Consideration
An act, abstinence or promise done or made at the desire of the promisor by the promisee or any other person, which is the price for the promise (Section 2(d) of the Contract Act).
Explained
Section 2(d) of the Indian Contract Act, 1872 provides that 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 to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise. Consideration may therefore be past, present or future, and it may be positive (an act) or negative (an abstinence).
Several rules follow from the wording. Consideration must move at the desire of the promisor; something done at the desire of a third person, or voluntarily, is not consideration. It may move from the promisee or any other person, so Indian law, unlike English law, does not require it to move from the promisee, although only a party to the contract can ordinarily sue on it. Under Section 23 the consideration must be lawful, and under Explanation 2 to Section 25 inadequacy does not by itself make an agreement void, though the Court may consider it in deciding whether consent was freely given.
Section 25 makes an agreement without consideration void, subject to three exceptions: a written and registered agreement made on account of natural love and affection between parties in near relation; a promise to compensate a person who has already voluntarily done something for the promisor or something the promisor was legally compellable to do; and a written, signed promise to pay a time-barred debt. Completed gifts are outside the section, and a gift under Section 122 of the Transfer of Property Act is by definition a transfer without consideration. In contrast, Section 118(a) of the Negotiable Instruments Act presumes that every negotiable instrument was made for consideration.
Examiners test who may furnish consideration, past consideration, the three exceptions in Section 25 with their Illustrations, and the rule on inadequacy.
What the law says
(d) 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 to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;
(e) Every promise and every set of promises, forming the consideration for each other, is an agreement;
(f) Promises which form the consideration or part of the consideration for each other are called reciprocal promises;
Section 2(d) defines consideration
An agreement made without consideration is void, unless—
(1) it is expressed in writing and registered under the law for the time being in force for the registration of [documents], and is made on account of natural love and affection between parties standing in a near relation to each other ; or unless
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless;
Agreement without consideration void, with three exceptions
The consideration or object of an agreement is lawful, unless—
it is forbidden by law; or
is of such a nature that if permitted, it would defeat the provisions of any law; or
Consideration must be lawful
(a) of consideration:—that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;
(b) as to date:—that every negotiable instrument bearing a date was made or drawn on such date;
(c) as to time of acceptance:—that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity;
Presumption that a negotiable instrument was made for consideration
“Gift” is the transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.
Acceptance when to be made.—Such acceptance must be made during the lifetime of the donor and while he is till capable of giving,
If the donee dies before acceptance, the gift is void.
Gift: transfer without consideration
Example
Illustration (f) to Section 25 of the Contract Act: A agrees to sell a horse worth Rs. 1,000 for Rs. 10, and A's consent was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration.
For the exam
- Section 2(d): consideration must be at the desire of the promisor.
- It may move from the promisee or any other person.
- It may be past, present or future.
- Section 25: no consideration, no contract, save three exceptions.
- Inadequacy alone does not void an agreement (Explanation 2 to Section 25).
995 questions in the Law Maker question bank use this term. Practise Contract Law questions
Related terms
- Quid pro quoSomething given or done in return for something else. In law it describes the element of exchange that underlies consideration in contracts and the distinction between a fee and a tax.
- PromiseA proposal that has been accepted. Under Section 2(b) of the Indian Contract Act, 1872, a proposal, when accepted, becomes a promise.
- AgreementUnder Section 2(e) of the Contract Act, every promise and every set of promises forming the consideration for each other. An agreement enforceable by law is a contract.
- ContractUnder Section 2(h) of the Contract Act, an agreement enforceable by law. Section 10 lists what makes an agreement a contract.
- VoidHaving no legal effect. Under Section 2(g) of the Contract Act an agreement not enforceable by law is void, and under Section 2(j) a contract becomes void when it ceases to be enforceable.
- GiftThe voluntary transfer of existing movable or immovable property without consideration by a donor to a donee, accepted by or on behalf of the donee during the donor's lifetime. Section 122 of the TPA.
Further reading
Checked 6 November 2026. Statutory text is quoted from the Bare Acts library, taken from India Code. See the full glossary.