (COLLINS V.S. GODFREY (1834).
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