by Present consideration,also known as executed consideration, refers to something of value given simultaneously with the making of the promise or at the time of forming the contract. It is the consideration that is exchanged between the promisor and the promisee when the promise is made. This type of consideration ensures that both parties offer something valuable at the moment the contract is created, creating a binding legal relationship.
According to Section 2(d) of the Indian Contract Act, 1872, consideration refers to an act, abstinence, or promise that has been done at the desire of the promisor. When the act or abstinence is completed at the time the contract is made, it qualifies as present consideration. For example, if A delivers goods to B, and B immediately pays for them, the payment acts as the present consideration for A’s delivery of goods.
Present consideration can take various forms — it may be an act performed, a service provided, money paid, or a promise fulfilled at the time of entering into the agreement. This immediate exchange distinguishes it from past or future (executory) consideration, which either precedes or follows the promise.
The law recognizes present consideration as valid because it shows that both parties have fulfilled part of their obligations right away, making the contract enforceable. It reinforces mutual trust and ensures that neither party enters into the agreement without contributing something of value.
Examples of Present Consideration (Executed Consideration):
If A agrees to sell his bike to B for ₹50,000 and B pays ₹50,000 immediately, the payment is present consideration for A’s promise to transfer ownership of the bike. The payment and the promise occur simultaneously, forming the consideration.
The law recognizes present consideration as valid and sufficient to support a contract.
Features of Present Consideration (Executed Consideration):
- Immediate Performance
Present consideration, also known as executed consideration, is characterized by the immediate fulfillment of an obligation by one party at the time the contract is made. This means that the promisor receives the benefit as soon as the agreement is entered into. For example, when a buyer pays cash for goods at the time of purchase, the act of payment is the present consideration. This immediacy helps create a binding and enforceable contract without delay in obligations.
- Legal Validity
Under Section 2(d) of the Indian Contract Act, 1872, present consideration is legally recognized as a valid form of consideration. The law accepts an act done at the time a promise is made, provided it is done at the promisor’s desire. This ensures that immediate performance of a duty or act during agreement formation satisfies the legal requirement for consideration. This feature distinguishes present consideration from mere gratuitous promises, which are not legally binding.
- Mutuality of Obligation
Present consideration relies on the principle of mutuality, meaning both parties exchange something of value at the same time. This mutual exchange ensures that neither party is bound without receiving a benefit in return. For instance, a restaurant serves a meal while a customer pays immediately—each party performs their obligation concurrently. This mutuality strengthens the enforceability of the contract and ensures fairness, as both parties have something at stake at the point of agreement.
- Simultaneous Exchange
One of the key features of present consideration is the simultaneous nature of the exchange. Both the promise and the act occur together. This is commonly seen in cash-and-carry transactions, where the buyer pays and the seller delivers the goods instantly. The simultaneous exchange reduces the chances of disputes and misinterpretation since all terms are executed at the time of the agreement. It makes the contract self-executing, which simplifies legal enforcement if necessary.
- Tangibility and Certainty
Present consideration often involves tangible actions or exchanges, such as cash payment, delivery of goods, or performance of a service. The tangible nature provides certainty and evidence that a contractual obligation has been fulfilled. This makes it easier to prove the existence and performance of the contract in case of any dispute. For example, a plumber fixing a tap and getting paid immediately illustrates executed consideration with tangible, provable results from both parties.
- No Future Dependency
Unlike executory consideration, present consideration does not depend on a future action or performance. The contract is partly or wholly completed when formed, without any pending promises from the performing party. This makes present consideration more secure and less prone to risk, especially in commercial transactions. Since there is no waiting period for performance, both parties gain immediate satisfaction from the contract, ensuring prompt fulfillment of obligations and eliminating dependency on future behavior.
- Commercial Application
Present consideration is frequently used in everyday commercial transactions because of its simplicity and immediate value exchange. Businesses prefer this model in scenarios like retail sales, service deliveries, and spot payments, as it ensures instant contract completion. The practical nature of present consideration reduces administrative overhead, increases customer satisfaction, and minimizes contractual uncertainty. It is especially suitable for high-volume transactions that do not require prolonged negotiation or delayed execution.
- Proof of Agreement
Since present consideration is executed at the time the promise is made, it serves as immediate proof that an agreement exists between the parties. This can include receipts, signed documents, or even physical evidence of performance. The presence of such proof makes legal validation and dispute resolution easier if the contract is ever challenged. In legal disputes, the fact that consideration was executed at the time of agreement often strengthens the position of the aggrieved party.
Legal Framework of Present Consideration (Executed Consideration):
- Definition under Indian Contract Act, 1872
The Indian Contract Act, 1872, defines consideration under Section 2(d), including acts done at the desire of the promisor. Present consideration, or executed consideration, refers to when one party performs an obligation simultaneously with the formation of the contract. This means the consideration is given at the same time the promise is made. The law recognizes such consideration as valid, provided it is done at the promisor’s request and not as a voluntary or gratuitous act.
- Essential Elements under Law
For present consideration to be legally enforceable, it must meet certain criteria: it must be lawful, have value in the eyes of the law, and be performed at the desire of the promisor. The act or performance must not be illegal, immoral, or opposed to public policy. Additionally, the consideration must have some measurable value, even if not necessarily adequate. Courts generally do not assess the adequacy of consideration but focus on whether some value was exchanged.
- Enforceability in Indian Law
Contracts with present (executed) consideration are fully enforceable under Indian law if all elements of a valid contract are met: offer, acceptance, lawful object, competent parties, and free consent. When consideration is given immediately upon the formation of the contract, it strengthens the enforceability because the promisee has already performed. For example, when goods are handed over upon payment, the transaction is binding without waiting for future promises. This instant fulfillment ensures minimal legal disputes.
- Legal Recognition of Executed Acts
The Indian Contract Act explicitly accepts that past or present acts can form valid consideration. This contrasts with some other legal systems where only present or future consideration is accepted. In India, if A promises to pay B because B has already delivered a service, it is enforceable. But when the act and promise occur simultaneously, such as cash sales, it is present consideration. The law recognizes the binding nature because both parties fulfill obligations concurrently.
- Distinction from Executory Consideration
Under the legal framework, it’s important to distinguish present consideration from executory (future) consideration. Present consideration is already performed, meaning the contract is partly or fully executed. Executory consideration refers to a promise to do something in the future. This distinction matters because remedies and liabilities can vary depending on the type. For present consideration, any failure by the promisor immediately results in breach, whereas in executory consideration, breach only arises upon future non-performance.
- Judicial Interpretation
Indian courts have upheld present consideration as valid and binding in numerous judgments. The courts emphasize that consideration must move at the desire of the promisor and need not necessarily flow directly to the promisor; it can move to a third party. Case laws often highlight that once one party has performed, the promisor cannot back out without facing legal consequences. Courts typically do not question the fairness or adequacy of consideration if it is freely agreed.
- Role of Adequacy
Indian law does not require consideration to be adequate—only lawful and real. For present consideration, this principle means even a small or nominal value exchanged at the time of agreement is sufficient to create legal obligations. The courts focus on whether the consideration has some value in the eyes of the law, not whether it equals the promisor’s promise. This principle protects agreements like token payments or symbolic deliveries, provided they are part of the contract.
- Practical Importance in Commercial Law
Present consideration has great significance in commercial transactions under Indian law. It simplifies contract enforcement because obligations are already performed. For example, cash purchases, instant services, and immediate transfers of property involve present consideration, ensuring parties have little room to deny the existence of a contract. The legal framework allows businesses and individuals to rely on such transactions confidently, knowing they have the force of law behind them when performed as agreed.
Past Consideration (Executory Consideration):
Past consideration refers to an act or service performed before a promise is made. In other words, the promise is made after the act has already been done, usually as a reward or acknowledgment. For example, if A helps B fix his car without expecting payment, and later B promises to pay A ₹1,000 for the help, A’s earlier action is past consideration. Under Indian Contract Law, past consideration is valid, provided it was done at the promisor’s request.
Executory consideration, on the other hand, refers to promises made for future performance. It occurs when both parties’ obligations are yet to be performed, meaning the contract is based on a mutual exchange of promises. For instance, A promises to deliver goods to B next month, and B promises to pay on delivery. This type of consideration is common in commercial agreements and forms the basis of many forward contracts.
While past consideration is valid under Indian law, many common law systems (like in England) generally do not recognize it as sufficient. Executory consideration, however, is universally accepted because it represents an exchange of promises binding both parties. Both past and executory considerations help cover the full timeline of contractual obligations, ensuring that promises related to past actions and future commitments are protected under the law.
Features of Past Consideration (Executory Consideration)
- Definition and Scope
Past consideration refers to something done or given before a promise is made, usually as a reward for a prior act. Executory consideration refers to a future promise where both parties are yet to perform their obligations. Together, they capture past and future exchanges in contracts. Past consideration, under Indian law, is valid if done at the promisor’s request. Executory consideration is widely accepted as it represents a mutual promise binding both parties in the contract.
- Legal Validity
In Indian contract law, past consideration is enforceable if linked to the promisor’s request, meaning even if the promise is made later, the prior act counts. However, under English law, past consideration is generally invalid. Executory consideration, where both parties exchange promises to perform in the future, is legally valid under both systems. Its legal strength lies in the mutuality: neither party has performed yet, but both are bound by the promise, ensuring future performance.
- Timing of Performance
Past consideration involves a completed act or service that has already been provided before the promise arises. Executory consideration involves obligations that are still pending, where the promise relates to something yet to be done by both parties. This timing distinction is crucial because past consideration looks backward, rewarding prior actions, while executory consideration looks forward, depending on future fulfillment of promises. Contracts can include both, but the legal treatment depends on this timing aspect.
- Mutuality of Obligation
Executory consideration is marked by mutual promises: one party promises to do something in exchange for the other’s promise, creating bilateral obligations. Past consideration, by contrast, involves only a one-sided reward or acknowledgment after the fact. Mutuality is weaker in past consideration because one side has already acted. In executory contracts, both parties remain equally bound, waiting for each other’s performance. This mutual exchange strengthens the enforceability of executory consideration in most legal frameworks.
- Examples in Practice
An example of past consideration is A repairing B’s car last week, and today B promises to pay ₹1,000 for that past help. An example of executory consideration is A promising to deliver 100 bags of rice next month, and B promising to pay upon delivery. In business contracts, executory consideration is very common because deals often revolve around future obligations. Past consideration usually appears in situations of gratitude, rewards, or afterthought compensations.
- Challenges and Risks
The main challenge with past consideration is proving that the past act was done at the promisor’s request and is closely linked to the later promise. Without this connection, the law may see it as a mere gift or voluntary act, not enforceable. In executory consideration, the risk lies in non-performance, as neither party has fulfilled obligations yet. Both rely on trust or contractual safeguards to ensure that the promised actions will be completed.
- Legal Principles Involved
Past consideration aligns with Section 2(d) of the Indian Contract Act, which explicitly recognizes acts already done at the promisor’s desire as valid consideration. Executory consideration aligns with the principle of reciprocal promises under Sections 2(f) and 2(e), where each party’s promise is consideration for the other’s. Both concepts are grounded in the idea that something of value must support a contract, whether it has already happened or will happen in the future.
- Importance in Contract Law
Both past and executory considerations ensure that different types of promises are recognized under law, broadening the scope of enforceable contracts. Past consideration allows parties to formalize rewards or payments for prior acts, avoiding unjust enrichment. Executory consideration is the backbone of most commercial agreements, enabling future-oriented deals. Recognizing both types upholds fairness and commercial certainty, allowing parties to rely on promises tied to both past efforts and future commitments under contract law.
Legal Framework of Past Consideration (Executory Consideration):
- Meaning and Recognition
Past consideration refers to an act or service that has already been performed before a promise is made, while executory consideration refers to promises where both parties are yet to fulfill obligations. Under Indian contract law, past consideration is valid if the act was done at the promisor’s request (Section 2(d) of the Indian Contract Act, 1872). Executory consideration is the most common form of consideration in bilateral contracts, where promises are exchanged for future performance.
- Indian Contract Act Provisions
The Indian Contract Act, 1872 explicitly recognizes past consideration as valid. Section 2(d) defines consideration to include past, present, and future acts done at the promisor’s desire. This makes India’s legal framework broader than English law, which generally does not recognize past consideration. Executory consideration is also legally enforceable because it is supported by reciprocal promises (Sections 2(e), 2(f)), where one party’s promise serves as consideration for the other’s.
- English Law Perspective
Under English contract law, past consideration is generally not valid, based on the principle that the consideration must be given in exchange for the promise, not before it. Exceptions exist, such as when the past act was performed at the promisor’s request with the understanding that payment would be made. Executory consideration is well-recognized under English law, as bilateral promises where each party’s future performance supports the contract.
- Judicial Interpretations
Indian courts have consistently upheld the validity of past consideration if it meets the statutory definition. Cases like Kedarnath v. Gorie Mohamed affirmed that acts done at the promisor’s request can be valid consideration even if they happened before the formal promise. Similarly, executory consideration has been reinforced in cases involving reciprocal promises, where courts emphasize the binding nature of future obligations on both parties.
- Role in Contract Enforceability
Past consideration plays a role in recognizing prior acts and preventing unjust enrichment. For example, if a person builds a house at another’s request, and the owner later promises to pay, the prior work counts as valid consideration under Indian law. Executory consideration forms the foundation of most contracts, especially in business, where promises about future delivery or payment are enforceable even before the actual performance.
- Requirements for Validity
For past consideration to be valid, the act must have been done at the promisor’s express or implied request, and the subsequent promise must link directly to that act. Without this, it may be considered a voluntary gesture. Executory consideration requires mutuality: both parties must have outstanding promises that are enforceable. If only one party is bound, it may be seen as a gift or gratuitous promise, which lacks contractual enforceability.
- Limitations and Challenges
One limitation of past consideration is evidentiary — proving that the past act was done at the promisor’s request and was not voluntary. In executory consideration, the main challenge is the risk of non-performance since both parties are relying on future actions. The legal framework addresses these challenges through contractual safeguards like performance timelines, penalties, and clear documentation of mutual promises.
- Importance in Commercial Context
In commercial contracts, executory consideration is the backbone of transactions — whether in supply chains, service agreements, or sale contracts. Businesses routinely enter into agreements where neither side has performed yet but is legally bound. Past consideration is less common but can arise in cases of retrospective agreements or settlements, where prior actions are formalized by a later promise. The legal framework ensures that both are enforceable under proper conditions.
- Remedies for Breach
If a contract supported by past or executory consideration is breached, the Indian legal framework provides remedies such as damages, specific performance, or injunctions. Courts evaluate whether valid consideration existed, the nature of promises made, and the extent of loss or harm suffered. For executory contracts, the remedy often focuses on ensuring future performance or compensating for failure. For past consideration, the focus is usually on compensating the promisee for prior efforts.
