Fundamentals of Business Laws and Business Communication · Void and Voidable Agreements, No Consideration No Contract

Consideration: Meaning and Essentials under Indian Contract Act

Updated 10 October 2026 · Fact-checked

Consideration is the 'something in return' for a promise. Under Section 2(d), it is an act, abstinence or promise done or made at the desire of the promisor, by the promisee or any other person. It can be past, present or future. It must be lawful, real and move at the promisor's desire.

Understand Consideration: Meaning and Essentials

A promise is not enforceable just because someone made it. Indian law asks: what did the other side give in return? That 'something in return' is consideration. It is the price of the promise.

Section 2(d) of the Indian Contract Act, 1872 defines it. When, at the desire of the promisor, the promisee or any other person has done or abstained from doing something, or does or abstains, or promises to do or abstain, that act, abstinence or promise is called consideration for the promise.

Consideration has three types. Past consideration is an act completed before the promise was made. Present consideration, also called executed consideration, is an act done at the same time as the promise. Future consideration, also called executory consideration, is a promise to be performed later, as in most business deals. Indian law recognises all three, so a past act done at the promisor's desire can support a later promise. This differs from English law, which does not accept past consideration.

Not every 'something' counts. The act must be done at the desire of the promisor, not voluntarily on your own. It may come from the promisee or from any other person, so Indian law does not require the promisee personally to give it. It must be lawful and real. It need not be adequate, which means a fair price is not required. A court does not weigh the bargain, but the consideration must have some value in the eyes of law.

Example: Ravi promises to sell his bike to Meena for ₹40,000. Ravi's promise to deliver is consideration for Meena's promise to pay, and the reverse. Each promise is the price of the other.

Key formulas to remember

Definition of consideration: Consideration = act, abstinence or promise, at the desire of the promisor, by the promisee or any other person; Section 2(d), Indian Contract Act, 1872. Remember the three words: act, abstinence, promise.
Types of consideration: Past (before promise) | Present or executed (along with promise) | Future or executory (promise to be performed later); Indian law accepts all three. Past counts only if the act was at the promisor's desire.
Essentials of valid consideration: At the desire of promisor + may move from promisee or any other person + past, present or future + need not be adequate + must be real + must be lawful; Consideration must be lawful under Section 23 and must be real, meaning not illusory or impossible. Unlawful, illusory or impossible consideration does not support a contract. Vague terms are dealt with separately under Section 29 (agreements void for uncertainty).
Adequacy rule: Consideration must have value, but need not be adequate; A court does not check whether the price was fair, unless it suggests absence of free consent.

How to solve Consideration: Meaning and Essentials questions

Use this method for any MCQ asking whether a promise is supported by consideration or which type it is.

1Find the promise and the promisor. Ask who wants something from whom.
2Ask what the other side gave or promised in return. If nothing, there is no consideration.
3Check whether it was given at the desire of the promisor. A voluntary act done on one's own is not consideration.
4Check the timing: before the promise (past), at the same time (present), or to be done later (future).
5Check who gave it. In India, it may come from the promisee or any other person, so a third party's act can still count.
6Ignore whether the price was fair. Adequacy is not required.
7Check that the consideration is real and lawful (Section 23). Unlawful, illusory or impossible 'consideration' fails. If the terms themselves are too vague to be certain, that is a Section 29 issue (void for uncertainty), not a defect of consideration.
8Pick the option that matches the rule in Section 2(d).

Quickest way: Desire, Timing, Reality check

When to use it: When you have under a minute for an MCQ on consideration.

Ask: was the act at the promisor's desire? If no, eliminate 'valid consideration'.
Match timing: before = past, same time = present, later = future.
Cross out any option saying consideration must be adequate or must move from the promisee only.
Cross out options claiming past consideration is invalid in India.
Choose the option that fits Section 2(d) wording.

Common mistakes in Consideration: Meaning and Essentials

Saying consideration must move only from the promisee.
English law requires this, and students mix the two systems.
Fix: In India, consideration may move from the promisee or any other person, as Section 2(d) says.
Saying past consideration is never valid.
Textbook memory of the English rule.
Fix: Indian law accepts past consideration if the act was done at the promisor's desire.
Thinking consideration must be adequate or fair in value.
Students assume courts protect against bad bargains.
Fix: Remember: it must have value, but need not be adequate. Section 25, Explanation 2 states that an agreement is not void merely because the consideration is inadequate. Illustration (f) gives the horse example: A agrees to sell a horse worth ₹1,000 for ₹10, and A's consent was freely given. The agreement is still a contract despite the inadequacy. The court may take inadequacy into account in deciding whether consent was freely given.
Treating a voluntary act as consideration.
Students focus on the act, not on whose desire prompted it.
Fix: Check for 'at the desire of the promisor'. A favour done unasked does not count as consideration.
Mixing past with present consideration.
Both involve completed acts.
Fix: Past: finished before the promise was made. Present: done at the time of the promise, such as cash paid on delivery.
Accepting unlawful or illusory consideration as valid.
Students check only that something was given.
Fix: Consideration must be lawful under Section 23 and real. A promise that is illusory, impossible to perform or unlawful does not support a contract. Vague terms are a separate issue under Section 29 (agreements void for uncertainty).

Worked examples

Example 1

Asha asks her neighbour Karan to look after her shop for a week. Karan does so. After she returns, Asha promises to pay him ₹2,000 for his help. Is the promise supported by consideration, and of which type?

Show the solution

The promise is Asha's promise to pay ₹2,000.
Karan's act of looking after the shop was done before this promise, so it is past.
It was done at Asha's request, so it was at the promisor's desire.
Indian law accepts past consideration if given at the promisor's desire.
So Asha's promise is supported by consideration.

Answer: Yes. It is valid past consideration because Karan acted at Asha's desire.

Example 2

Which statement is correct under the Indian Contract Act? (A) Consideration must move only from the promisee. (B) Consideration must be adequate to the promise. (C) Consideration may move from the promisee or any other person. (D) Past consideration is never valid.

Show the solution

Recall Section 2(d): the act may be done by the promisee or any other person.
Option A is the English rule, not the Indian rule, so eliminate it.
Option B is wrong because adequacy is not required.
Option D is wrong because Indian law accepts past consideration done at the promisor's desire.
Only option C matches the Section 2(d) wording.

Answer: Option C.

Exam tips

Learn the Section 2(d) wording almost word for word. Many MCQs test one phrase from it.
Spot trap options built on English law: 'only from the promisee' and 'past is invalid'.
In case-based MCQs, first check whether the act was done at the promisor's desire, then the timing.
Remember adequacy is not required, but the consideration must be real and lawful.
Keep two minutes at the end to recheck options that use 'always' or 'never'.

Practice questions from Void and Voidable Agreements, No Consideration No Contract

Consideration: Meaning and Essentials in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Consideration: Meaning and Essentials: frequently asked questions

What is consideration under the Indian Contract Act?

It is an act, abstinence or promise done or made at the desire of the promisor, by the promisee or any other person. It is defined in Section 2(d). It is the price paid for the promise.

Is past consideration valid in India?

Yes, if the act was done at the promisor's desire. Indian law differs from English law here. A promise to pay for a service already rendered on request can be enforced.

Does consideration need to be adequate?

No. It must have some value in the eyes of law, but courts do not check whether the price was fair. Inadequacy may matter only if it suggests that consent was not free.

Can a third person give the consideration?

Yes. Under Indian law, consideration may move from the promisee or any other person. But a stranger to the contract generally cannot sue on it, which is a separate privity rule.