Types of Considerations with an example

Types of Considerations with an example

Consideration in contract law is simply the exchange of one thing of value for another. Without consideration, a contract cannot be enforced or is otherwise voidable.

At least three types of Considerations found in Business Law:

Past consideration: When something is done or suffered before the date of the agreement, at the desire of the promisor, it is called ‘past consideration’. It must be noted that past consideration is good considering only if it is given by the promisee, at the desire of the promisor.

Under English law, past consideration is no consideration. In India sec 25(2) adequately covers a past voluntary service.

Illustrations:

(a) A teaches the son of B at B’s request in the month of January, and in February B promises to pay A a sum of Rs. 200 for his services. The services of A will be past consideration.

(b) A lawyer gave tip his practice and served as manager of a landlord at the latter’s request in lieu of which the landlord subsequently promised a pension. It was held that there was good past consideration.

Present consideration: Consideration which moves simultaneously with the promise is called ‘present consideration’ or ‘executed consideration’.

For example, A sells and delivers a book to B, upon B’s promise to pay for it at a future date. The consideration waiting from A is present or executed consideration since A has done his act of delivering the book simultaneously. With the promise of B.

It should, however, be noted that it is said to be, ‘Present consideration’ when at the time of the agreement it is executed on one side and executory on the other. If both parties have done their part under the contract, e.g., where A sells a book to B and B pays its price immediately, it is a case of executed contract (where nothing remains to be done) and not of executed or present consideration.

Future consideration: When the consideration on both sides is to move at a future date, it is called ‘future consideration’ or ‘Executory consideration’. It consists of an exchange of promises and each promise is a consideration for the other.

For example, X promises to sell and deliver 10 bags of wheat to Y for Rs 6,500 after a week, upon Y’s promise to pay the agreed price at the time of delivery. The promise of X is supported by a promise of Y and the consideration is Executory on both sides.

It is to be observed that in an ‘executed consideration’, the liability is outstanding against only one side whereas in an ‘Executory consideration’ it is outstanding on both ends.

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