 Yeah, considering that contract is always an important aspect for a student of law advocate. We thought that let's do some series that we have also done certain sessions with Professor Nilima Babade. And we had also done one of the sessions with Professor, sorry, Justice Suresh Gupta. And taking things forward just because we were connected through him through Justice Roshan Dalvi. We thought that the second part as to the consideration in the contracts in the Indian Contract Act. That it will be a connecting point, those who can watch that Justice Suresh Gupta's video as well as on the aspect of consideration in contracts. For taking you from the topic itself, Justice Roshan Dalvi has always been considered, though there is no contractual obligations, but she always exceeds to our request. And today I am finding that she was saying that she's not able to see us and be that as it may and since she says that she is having a difficulty with the PPT part etc. But her passion, her zeal to share the knowledge, paying back to the society has always been a fascinating part. And therefore, the topic for today's topic is consideration in the contract. I will not take much time, I will request ma'am to take the things forward. Good evening Vikas and good evening friends. I know you have heard about the offer and the acceptance from Justice Gupta. You have heard about the elements of the contract act from Professor Nilima. And I have heard both of them. And I think from there, we must follow one of the most important aspects which may be quite missed at some times but which has got many prongs of understandings and that is the consideration. There is no contract which is enforceable if there is no consideration in the contract. So first friends, we will see what is this provision in the Indian contract act. It is in one of the corners, section 2D that shows what is the consideration. And that consideration is a little different from the English law from which our contract act has been based from 1872. So under section 2D, when at the desire of the promissor, promissor is the person who offers something and wants to promise. So it is only at his desire and not any other person. The promissor or any other person has done or abstained from doing this past consideration, does or abstains from doing present consideration or promises to do or abstain from doing future consideration. Something such act or abstinence or promise is called consideration for the promise. So it's a very simple but a long definition and this definition consists of three parts. It shows that something, some value to whatever is enforceable in law must be there. As we go along, I'll tell you what are the exceptions etc. But when you have this value, you can't have it at that minute when you enter into the contract. It may be given before, it may be given at the time of the contract or it may be agreed to be given afterwards also. And everything is acceptable under the Indian contract act. Past consideration is no consideration under the English law. But we are not really concerned with that because a lot of our contracts through 1872 and even there before when the contract act came into being dealt with past consideration. Because of something that somebody had done earlier, some contract came to be and that was enforceable in law. So it was a contract. It was not only a social agreement. Okay, so at the desire of one person, another person has done is doing or will do something that is consideration. It's as simple as that, but it's extremely important. Now, when we analyze the section friends, it is what is this consideration? If you have to explain, we would say that it is a reasonable equivalent or any other valuable benefit that somebody will give somebody else. The two parties to the contract. Okay, so a valuable consideration may consist in. Now this is as per the judge made law, a right interest, forbearance, detriment, loss, responsibility, given, suffered or undertaken by another person. So it could be any of this. It can be a right to get the money. It can be an interest in a thing, for example, to purchase. It can be forbearance. Okay, I will not do something for another one year. It may be to the detriment of somebody also that I don't mind I will I will get this loss but I want this contract. Or it may be a loss which is suffered that can be construed as consideration or a responsibility for doing something like for example an employee working for an employer. So all this any of this could be consideration. And therefore it is called a price under the contract that which deals with commercial contracts. What we consider of value is the price. This is not morals. So it is not the word, like the word of a man, it is the value of a thing. So it is the promise, it is a price for a promise, a return or a quid pro poco, as we call it something for something else that is consideration. The second question is consideration is for whom. One is the promissor. So a financial bank giving a loan is consideration for the other man getting the loan and paying off the loan with interest. So both have given some consideration. A construction man constructer, he constructs a building. He is a promissor. He says I will construct a building and I will get this much money, but I'll give you a flat. So that is consideration. A purchaser and seller in the sale of goods, that is usually the commercial contracts, both either you purchase for consideration that is for money or a price or you sell for a price. A stevedor, for example, in commercial maritime contracts, all these are promissors for whom the consideration can be considered. But that is not all. In Indian law, that is under the Indian contract that it is also for the promissor or some other person. So it is a third party. It is not only for the promissor that the promissor gives a consideration. Now, when we say third party, why has that come? That is in our Indian law, not in English law as such. But it must be seen to be understood. For example, a father pays the school fees for the education of his child. Now, the school fees is consideration for the education, not of the father, not of the father who is paying it with office check. Then, for example, there are marriage contracts where you say that I will give you this gift if you marry my daughter or something like that, aside of course from the W Prohibition Act. So those agreements are also for the bride, which a bride's father or sometimes even the groom's father gives when they settle a marriage. Then there is a trust. So whenever there is a trust, there is a settlement for some money. And even if the trust has to do some charitable act and therefore that charitable act or that settlement is for the beneficiary. That beneficiary is a third party. Then there are some contracts in labor laws. For example, contracts of employment and various contracts between the employer and the employee. Now, if a settlement is done under the Industrial Disclutes Act, for the workers, it is held that it is very good consideration. And once that is done, nobody can resale from it, both the employer and the employee. There have been many cases on this. Then if there is a HUF, for example, and there is a partition of the HUF, the father wants the partition from his brothers. But for whom does he want? He wants it for his son, so that he can have another HUF of which he becomes the Kartha with his sons and his son's sons and his son's son's sons. As the law was prior to 2005 and the daughters became co-pastas. So any Kartha doing it also for his son, the son is a third party for whom consideration is given. So that he says, okay, I give up this and I get this property in partition in a family arrangement. It has been held that it's good consideration. Now, very often nowadays we have got contracts of redevelopment of properties. These contracts are made by the society, the housing society with the builder. But the real beneficiary are the flat owners. For whom the flats and the occupants for whom the flats could be taken. So those occupants are the beneficiaries for the consideration which has passed from the builder to the society of ICOS. Then there are some tourist holidays. There was a very interesting case of certain tourists who went with a man had made a contract. He was the promissor, but he took his whole family for his tour and the tour was a complete loss. So he applied for some damages and it was said that okay, for him we can give but not for his wife and all his three children and all that. And the court said no, that is a third party for whom the consideration was paid because he paid for all five of them. So when the holiday went around, when the contract was breached damages were given to all. Okay, so these are the various aspects of third party beneficiaries in a contract of consideration. Now friends in commercial contracts price is the fundamental condition because no commercial contract can be entered into without a price being fixed. It may be adequate or it may be inadequate. But there has to be some price for a contract otherwise it is not enforced. You can understand this by this example. A wanted to construct a building through B. The parties negotiated the price but they did not agree. B introduced the financer also. But since they could not agree on the price, A gave the contract to somebody else after he got the financing. B sued A for breach of contract to construct. He wanted that contract to construct. But it was held that there was no price fixed and without price there can be no consideration in a commercial contract. So price was held to be fundamental and having not to be agreed there was no contract. Then comes now there is there has to be a consideration we understand. But what is this consideration? I want to sell a house for 10 rupees. Is that consideration? Yes. It is good consideration in law. So somebody would say why would you sell for 10 rupees? You must have got all the other amount in black. Or you must be having some kind of a front to show somebody that you have bought this house when you have not bought. Or you want to make it Benami which is prohibited under the Benami Transactions Act or whatever. But the court will not go into it unless one of the parties says that this consideration was not proper. So inadequate consideration is also good consideration. It is lawful consideration provided it is given with free consent. So both the parties have agreed. Now we will deal later on with some kind of exceptions to it and that would be exception 2 to section 25 which I'll deal with later. But for example there is a sale of a dilapidated building. It goes for an undervaluation. If there is an auction sale of a building it goes at an undervaluation. So the consideration is inadequate but it is not unlawful. Depending upon the exigencies of commerce of trade of that particular contract parties decide on any consideration and that the courts accept. But if it is challenged if the other party says that no this consideration is not proper. I was given this and I had to be given some more. This was actually only in part payment. Then the court will go into adequacy or inadequacy of the consideration. So the court will say that this contract is worth so much price. How can it be done at most at so much of an undervaluation? There is something right and we will not enforce it. So that is about adequacy of consideration. Then we come to past consideration which is only in Indian law. So an act done by a person without any contemporaneous promise. He just does something for somebody else. That can be a consideration for a subsequent promise and for its enforcement. Now how did this come about? This came about actually in cases of caring for children. That is as I first only told you about the education of children. So the father pays the fees in advance. But then that is past consideration and the teachers are supposed to educate the child. So if suppose nothing is done in schools or colleges or any such thing, the father will say give me back my fee or that I will have to claim damages. So this is past consideration. Suppose somebody finds a wallet and gives it to the person. He has done it without any consideration. But he may not have done it absolutely gratis. He may be wanting something and the promise he says, yes, I will give you a reward. Once he says that there is an oral contract and that is for past consideration. And that becomes enforceable in law. Similarly, I have a marriage contracts. In fact, actually it appears that this past consideration came into our law seeing the custom of marriages in our country. Because there were many contracts made of movable as well as movable properties of ornaments, etc. at the time of marriage and they became enforceable. And therefore if the marriage could not take place or there was a breach, then that had to be written. And that was the past consideration which had to be written. Now this aspect of past consideration, we find in our Indian contract act in other sections. That is sections 68, 69 and 70. 68 are for necessary supply for good consideration of payment. So if suppose a grocer supplies us food, groceries, because there is some kind of an oral contract that every month I will want 10 kilos of rice and the grocer supplies. He doesn't supply gratis. He has supplied it for necessities and therefore he has to be paid. That becomes an enforceable contract under section 68. Then if there is money paid on behalf of another person who is legally bound to pay, then it is again good consideration for reimbursement. So if suppose a bank gives money on behalf of one person to his purchaser or seller in a purchase and sale contract, it will be taken as a loan and on an implied footing that the loan will have to be returned. In fact, these are the written agreements and this will be returned with interest. So under section 69, if there is any money paid, it must be paid back. Now suppose there are some goods and services given. Suppose there is some service actually undertaken. For example, if there is a construction contract and a lot of construction has taken place, but money has not been paid for the raw materials. So then that developer would fall under section 69 and he would be able to claim for all the raw materials that he has purchased earlier in anticipation of that contract which he had, that this raw materials would be required. Then under section 70, acts done and delivery made not intending to do so gratuitously is for consideration. So even if there is a contract and if everything doesn't go well, but some thing is done in the contract out of many acts which have to be done. Let us say for example, a building had to be constructed and it was of 20 stores, but the developer did construct up to say five stores and there was a lot of delay and monies were not paid. And he says, unless now you pay me the monies for the raw material which I have purchased, cement, steel, etc. I will not be able to do anything further. So he stops the construction. And the person, the owner says that you have reached a contract. I am terminating your contract and I want damages. Now at that time, the builder can say that whatever is this past consideration, the amount that he has put into say cement or steel or whatever for the raw materials will have to be paid even if the contract is terminated. There are many such contracts in our arbitrations in commercial law. And we hold that when we are deciding on whether the termination is lawful or not. And what is the damages that the party has suffered because the other party has not done a part of the contract. You say yes, you can terminate because now he is not going to construct, but you will have to make that payment. And that payment, it is not understood quite often, but that payment is under section 70, even if it is not under the contract. So a reasonable value for the goods purchased for the services rendered for whatever construction put up is always deducted from the damages which are given. That is the question of justice, equity and good conscience. Okay. Then friends we come to executory and executed consideration. Now as I told you past consideration, as well as future consideration both are good, because most of the contracts you don't have consideration at the moment of the contract. So in executory consideration, it consists of a promise. It deals with outstanding rights and liabilities of both the parties. Like I gave you some example marriage contracts for example, my daughter will marry your son but I will give her this house. So it is an executory contract. If the marriage doesn't take place you can't get the house. But if the marriage takes place you can demand the house because that was executory consideration. The contract is binding as soon as promises are exchanged. Now this happens also in sale of goods. For example delivery and payment at a future date. So you make a delivery on save after one week and payment will have to be made in installments at after one week two weeks two weeks four weeks. Okay, so that is executory consideration but it is enforceable at a future date. Then there is promise to sell and deliver and the promise to pay in such a contract. The contract becomes binding as soon as promises are made and does not depend upon delivery and payment delivery and payment can be later enforced. Okay, another example which we always have is the power of attorney to sell. Now that is the power of attorney coupled with interest. It is irrevocable power of attorney. It actually gives leeway to a party to wait on because he has got to sell that property. Now he has to wait for the best price to get that property. It is under the power of attorney. The giving of the power of attorney is good consideration that you wanted him to sell and therefore you can demand that he sells that property. Now what is a executed consideration? It consists in performance. For example, if there is a lawyer, now a lawyer acts for the client. The lawyer may charge fees in advance. He may charge part fees. He may get a good order for the client. He has done everything for the client. He can demand this fees for executed consideration. You understand this is generally in service contracts. There is a right of one party and the outstanding liability of another party. The contract becomes binding after the work is performed and the payment is promised. These are also offers for labor. For example, a contract for a salary, let us say for an employer and employee. The employee works for the entire month. The employer has to give the salary at the end of the month. Now this is for executed consideration. The work of the employee is good consideration for the salary which is agreed. Then there is a different aspect to consideration. Unilateral and bilateral consideration. Unilateral is consideration of one party which is executed and can be enforced. Then there is a right of one party and the outstanding liability of another party. Just in the last example which I gave you of a service contract or an employee's contract, it is unilateral. One side consideration is already given. The other side that is the employer has the liability to pay. Now for example, there is a promissory note. It is on a unilateral consideration. The money is given and the party who receives the money promises to repay at a particular date. So there is a unilateral consideration for an outstanding liability. Even certain sales which are on credit, for example. There are many sales which you can take, books which you can take on credit and goods which are supplied on credit. The orders of credit are executed and the goods are shipped from one country to another. Now all this is unilateral consideration and that can be enforced by the outstanding liability of another party who receives the goods or who gets the services. Then the other is bilateral consideration. That consideration is executed on both the sides but the contract is in the present. So there is nothing to enforce. For example, sale of goods over the counter. So you buy one packet of rice and you pay the price for the rice. These are bilateral considerations. The grocer gives you the packet and you give him the money at the same time. Another very important example of this is co-owners. Co-owners getting one property each and giving up the claim to another property. Quite often we have our arbitrations also and mainly our adjudications where there are family arrangements. Family arrangements is between brothers and sisters or brothers or whatever. And there are several properties and for whatever consideration one brother gives up one property and says I will take this property and you take that property. Now these are bilateral considerations. They are executed on both the sides. So one brother will say I must get this property. Another brother will say I must get the other property. So giving up of one property also is good consideration for one person. Now I have been telling you about giving up. That giving up in law is called forbearance. So forbearance itself is good consideration. Now which are these types? Again examples will give you the best picture. Parting with something of value. For example the settlement of a house in anticipation of the marriage of the daughter. I will give you, I will part with this. So that is good consideration. Somebody in a family moves out of the family because he wants better space but he has been given some money. Now that is good consideration. We cannot have the right to that property thereafter. Once and for all it is settled. So he says I will not come into this house for this much price. So there is a forbearance. Then sometimes there is an undertaking. There is a legal responsibility which is undertaken. So a party undertakes a legal responsibility. For example, tutoring a child. You got a tutor. You are going to pay the tutor at the end of the month but the tutor takes legal responsibility. And the tutor says yes now he will pass in his math exam and therefore he will get admission to whatever IIT college. That is the legal responsibility. And that forbearance undertaking of that for the amount which will come at the end of a month or at the end of the course is also good consideration. And therefore the tutor can enforce it. Then in law really the more of the cases that come up are forgoing the exercise of a legal right like the right to sue. That happens in very many cases where you agree and there is an agreement after there has been a legal notice for example. So there is a forbearance to sue but that should be for consideration. Non enforcement of a claim for a specific time or non enforcement of a claim or suspension or abandonment of the claim is also good consideration. Because there may be something which that person got and he says okay, I don't want it may be peace of mind for example. I don't want to withdraw my claim. I don't want to prosecute the claim. Now that is good consideration. After sometime you can't say no now I want to prosecute the claim because the suit is withdrawn that contract comes to an end. So non suing for eviction for example the landlord says you give me more rent and I will not I will not sue you for the areas which have now happened or for the construction that you have put up or even for my bona fide requirement or any such thing which is another rent act that is entitled to claim. This is good consideration. And many times now contracts do take place like this, there are agreements for compensation of rent executed after every three years or so. So that is actually forbearance of the licensor or the owner and the consideration is paid by the licensee or the tenant. So that is an end strength. Then compromise of a doubtful debt or a disputed claim quite often parties file a suit. Then they realize they don't want to go on with the suit. It has been 10 years and there has been no judgment. So they declare it as a bad debt or a doubtful debt and they claim that income tax benefits and whatever because it can be shown as the expense that itself is good consideration for the travel of that case. Then there is an NOC. The arbitration we find that in all this construction contracts which cannot go through till the end. Quite often of course contracts can go through till the end and a bridge is constructed or a road is constructed or whatever like that happens. But when that doesn't happen and the government or whoever is the promise or he says we are not constructing and the construction has stopped. So all right, I will pay you, but you please go away and let me have another call. There are many such arbitrations. Now in that what they do is they get an NOC that is no play no objection for any claim or something like that. So that NOC is in full and final settlement of whatever are the rights that the contractor will get for whatever construction that he has already put. Now then the adequacy and inadequacy of consideration becomes important because these are commercial contracts and the employer says the contractor says that no I never gave this NOC and that doesn't mean that I'm not entitled to. I am yet entitled to damages because he did not allow me to go onto the site. Then I had to do various other works. There are very many contracts of quarrying where the contractor quarries and finds nothing and then he says that I've done enough quarrying and it just goes on and on. I can't do anymore in the price that I'm going to pay. So the court will look into the adequacy of consideration and if the contractor is paid everything for whatever that he has done, then that would be taken in full and final settlement. There is a lot of jurisprudence on that. I don't want to go into all those case laws but this comes about usually in construction contracts. So if everything has not been paid then that much amount would be taken to be the admitted amount paid and that much can be deducted but the claim for damages for the remainder of the amount remains. There was an interesting case of an insurance contract. The insurance company said that we have made the payment for this kind of fire benefit. The goods which were destroyed in the fire. And we told him that if you give an NOC then we will pay this amount, this much amount you are entitled. So if the insured was entitled to say 100 rupees, the insurance company said no you are entitled to 80 and we will give you 80. But to give us a receipt in full and final settlement, the insured refused and said this is not adequate consideration. Now it was held that this cannot be, 80 you have to pay and this is an admitted amount. So there can be a judgment on admission or if there is an arbitration there can be an award on that admission. But the claim for the remainder of the 20 rupees will remain and if the insured can satisfy and prove that this claim was given to be given and was a proper claim he is still entitled to last 20 rupees. So this NOC in full and final settlement is very important in commercial contracts because there is forbearance. Then friends we go to another statute, the Negotiable Instruments Act. Under that act there is an exception to the rule of consideration. Other considerations will have to be proved, it will have to be shown. But under the Negotiable Instruments Act as you would definitely know there is a presumption of consideration. So until contrary is proved, there is a presumption that the Negotiable Instrument was made, accepted, endorsed, negotiated and transferred for consideration. Now this is a rebuttable presumption. It is not an irrebuttable presumption. The rebuttable presumption is that as soon as you produce a negotiable instrument, anybody would say that some consideration had passed. But the defendant or the respondent can say no, this was passed consideration for some other contract or it was in part payment of something else and it was not the whole consideration or that I have made payment and this included also the interest which I did not get. In many of the moneylenders claims, those are the defenses which come out. Now this applies to bills of exchange, hoondays, promissory notes, dishonored checks, letters of credit, etc. Now these are for business experiences. Every time somebody gives a check and the check is dishonored, you don't have to go on proving that it was for this consideration because there would be chaos. So therefore the law says that for all of these, when there is a written instrument which is negotiable, which you can transfer by mere delivery, then there is a presumption that consideration which is the price had passed or whatever is mentioned in that document. Then friends, in contract, especially in commercial contracts, we have always reciprocal promises. One party sells and the other party has to make the payment of the price. One party constructs and the other has to make the payment for that construction. So in all of these kind of contracts, there are reciprocal promises, promises of two parties for each other. So one party has to perform when the other party is ready and willing to perform. Now these contracts are usually executory and in stages. Like for example, you have to supply 100 computers. So you may supply 10 computers in the beginning. The person has to make payment for those 10 computers. But it doesn't make payment. So there is a running account. And further 10 computers are also supplied. But it doesn't make the payment. So the supplier says now no more computers until you make this payment. The person says you are supposed to supply 100 computers. So there is a breach. He says no, there is no breach because you had a reciprocal promise to pay for the goods which were delivered. And it has been held in several arbitrations and in judgments that one party's forbearance is good consideration. So he has given for 10, 20 computers. He has foregone but how will he go on? He requires the money again to roll into his business. And therefore payment of price is a very good reciprocal promise for the goods which are delivered for the services which are made. So as they say, no supply, no price, no payment, no supply. Both of these ways the commercial contracts run. Then there are those contracts for designs and plans in construction of structures in construction of artworks, etc. These also form a very important part of arbitrations in commercial contract. And if suppose for example there was a case where art designs had to be made digitally for a serial on the television. And designs and plans had to be given to the designer based upon which he would make it digitally. So when the designs and plans were not given on time and he could not make the digital work and the serial could not be telecast. It was hell that the earlier promissor had could not get damages because he has not supplied the designs because he was himself delayed in supplying the plans for the digital work. This happens in many construction contracts also because in construction contracts again the constructor says up builds up to the plant level and then waits for the first installment to come. And that installment if it is delayed his construction contract for the next slab will be delayed and that will not entitle the owner to damages. Then friends one more aspect is consideration in mutual promises. A mutual promise is a promise for a promise and each promise is the consideration for the other promise. So neither promise in itself is of value but each promise gets its value from the exchange which makes both the promises binding. And therefore each party has a right to enforce the promise of the other. Again the examples are similar that situations may differ. These are for example marriage arrangements also. Marriage will not take place he says unless you give me this much. And if they have if the bride's father has given a particular promise and he has to supply things in the name of the bride. And that is of course not under the dowry prohibition act and I'm not talking about illegal contracts. They'll come to them later. He would say that the marriage not having taken place there is a breach of promise to marry. And under section 73 of the Indian contract act would be entitled the bride would be entitled to damages because the bride was the beneficiary. It was made for the benefit of the third party. Then in commercial contracts also there are various contracts you know from time to time you go on supplying goods from time to time you go on making construction of one road another road one bridge then the end of the bridge whatever that is. So each promise is a consideration for the next one. Similarly in family partitions sharing properties between two heirs is consideration. So there is one promise for the consideration of another promise. There are more properties. Let us say the father died leaving behind four properties and there are two brothers. Now one brother says I'll take the biggest and the smallest property. And the other brother agrees to take the second and the third problem. So there is a family arrangement. Now for each of these there is a contract, but it is a contract, which is a mutual promise for another. And therefore a promise is a consideration for another price. And the entire family arrangement is enforceable. This is the aspect of a fresh consideration. In the same contract sometimes there can be a fresh consideration. There can be an extension of the contract period. Again in arbitrations this is what happens. A agrees to build a house in eight months for rupees one crore for being. We agrees to pay one lakh of rupees, one crore of rupees. A cannot complete this construction. We says all right I'll give you four more months. So he extends the period by a month or four months let us say. Now at that time he says that look you had to construct the whole building. You were supposed to get the cement, steel, all of those other parts etc. And now the prices are rising. So though I will give you extension I will pay at the price that we have agreed. And he also says that if suppose in future the prices fall. Then that doesn't mean that I will have to bear that loss or I will have to pay less. I may still say that I will take the price which has been agreed that is one crore of rupees. So this is a fresh consideration for the same contract the contract of building that house. But extension by one party and for the extension taking the benefit of the price for the raw materials which is implied in the contract is good consideration. And that is a fresh consideration. Then there are some collateral contracts. So there is a consideration in a collateral contract also. A contract the consideration of which is the making of another contract. That is enforceable as collateral to the main contract. Again by example you would understand best. If you enter into a contract of tenancy I will give you rupees 100. Now if this is a lawful consideration if you can give 100 rupees and enter into a tenancy. Then this consideration is collateral to the contract of tenancy which will have some other consideration also. That every month you will have to pay that rent. This doesn't take place many times but quite often sometimes it takes place. Now friends we have the ADR system. In the ADR mediation is now taking hold and many of the contracts specially commercial contracts then realistic properties then in consumer forums. Then in family disputes of properties etc this mediation helps a lot. In this mediation there has to be a women's situation. So each party gets something and gives up something. That is how it is called mediation because it is somewhere in the mean, mediate. So you require negotiation, facilitation, mediation and consignature. And you come to a particular agreement. Now in all these agreements some party loses out something and gets something. Another party may get a little more but one party may have lost out a little more. But the peace that you get, the litigation that comes to an end, the friendship that remains is also good consideration in mediation. So therefore mediation agreements are foreseeable. So any dispute which is analogous to order 23 rule 3 which can be settled down today by mediation or otherwise it was under what we were calling consent terms in adjudication is a good consideration and therefore it is enforcing. Now I would again give you some illustrations of consideration. A gramophone record was to be sold. This was a very interesting case for one shilling sixpence and three wrappers of the gramophone record sold earlier. So it was held that the wrappers were a part of the consignature because this would mean that you would get this price only if you have purchased three gramophone records before. So for a you can say a repeat customer, we will give you a discount. Now that is good consideration upon proving that you are a repeat customer. Many of these contracts today even online in Amazon, if you take this, you get rewards on your credit cards, etc. All these reward points become enforceable because it is for past consideration of the credit card holder. He has purchased something and he has got the points and now those points are valued and can be converted into a purchase. Then a power of attorney to sell a property by a developer. Sometimes the owner says, okay, you develop my property. You give me four flats, the remainder of the flats you can sell. So he gives him a power of attorney to construct, but that power of attorney under that power of attorney he can sell. It is coupled with interest. It is irrevocable and the consideration is the earnest money paid. So when the developer plays the earnest money gets the power of attorney enters into an agreement much before the conveyance he can sell and he can then ask the society to convey the property to the flat purchases. Then allowing a creditor to sell the property is also consideration for the loan given. Now banks and financial institutions give loans. They enter into contracts. There is a promissory note. There is a hypothecation. There is an English mortgage. Then there is an agreement to repay and there is a bank account or a financial institutions account. And one of the clauses of the agreement is that if the loan is not repaid in so much instalments etc. Then the banker or the financial institution will have a right to sell the mortgage property. This is good consideration for the loan which is given by the bank. And this can be sold even at an undervaluation if there is an option sale which is in terms of following the process of law that is today under the securitisation. Then other example is of tenders. When government or PSUs or other parties also invite tenders then the tenders may be for a lesser amount. But the party who wants the tender will give it at an amount which is lesser than the other parties so that his tender can be accepted. Then he cannot say that this is inadequate consideration. A tender price then would be enforced here. Similarly for development of property. So sometimes the tenants they know that they are in a dilapidated building. They are going to get a new flat. The new flat may be more than the area or less than the area. Because there is a capping given in most of the things. In Bombay under the murder act there is a capping of 753 square feet carpet area. Now if the flat was larger also but it is dilapidated they give a larger flat to get a new smaller flat. That is also good consideration. Similarly when we have leave and licence agreements, tenancy, conducting agreements of hotels, restaurants etc. Then the rent or the compensation whichever is agreed by the parties is good consideration. But what if there is a gratuitous licence? For example if a man allows his nephew to stay in his house in one room. And then he says that now my daughter is getting married you please get out and you get another house. The nephew says that no you have not given me anything you pay me something for getting out. And he says no this was a gratuitous licence. I have given you the flat for no reason at all. That is I allowed you to stay for the period that we agree. That was good consideration. And for that consideration you would have to give up his possession after the contract comes to an end. It may be it is generally an oral contract. Liquor licences for example. Liquor licences are held not to be contractual. They are the privilege. So when you get a licence and you have to sell liquor at a given price only and for of a given quality. Because it should not be detrimental to the people who are purchasing it. It is under the excise laws and that becomes good. The licence itself is good consideration. The price even if it is less has to be sold at that price. Now letters of credit are given in most of the international contracts. So when letters of credit are given and the contract is over a period of time. There is devaluation of the dollar or the devaluation of another currency to a dollar. For example a rupee to a dollar. So in that case they increase the limit of the letter of credit. That increase is security for the payment and therefore that is good consideration. So nobody can say that you cannot increase the limit and that is enforceable as consideration which is given. It is a kind of presumption of consideration. Then there is an agreement to avoid a tax. For example parties enter into some agreement to divide the properties between two brothers or between partners. So that the taxation liability becomes less capital gains tax or whatever. Now that is good consideration. So each one will be able to enforce that because evasion of tax is unlawful but avoidance of tax is lawful. Then there are many other examples. For example sale of property in a winding up petition. When there is a company which is going to be wound up the property will be sold by the official liquidator. And when the property is sold it can be that somebody is a buyer. So there is a buying and selling transaction which is called buy off or sell off of a particular party's share. For example there are minority shareholders and majority shareholders. There is a buy off and sell off. And the sale of property if the company has gone into winding up the creditors can also sell the property. It is like the sale by the bank and those are considerations that they will get in an auction sale the price which may be less than the other price but the company cannot challenge it. Then there are partnership contracts. That may be between sleeping partners and active partners. For example one partner will get the capital. He is an old man. He has got a lot of money. He brings in the capital and the younger partner brings in labour. He cannot bring in the capital but they both agree to share half and half. Now these are reciprocal considerations for those promises. So it is good consideration for each of these partners. I told you withdrawing a suit and giving up a claim. Settlement of a bona fide dispute. All these are good considerations. If there is a mutual agreement to avoid further litigation. So if there are commercial contracts or if there are family properties and family businesses then they enter into a mutual agreement so that then there won't be litigation. There is something like a buy over sell over. So all those agreements also are with good consideration. A mere family arrangement to promote peace and harmony is good consideration. In a very interesting case an elder brother had to pay his younger brother a part of the money. He could not pay fully. The mother said that she will pay the deficit, the balance to bring about harmony in the family. That is very good consideration. And that can be enforced against the mother by the younger brother. Then an agreement to pay maintenance to a wife or to an illegitimate child. That is also good consideration for the mere purpose of being a wife at one time at least even if the marriage has been dissolved. And the child who is entitled to be maintained so that agreement to pay maintenance. Then a mother agreeing to pay any shortfall or that is what I told you shortfall for the elder son who had to pay the younger son. All these were good considerations. Now when so far we have been talking about lawful considerations. But there are some unlawful considerations also and they are not enforceable at law. So these unlawful considerations make the contract void under section 23. Which are those unlawful considerations. When the consideration is forbidden by law. When it defeats the provisions of any law. When it is fraudulent. It involves injury to a person or property. Or it is immoral or against public policy. So let us understand all these also by examples. Something which is forbidden by law. If a consideration is given in a binami contract. For a binami purchase. The entire consideration is unlawful. And therefore the contract is void as being as being barred under the binami transactions act. Similarly, Pugrees which are paid in rent contracts. For example, I will give up my rented property to you because you have one of ID requirement. But I will get 50% of what the other purchaser gives. That is a Pugree system which was illegal. And then thereafter under the amended rent tax. It's not Pugree, but it is additional compensation which can be taken or additional rent. That makes it a lawful consideration. Then loans from unlicensed money holders. Under the money holders regulation on prevention act. There was an act of 1976. All money lenders had to be licensed. And all those licensed money lenders had to receive by checks. So they gave loans. Loans taken from unlicensed money holders. This was forbidden by law under the money lenders act for my money lenders act. Therefore, any loan which you have taken from an unlicensed money holder money lender. The money lender cannot recover. It is forbidden by that law. Then employment for money. If suppose somebody says I will give you employment if you give me the first salary. In fact, there are many such contracts and parties have paid. Even in a Lehman license agreement the broker takes the first month's rent as consideration. But employment contracts under the labor laws could not be executed that way. They are forbidden by the labor laws. And if forbidden, they cannot be recovered. GST, for example, it is not forbidden. But GST has to be taken and has to be deducted or added to the price depending upon who gives the service and who takes the service. And therefore there are several contracts which take place. If you do not want GST, then we will not issue the bill. But then if there is an executory contract, you would not be able to execute that contract because there has been no invoice. And GST, it goes against the GST act. Then transfer of license or transfer of tenancy, which is prohibited under the rent act. Again, if there is a transfer, then that contract is for an unlawful consideration. Agreements to evade tax also. For example, GST, all the, so many of the shop owners are evading GST. But an agreement to do that, if it is separately given for an executory contract, you would not be able to enforce it. Then second, if it defeats the provisions of any law. For example, minor's marriage, I will give you my minor daughter in marriage is not a contract which can be enforced. It defeats the provisions of the child marriage restraint act. Dowry prohibition act, very important than in so many houses. I hope it is not there anymore. But all these dowries which are given are under contracts which are not enforceable at law. Then under the urban land ceiling act, nobody could transfer property or develop property more than 500 square meters, etc. Now there were very, very family people and therefore they divided the properties amongst those family people. But if you cannot do that, then what the developers used to do is, they say that you enter into a partnership with us. And after some time, you will dissolve the partnership and you retire as a partner. All these agreements are for unlawful consideration and cannot be enforced. Similarly, Mumbai Tenancy and Agricultural Lands Act. If agricultural land, there was a ceiling limit. And if you exceeded that ceiling limit, the consideration for that particular land could not be recovered. Then under the goal control order, under the prohibition law, you could not sell gold at certain times. And all the jewelers who sold gold sold it on the slide. This was in the 1960s and 70s special. And all those monies which were paid were supposedly called black money as we call it. And nothing enforceable. It is all done at the same time. I give you the goal and you give me the money so that there is no contract which remains executable. Sale of liquor also without the license falls in the same category. Sale my data to a relative. Now, for example, there is a loan taken and the data sends the property to a relative so that when the loan becomes enforceable, when a court decree is obtained, then he says, no, it is not my property. It is my relative's property. All the consideration which is paid under such a contract is unlawful consideration. And if that has not passed at this time, the unlawful contract was made cannot be recovered. Sale by a revenue authority to a default. Now, this is in collusion. It is actually a criminal act. But then maybe and there were some cases where the revenue authorities sold back the property to a default at an undervaluation. The default himself got the property. So he never paid the land revenue under the land revenue code, but this property remains secure. All those considerations were unlawful and payment to stand surety. For example, in the criminal law, if you're going to be released on bail, you somebody stands a surety. When a surety is given, then payment to stand the surety. If you stand surety, I will pay you this much amount and he stands that surety. The consideration is unlawful. Then comes the fraudulent contracts. A sale date in place of a development agreement. The builder or the developer enters into a sale date with some old people who cannot read or do not know the law, etc. And they understand that the property is going to be developed. They are going to get this at the top floor, there is flat, etc. And they will get some consideration with some consideration is paid. And after that they realize that there is a sale date. There is not a development agreement. This was actually a matter in court. It was held that the consideration which was paid was unlawful. The contract itself was void under section 23. And therefore the developer got nothing. Then fraudulent preference to a single creditor is also wrong. When there is a creditor and other when there are many creditors and when there is a settlement with one creditor. So that that creditor can pay less and get out is of unlawful consideration. And the other creditors can come up to that same data and get the property. Now assignment on the eve of insolvency. For example, a man knows that he's going to be declared an insolvent. And just a little before he enters into a contract to sell his immobile property and get some money. That contract is for an unlawful consideration. Payment to biological parents for adoption is unlawful under the adoption set and the Hama Hindu adoptions and maintenance act. And therefore to say that if you give your daughter or son in adoption to me and there is an adoption deed for a consideration, the consideration is unlawful. And fraudulent actually this fraudulent. And then there are contracts and considerations which involve injury to person or property. For example, a lease by an agent and agent is supposed to maintain the property. He has been given the contract to maintain the property to pay the taxes etc. And he enters into a lease and gets the rent. This involves injury to the property of that other person who is the owner. And therefore that is an unlawful consideration. Under the bonded labor prohibition act, any bonded labor is for unlawful consideration. That consideration is very meager. There are boys trafficked and taken into bonded labor. Now there is supposed to be no bonded labor in the country. So if any person cannot get out of an employment by virtue of say his passport having been kept with the employer or his ration card having been kept with the employer. And he is supposed to be given. He is supposed to do some labor work. It is unlawful consideration. Then he saw immoral and what is opposed to public policy. Immoral as really of this concubinage and all those contracts. But admissions to college by influence, you pay the money to somebody to get admission to the college. That consideration is also unlawful. And if that consideration is paid, admission cannot be sort of guaranteed or granted. Dropping a criminal prosecution, there are some contracts where if you drop a criminal prosecution, then you are made some payment. That is an unlawful payment. It is opposed to public policy. What is the consequence of all these unlawful considerations. The agreement is void. When the agreement is void, it is not enforceable under section 2g of the Indian contract. The promissor cannot go back on it without restoring the benefit, but the promissory cannot sue. So you can't come to a court of law. Now I've given you many illustrations of unlawful consideration. Agreements at the time of marriage, annual allowance to biological parents for adoption. Compensation to a witness for deposing was also held to be unlawful consideration. Agreeing to pay a bribe for the work done is also unlawful consideration. The person can get the work done and not pay the bribe. Agreeing for our payment of amount in excess of what is mentioned in the document of transfer. This happens in actual written contracts. Nobody can come to a court of law and enforce a consideration which is not mentioned in a written contract and say, no, this was also agreed to be paid. That is supposed to be black wedding. And that is not enforceable because it is an unlawful consideration. Now consideration by courts of consideration in international contracts. These are certain sound principles. Courts will not enforce contracts or agreements which are contrary to the law of the other country. That is the common law or the statute. It may be either law, but courts will not enforce those in international contracts. And if it is void under the proper law of contract also in international contracts, the courts will not enforce those contracts. For example, contract of selling poppy seeds in Saudi Arabia is illegal and unlawful. So if there is an international contract and there were such contacts within Saudi Arabia and China, which were to be enforced in London, in the Royal Court of Justice in London. The London court said this is contrary to the law of the country where the contract was executed. We will not enforce it. It was not unlawful in England. It was not unlawful in China, but it was unlawful in Saudi Arabia, which is the proper law of contract. And international contracts are not enforced because of unlawful consideration. Then courts will also not enforce or grant damages if the contract would be illegal in the country in which it is required to be performed. So if goods have to be supplied in international contracts, and if those goods could not be supplied in those contracts, then the consideration is unlawful and those contracts are not enforced. So the principle of law, what is that? Courts of one country should not help to break the law of another country. That is the, it is also shown and reflected in conclusivity of foreign judgments and all this. Under section 13, D, E and F of the civil procedure court, I will not go into that now, but that is based on the principle of unlawful consideration that a contract cannot be enforced. The judgment also cannot be enforced. Then friends, when there is part consideration, which is unlawful, a contract may have some lawful and some unlawful consideration. Then lawful consideration can be enforced and unlawful cannot be enforced. For example, if there is a contract for 100 rupees, but there is another contract or in the same contract they make a clause that if such and such a thing happens, I'll pay you another 1000 rupees, which is illegal. Then a part of the contract will not be enforced. So now this is under section 24 of the Indian contract act, where there are different agreements and different considerations. A single consideration for more objects and several considerations for one object. Now, again by way of illustration, payment of municipal permission to get plans passed illegally for buildings in a layout. This is a single consideration. The consideration is the bribe for many objects. Objects are to build 10 buildings in a layout and one consideration is paid. That consideration is illegal. The consideration cannot be enforced. The layout will be enforced. Any part of several considerations for one object also. For example, an employee is paid salary from time to time for bribing some government officers. So his work is only for bribing. This is an illegal contract for an unlawful consideration. And though it is several considerations, it cannot be enforced. If of course the salary is to be paid for lawful work that also then the salary would be payable unless the employee shows that the part of his contract of employment was illegal and unlawful. Then there is the exceptions. The exceptions would be contracts without consideration, which also can be enforced. These are under section 25 of the Indian contract. One is a written and registered contract for love and affection between relations, parties in close relations. This is actually a gift. It is explained also in explanation one to the same section. Now if you make a gift to your son or a daughter or whatever, it is to be under a registered agreement. It has to be stamped with whatever is the stamp duty payable. Then it must be for no consideration but signed by both the donor and the donor. And then it becomes a valid gift, which is a valid and foreseeable agreement, but without consideration. Then a promise to compensate for past work. As I give you the example of NOC in full and final settled, some past work is done. That has to be paid. At least it must be paid under section 70 of the contract act because it was not meant to be gratuitous. It can be paid as a part of the contract which has been done. So that would be to compensate for past work. There is no further consideration required. But the promissor should be competent to contract when the work was done. So a minor upon attending majority promises to pay for his education is not good consideration. At the time he was a minor, he had no capacity to contract. He cannot afterwards say that I will pay you. And the tutor cannot afterwards, when he becomes a big man, say that I had given you a tuition and therefore now you pay me that consideration. It was under the oral contract. That would be bad. So every single last thing has been seen in this law. Then promise to repay time bar debts is an exception. Now that is confirmation of the balance at the foot of the account. So from time to time when a bank or a financial institution gives money and the data keeps on receiving money and just paying interest. He acknowledges that liability. He makes some part payment or he gives. He pays the interest which is due. All of these will be for that past consideration of that loan. And for all of those contracts of extension, there is no consideration. This we will have to read with sections 18 and 19 of the limitation. This will also extend the period of limitation. Now a Kartha in an HUF cannot promise to pay a time bar debt. A Kartha can promise to pay a debt which is for legal necessity. But the time bar debt is not for legal necessity. So a Kartha cannot say that I will acknowledge this liability because the co-partners are the beneficiaries and without their consent he cannot do that. Similarly, a Christian cannot promise to pay his father's time bar debt because in Christian law there is nothing like paying the father's debts all for legal necessity also. So those will be exceptions to the exception. But the exception is payment of the time bar debt. So friends, I think from whatever I know, these are all these various sections of the contract act and other laws which deal with consideration. And you will realize that in anything which is enforceable at law, there must be a consideration. Thank you. Good evening, ma'am. As usual, you have taken us to the entire spectrum of contract law in terms of the consideration and that too without consideration. That was the most important part. We have few questions not on the chat box but on the YouTube. It says agreement in regard to an immobile property on invalid stamp and without registration, whether it can be enforced by paying stamp duty later on. Yes, stamp duty can be paid. You would have to register the agreement, pay the stamp duty which will be adjudicated by the stamping authority with interest and penalty. Once the stamp duty is paid, the agreement is a lawful contract. Then could you explain if contingent contract is enforceable by other party or not? Yes, of course. A contract to do something at a future time if something happens. Like for example, an insurance contract which will have the insurance company agreeing to pay some amount for the consideration of the premium receipt if there is a fire or flood or whatever is the policy. It is a contingent contract. It is definitely enforceable. And it's a lawful consideration. The payment of premium is consideration for that. For example, we pay the premium for our car and the car meets with an accident. So in the terms of that contingency, the amount can be recovered by whatever is the contract of insurance. This is owner of a property has executed an unregistered sale deed. Affidavit registered GPA in favor of the purchases slash attorney. Affidavit GPA? General Barotoni. He says that he is the owner of the property has executed an unregistered sale agreement. Affidavit registered General Barotoni in respect of the purchasers slash attorney and formed a few sites and sold few attorneys died early on. Whether the legal here is entitled for the property? Legal care would be entitled. If the owner was entitled, if the owner dies, the legal heirs right on succession would start. Then if the contract survives to the legal heir, the legal heir would be entitled. But if there is an unregistered sale date, I don't know what the owner himself would be entitled because he will have to register it, pay stamp duty and then only get some. Then thereafter of course the heirs would be entitled. Before we conclude, we will ask Professor Mohan Bhola to express his views. Mr. Bhola. As it's usually heard, very great with great comprehension madam has given a great rendition and this presentation has taken us to a place where we have every such example given for each one of the minute considerations that are possibly legal or illegal depending upon the circumstances. And very great to hear madam and we are indeed, there's a lot of take home and we are indeed very much blessed to have this very great program. I take this opportunity to congratulate Vikas for this and all those who are there in this platform are greatly benefited. Very kind of human. Thank you. Madam's sessions are always well received and it gives a lot of food talks, food thoughts. I will ask if there's another professor, Ayushi Negi, if she wants to share the knowledge or the expressions of the session. No. Yeah, she has taken over. Over to you Ayushi. Hello sir. Thank you ma'am. We had like a very enlightening session and I, that's all I would like to say. I have no questions. Thank you. Ayushi is a regular follower of your sessions ma'am. Besides the other sessions also. She teaches in Shimla. Yeah. Yeah, but then now I'm not teaching anymore. I've joined practice. Okay. That's good. Yeah. Since you are a teacher. Yeah. Okay ma'am. Thank you. Thank you. Yeah. Tomorrow we will be having a session with K. He will be taking us the sessions between the co-ownership etc. So do connect with us at 6 p.m. Thank you everyone. Stay safe and stay blessed. And thank you ma'am once again. Thank you.