Introduction
Consideration is one of the essential elements of a valid contract as per Section 10 of the Indian Contract Act, 1872. It refers to something in return – an act or abstinence – given by the promisee in exchange for the promisor’s promise. However, the adequacy or sufficiency of consideration is not necessarily a concern of law. What matters more is that the consideration must be real and lawful.
Main Body
Concept of Consideration
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 abstains from doing, or promises to do or abstain from doing something, such act or abstinence or promise is called a consideration for the promise.”
Hence, consideration involves a mutual exchange that makes a contract enforceable.
Insufficiency of Consideration is Immaterial
As per Explanation 2 to Section 25 of the Act, inadequacy of consideration shall not void a contract. The law does not insist on equality of value; it only ensures that something has been exchanged.
Example: If A agrees to sell a watch worth Rs. 10,000 to B for Rs. 1,000, it is still a valid contract as long as A consents voluntarily and the consideration is lawful.
Case Law: Thomas v. Thomas
In this case, the court held that even a nominal consideration is sufficient to make a promise enforceable if it is given voluntarily.
Lawful and Real Consideration is Necessary
Even though consideration need not be adequate, it must be lawful and genuine.
1. Lawful Consideration
The consideration must not be illegal, immoral, or against public policy. If the object is unlawful, the contract becomes void.
2. Real Consideration
The consideration must not be illusory or impossible. It must have some value in the eyes of the law.
Example: A promise made on a past illegal act is not enforceable, even if consideration was given.
3. Exceptions to No Consideration, No Contract
- Natural love and affection (Section 25(1))
- Compensation for voluntary service (Section 25(2))
- Promise to pay a time-barred debt (Section 25(3))
Importance of Free Consent
Even if the consideration is lawful and real, the contract must be formed with free consent. If consent is obtained by fraud, coercion, or misrepresentation, the contract may be voidable.
Conclusion
While the law does not require consideration to be adequate, it insists that it must be lawful, real, and not obtained through coercion or fraud. This principle ensures contractual freedom while maintaining legal safeguards against exploitation and unjust enrichment. Thus, insufficiency is immaterial, but the presence of genuine and legal consideration is vital for the validity of a contract.