PRESENTATION OF UNIVERSITY OF CENTRAL PUNJAB OF BUSINESS LAW OF BBA OF SEMESTER -5

2. CONSIDERATION AND VALID CONSIDERATION
It is a essential element for formation of a valid contract .
A contract is void without consideration.
According to Sir Pollock-” Consideration is the price for
which the promise of the party is brought”.

3. EXAMPLE
A agrees to sell his factory to B for Rs. 50,000.
Here for A’s promise, the consideration is the
price of his factory i.e. Rs. 50,000 and for B’s
promise, consideration is A’s factory

4. ESSENTIAL ELEMENTS OF VALID OR LAWFUL
CONSIDERATION
A) Consideration may be an act to do something of doing
something.
B) Consideration may be past, present or future.
C) Consideration must be real & not illusory.
D) Consideration should move at the desire of the promisor.
E) Consideration may move from any person including the
promisee.
F) For supporting each independent promise, there
must be an independent consideration.

5. G) Consideration need not be adequate.
H) Consideration must be something which the
promisor is not already bound to do.
I) Consideration must be valuable in the eyes of
laws.

6. KINDS OF CONSIDERATION
1) Present or Executed Consideration
2) Past Consideration
3) Future or Executory Consideration
4) Unlawful Consideration
5) Illusory or Unreal Consideration

7. 1) Present or Executed Consideration-
A present Consideration is something which is
already actually done . It is done in response to some
promise by the promisee. In this, one party has
already performed its part of the promise while the
other party has to perform its part of the promise.

8. 2) PAST CONSIDERATION
A past consideration is something that is wholly done
by the promisee even before making of the
agreement. It is always supported by the future
promise.
For example
X was an infant & at his desire, Y provided him
certain essential commodities. After attaining the
majority X promises Y to compensate for what Y
did in the past.

9. 3) FUTURE CONSIDERATION
A Consideration is said to be future when it is to be
done in future.
A future Consideration is always a promise to do or
for bear or suffer at a future date only.

10. 4) UNLAWFUL CONSIDERATION
1) When forbidden by law
2) When defeat the provisions of law
3) When they are fraudulent
4) When cause injury to other persons or their
property
5) When opposed to public policy

11. 5) ILLUSORY OR UNREAL CONSIDERATION
When a consideration subsist in wards only & is
physically or legally impossible to perform a
promise, such consideration is known as illusory
or unreal.

12. CAPACITY OF PARTIES
All agreements are contracts provided that:
a) they are made by the free consent of parties.
b) these parties must be competent to contract
c) the contract must be for a lawful consideration
and with a lawful object
d) they must not be expressly declared to be void

13. AS PER SECTION 11 DECLARES THE FOLLOWING
PERSONS TO BE INCOMPETENT TO ENTER INTO A
CONTRACT:
1) Minor- A person who has not completed his 18th of
age is considered to be minor in the eyes of law & his
minority
a) where a guardian of a minor’s person or property is
appointed by the court under the Guardians & Ward Act
1890.
b) Where the property of a minor is taken over by the
court of wards for management under the Court of
Wards Act

14. AGREEMENT WITH THE MINORS:
1) Agreement with or by a minor is absolutely
void:
An agreement with a minor is void
2) No Ratification of Minor’s contract: A minor’s
agreement or contract cannot be ratified by him when
he becomes a major. A consideration given by a
person when he was a minor is no consideration in the
eye of law & therefore a consideration given under
earlier contract cannot be implied into the contract
which the minor enters on attaining majority. Minor
can enter into a fresh contract on attaining majority.

15. 3) A minor can be a promisee :
A If minor has carried out his obligations on
entering into a contract, he gets every right to
bring a suit against the other party for the
enforcement of the other party’s obligation.
Suppose , if a minor delivers some goods under a
contract a sale of Mr. X & if Mr. X does pay, the
minor is entitled to bring a suit for the recovery of
the price of the goods sold.

16. 4) NO RESTITUTION IN AGREEMENTS WITH A
MINOR:
If a minor receives any benefit or advantage under
an agreement or a contract which is void, he
cannot be asked or compelled to pay the amount
benefit received.
example
suppose a minor gets a loan from a money lender by
mortgaging his property neither a minor nor his
property can be held liable for recovering the loan
given to him.

17. 5) MINORS INSOLVENCY
A minor cannot be declared as an insolvent because of
his or her incapacity to enter into a contract . He
cannot be held personality liable even for necessities
of life.

18. 6) NO ESTOPPELS IN THE CASE OF A MINOR
A minor can always plead minority & is not bound by his
misrepresentation or fraudulent behavior the rule of
estoppels is not applicable against minor.

19. 7) MINOR AS A PARTNER
A minor cannot be a partner or cannot enter into
partnership contract as a partner. However , he can be
admitted to the benefit of the partnership firm already
in the existence with the prior consent of other
partners. Even though he is admitted to the benefit of
the partnership firm, he does not get any right to
participate in the management of the firm or inspect the
books of the firm.

20. 8) A PERSON WORKING AS A SURETY FOR A
MINOR
Any person may stand as a surety for any liability
incurred by a minor. Such person is held
responsible to a minor’s creditor but not a minor

21. 9) LIABILITY OF MINOR FOR NECESSITIES
If the contracts are entered into for the supply
of the necessaries of life and other necessary
services, all such contracts are valid and a
minor is liable to pay out his property for
the same.

22. 10) RESPONSIBILITY OF PARENTS OR
GUARDIANS OF A MINOR
Parents and guardians are not liable for any
contract entered into by a minor; even though the
contracts entered into are for the supply of
necessities and essential services to a minor.

23. PERSONS OF UNSOUND MIND
Idiots, lunatics, drunkards are considered as the
persons of unsound mind.
According to section 12 “ A person is said to be of sound
mind for the purpose of making a contract if, at the
time when he makes a contract, he is capable of
understanding
it & of forming a rational judgment as to its effect
upon his interest. A person who is usually of
unsound mind , but occasionally of unsound mind,
may make contract when he is sound mind. A person
usually of sound mind but occasionally of unsound
mind may not make a contract when he is of unsound

24. PERSONS DISQUALIFICATION FROM
CONTRACTING BY THE LAW
Alien enemies
Foreign sovereign, their diplomatic staff &
accredited representative s
Insolvents
Convicts
Corporations

25. FREE CONSENT
All agreements are contracts if they are made by the
free consent of the [arties competent to contract,
for a lawful consideration and with a lawful object
& are not hereby expressly declared to be void.
Thus a free consent is one of the essentials of a
valid contract.

26. CONSENT IS SAID TO BE FREE WHEN IT IS NOT
CAUSED BY
Coercion It is committing or threatening to
commit, elements of physical pressure any act
forbidden by the Indian Penal Code.
Undue influence It is a mental which is put upon
the other party to the contract.

27. Fraud Fraud means any act by a party to a
contract or with his connivance, by his agent with
intent to deceive another party thereto or his
agent
1) The suggestion as a fact of that which is not true
by one who does not believe it to be true.
2) The active concealment of fact by one having
knowledge or belief or the fact.
3) A promise made without any intention of
performing it.
4) any other act fitted to deceive.
5) Any such act or omission as the law specially

28. Misrepresentation
1) The positive assertion in a manner not warranted
by the information of the person making it, of what
which is not true though he believes it to be true.
2) Any breach of duty which without an intent to
deceive, gains an advantage to the person
committing it or any one claiming under him , by
misleading another to his prejudice, or to the
prejudice of any one claiming under him.3) Causing
however innocently a party to an agreement to
make a mistake as to the substance of the thing
which is the subject of the agreement.

29. VOID AGREEMENT
1) Agreement by incompetent parties
2) Agreement made under mutual mistake of facts
3) Agreement, the consideration or object of which is
unlawful
4) Agreement, the consideration or object of which is
partly unlawful
5) Agreements entered into without any consideration
6) Agreements made in restraint of marriage
7) Agreements made in restraint of trade, business,
occupation
8) All agreement s, the meaning of which is not certain
9) Wagering agreements
10) Agreement contingent on impossible events
11) Agreement to do an act impossible in itself.