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CPT Paper 2 Mercantile Law Chapter 1 Unit 2 Consideration
Mr. Varughese Thomas
Consideration, Concept, Importance, Double aspect
Consideration from 3rd party to contract
Valid contract without consideration
Stranger cannot sue
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Contract Minus
Consideration
Unenforceable
Promise
Double aspect of consideration
Benefit to promisor
Detriment to promisee
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Price agreed to be paid by Promisee
for Obligation of Promisor
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At the desire of the Promisor
Promisee or any other person
Gives consideration of past / present / future
Consideration (need not be
adequate)
Done or abstained/
does or abstained/ to
do or abstained from doing
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1. Promisor’s desire
2. From promisee or others
3. Executed or executory
4. Past consideration
5. Adequacy
6. Ought to legally perform
7. Not unlawful, immoral or opposed to public policy
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Types Executed (consideration consist in
performance) Executory (Consideration consist in
promise)
Can be from promisee or any person
Must move at the desire of promisor
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Moved by previous request
Has done or abstained
May be motive
Cannot be real for subsequent promise
Past services provided not gratuitous
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Adequacy
Need not be adequate
Should have lawfully some
value
Then that performance
is no consideration
And performance exceeds boundation,
it’s a good consideration
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Real Competent
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Immoral Unlawful Opposed to public
policy
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Consideration can be from 3rd
party
But 3rd party cannot sue
(i.e. Doctrine of privity of contact.)
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TRUST – a beneficiary
FAMILY SETTLEMENT – terms in writing
MARRIAGE CONTRACT - female under HUF
ASSIGNMENT OF CONTRACT - benefits
ESTOPPEL: by liability acknowledgement
COVENANT TO LAND – successor of seller can
CONTRACTS BY AGENTS: in scope of authority & in principal’s name
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Cases without consideration valid &
enforceable
Natural love & Affection
Past voluntary services compensation
Promise to pay time barred debt
Agency
Completed gift
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• Benefit • Detriment
Consideration = price for promise of other party
Consideration = promisor’s desire must
• Executed • Executory Consideration may be
Past consideration = previous request = valid
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In some case contract may be enforced by third party
“No Consideration, No Contract” but Exception are
Consideration must legal
Consideration need not adequate
Consideration may move Promisee Third party
Consideration - not one already legally bound
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MCQ’s
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(a) Consideration must result in a benefit to both parties
(b) Past consideration is no consideration in India
(c) Consideration must be adequate
(d) Consideration must be something, which a promisor is not already bound to do
Answer: (d) Consideration must be something, which a promisor is not already bound to do
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(the points as mentioned in (a),(b) & (c) are not necessarily true
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(the points as mentioned in (b),(c) & (d) are exception to rule “No consideration, No Contract”
(a) Compensation for involuntary services
(b) Love & Affection
(c) Contract of Agency
(d) Gift
Answer: a) Compensation for involuntary services
(a) Must move at the desire of promisor
(b) May move from any person
(c) Must be illusory
(d) Must be of some value
Answer: (c) Must be illusory
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(points mentioned in (a),(b) & (d) are the legal requirements of consideration
(a) Promisor
(b) Promisee
(c) Any other person
(d) Any of these
Answer: (a) Promisor
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(The definition of consideration lays emphasis that it is upon the desire of the promisor, the consideration must move.
(a) Desires
(b) Wishes
(c) Consideration
(d) Promise
Answer: (c) Consideration
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(The aspects of ‘doing or not doing …..’ is contained in the definition of consideration)
(a) The services should have been rendered voluntarily
(b) The services must have been rendered for the promisor
(c) They must be in existence at the time when the services were rendered & must have intended to compensate the promise.
(d) All of the above.
Answer: (d) All of the above.
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(past voluntary services when cognized and compensated, the said service changes to good consideration)
(a) is expressed in writing
(b) of natural love and affection or the parties to the agreement stand in near relation to each other
(c) The document is registered under the relevant law
(d) All of the above
Answer: (d) All of the above
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(All above stated aspects are must in the case of agreement made out of natural love and affection, although it is without consideration)
(a) Consideration must be at the desire of promisor
(b) Consideration may be past, present or future
(c) Consideration need not be adequate, but real & backed with free consent
(d) Consideration should be always monetary
Answer: (d) Consideration should be always monetary
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(a) Consideration should move at the desire of promisor
(b) Consideration may move from promisee or any other person.
(c) Consideration may be past, present or future
(d) All of the above
Answer: (d) All of the above
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(a) A contract cannot confer any right on one who is not a party to the contract, evens though the very object of the contract may have been to benefit him
(b) A contract can confer right on one who is not a party to the contract, if the contract benefits him
(c) A contract always confers right on one who is not a party to the contract
(d) A contract can confer rights on strangers
Answer: (a) A contract cannot confer any right on one who is not a party to the contract, even though the very object of the contract may have been to benefit him
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