Ads Top

Answer to the Short Answer Questions /Consideration

The answers are prepared for very short answer questions under the subject of business law. We upload all the matters covering the entire syllabus of the university. It is a series to cover the entire syllabus of BBS/BBA. 

1. What is consideration?

Answer:

Amongst essential elements of a valid contract, Consideration is a very important one. Any agreement to be converted into a contract having consideration is a necessary condition. Consideration is defined as the price of promise. It means the price, reward, payment, or value for which promise of the other is carried is called consideration. It is something but it must be valid in the eye of law.

In the agreement, two parties are promising to fulfill their obligations. The promise made by one party to another party is a consideration for that other and counter promise is the consideration for the initial party. A party getting something instead of nothing is not a consideration and an agreement consisting of such condition is not enforceable in the eye of law.

Blackstone defines consideration as, “Consideration is the recompense given by party contracting to the other.”

For example, Stone offers to Rock to buy his laptop for Rs. 30,000and Rock accepts the offer of Stone. Here the promise of selling a laptop by Stone to Rock is a consideration for Rock and the promise of paying Rs. 30,000 by Rock is a consideration for Stone.

2. State any three features of consideration.

Answer:

Consideration is something for something and something for nothing or nothing for something is not valid in the eye of law. So, it plays a significant role in the formation of a valid contract. The major features of consideration are listed below;

  • Consideration is something for something,
  • It is a price paid for the promise in a contract,
  • It should be something valuable in the eye of the law,
  • It must be necessarily given in the return of promise,
  • It is not the fulfillment of condition or giving consideration is not a condition in the contract,
  • It is a return promise by the promisee or offeree at the desire of the promisor or offeror.

3. State the rules of consideration.

Answer:

A valid consideration requires certain essential rules. The major rules necessary for consideration to be regarded as a valid one and legal one is enlisted as below;

  • Consideration is fixed at the desire of the promisor or offeror,
  • It could be furnished from the offeree or any other person,
  • It can be past, present, and future,
  • Consideration need not be adequate but should have some value in the eye of the law,
  • It should be real, not illusory,
  • It should be lawful and valid,
  • It could be positive or negative

4. Point out the type of consideration.

Answer:

Consideration may also be classified into several types based on the characteristics of the contract. Consideration can be classified into the following three types;

Present consideration: A consideration in which one or both parties perform their duties or obligations created from the contract at the time of the contract is called present consideration.

Future consideration: If a promise is made now but the performance of such promise is designed for a certain future date then it is called future consideration. For example, Philip promises to deliver some goods to Douglas after two weeks and Douglas also promises to pay after a week from the date of delivery. Here the promise of Philips is supported by the promise of Douglas. It is the case of future consideration. In this case, one party could fulfill his or her promise partially or fully at present and others will perform in a certain future date and which is also assumed valid future consideration.

Past consideration: It is explained in another answer.

5. Mention the meaning of Roman Maxim ‘ex mudo non oritur action’.

Answer:

When at least two parties enter into a contract there is an exchange of promises. Neither party promised for noting. It means promise has a price in general. In return for a promise, one gets something and others lose the same and get what the initial party has sacrificed for his or her promise and it is called consideration. So, it is an essential element for the validity of the contract.  In Roman law it is known as ‘ex mudo non oritur action’menas an agreement made without consideration is not valid.

6. Who does determine the consideration?

Answer:

Consideration is the price paid for the promise. Both of the parties of the contract have to fulfill their obligations and they both will return something in return for fulfillment of their promises. But there is one rule that states the provision that the consideration should be moved or determined at the desire of the promisor or offeror. So, we can say that the promisor or offeror determines the consideration of the contract.

7. Enlist the exceptions of the rule’s consideration.

Answer:

The general rule is no consideration no contract. However, such a rule is not applied all the time and we have certain cases in which an agreement not containing the consideration is also valid and bale to form a valid contract. The following are these conditions;

  • Contract-based on natural love and affection,
  • Payment for past voluntary services or acts,
  • Payment or promise to pay a time-barred debt,
  • A gift made,
  • Promise to subscribe to a charitable organization and so on.

8. When consideration is known as a past consideration.

Answer:

When consideration is related to past work then it becomes a past consideration. In case if a party has already gained a benefit from others in the past but he is now making the promise to pay for such past voluntary service rendered or work performed then it becomes past consideration. The English law does not consider past consideration as a valid one.

Answer to the short answer questions /Consideration

For example, Kimmich rendered some services to Kovac in December. In January Kovac promises to pay Rs. 17,000 for service rendered to him. This is called passed consideration and now Kimmich can recover the said amount. 

9. State the essentials for the validity of the contract entered into on the account of natural love and affection.

Answer:

Any agreement based on the natural love and affection is considered valid even without the inclusion of consideration. But it requires some essential conditions. As mentioned in Section 25(1) of the Indian Contract Act, 1872, an agreement deprived of consideration is valid with the fulfillment of the following cases;

  • It must be made in the written documents,
  • It should be registered under the law,
  • It must be made on the ground of natural love and affection,
  • The parties to such an agreement must be in blood relation to each other or near relation to each other.

10. State two cases where past consideration amounts a valid.

Answer:

When consideration is related to past work then it becomes a past consideration. In case if a party has already gained a benefit from others in the past but he is now making the promise to pay for such past voluntary service rendered or work performed then it becomes past consideration. It is also called an executed contract. For the validity of past consideration following may be considered as required conditions;

  • The act should be done or service should be rendered by the promisee in the past at the desire of the promisor.
  • The party who has performed the act in past he or she should not have done with the expectation of getting any return or benefits.
  • The promise to pay his or her earlier time-barred debt then such promise also considered a valid one.

11. When a consideration becomes illusory and not real?

Answer:

The consideration is considered as an illusory and not real when it is impossible to perform and when the matter of consideration is restricted by law. 

References/Suggested Readings
Kalika S.N. (2013), The Law of Contract, Kathmandu: Prithivi Prakashan
Kuchhal M.C. (1978), Mercantile Law, New Delhi: Vikas Publishing House Pvt Ltd
Mishra B.P. (2006), Mercantile Law, Kathmandu: Asia Books Distributers
Panday Yugraj. (2019), Business Law, Kathmandu: Asmita Books Publisher & Distributors Pvt Ltd
Upreti Shreepraksh. (2018), Business Law, Kathmandu: Samjhana Publication Pvt Ltd

No comments:

Please do not enter any spam link in the comment box

Powered by Blogger.