Consideration v/s Reciprocal Promise
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We gradually induce the habit of observation and questioning by beginning with a simple exercise pertaining to the Indian Contract Act, 1872. Indian Contract Act is one of the basic statutes that is studied in the first few semesters of the law school. It is ever-relevant in the practice of the law.
Ques: What is the difference between consideration and reciprocal promise? Is every consideration a reciprocal promise, or vice-versa?
Background: Sec 2(d) defines ‘Consideration’ as – “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.” Sec 2 (f) defines ‘Reciprocal Promises’ as – “Promises which form the consideration or part of the consideration for each other, are called reciprocal promises”
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Sec 2(d) defines ‘Consideration’ as – “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.” Sec 2 (f) defines ‘Reciprocal Promises’ as – “Promises which form the consideration or part of the consideration for each other, are called reciprocal promises.
According to the definition stated in section 2(d) consideration can be considered as when the promisor promises to do something or promises not to do anything this act is called consideration of the promise. When such promises form an agreement, it is called Reciprocal Promises.
According to the definition given in section 2(f) reciprocal promises are a part of the consideration or form the consideration for the contract. A reciprocal promise is a promise for promise which makes an agreement.
“Is every consideration a reciprocal promise” Consideration can usually be called as reciprocal promise as a promise in an agreement by the promisee to the promisor is called consideration. Similarly, a reciprocal promise is a promise for a promise and consideration is a reciprocal promise, but may vary according to the situation and transaction that took place. Consideration is usually the cost of the promise given by the promisor to the promisee. It can be said that some value against the promise is given to the promisee is a consideration. The value of consideration may vary in each transaction. For example: – money, or a promise to do something or not to do something.
“Is every reciprocal promise a consideration” Reciprocal promises are generally not considered as consideration. Reciprocal promises are a set of promises from both the parties who agree to come into a contract. Reciprocal promises lead to the formation of an agreement. But there may be exceptions in the statement according to the transactions taking place.First of all I would like to state the section,
Sec 2(d) defines ‘Consideration’ as – “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.” Sec 2 (f) defines ‘Reciprocal Promises’ as – “Promises which form the consideration or part of the consideration for each other, are called reciprocal promises.”
I will try to explain between the two concepts with the help of an example.
For instance, in the case of sale of immovable property, the vendor will propose the sale of certain house for a consideration subject to certain conditions. If the purchaser accepts the proposals and performs the reciprocal promise of paying consideration or part of consideration, the acceptance is absolute.
Reciprocal promise is promises by both the parties, so in this example, one party promised to sell his land for a certain consideration whereas other promised to pay consideration to buy that land. This is reciprocal promise and it has been constituted or formed the consideration for both the parties, consideration here means that both the parties have promised to do a certain act. Therefore reciprocal promise is like a bigger umbrella and it is the basis for the consideration for both the parties. (B Rajamani v. Azhar Sultana & Others LNIND 2004 AP 1466)
To understand the concept better we may now take another example of a lease.
A ’lease’ of a building involves two promises: (1) by the lessor to transfer his right to enjoy his premises to the lessee in consideration of the latter’s promise to pay rent to the former, and (2) by the lessee to pay rent and to abide by other terms of the lease in consideration of the lessor’s promise to transfer his right to enjoy the building to the lessee as aforesaid. Thus, it can be said that the promise of the lessor forms consideration to the promise of the lessee and vice versa. These promises may be described as reciprocal promises within the meaning of S. 2 (f) of the Contract Act. (Nutan Kumar v. IIND Additional District Judge, Banda LNIND 1993 ALL 220)
Therefore, these two concepts have a subtle difference, but through these examples one can categorically differentiate between the two concepts.What is the difference between consideration and reciprocal promise? Is every consideration a reciprocal promise, or vice-versa?
Firstly we have to understand the difference between an Act and a Promise. Anything which is done right away is an Act and anything which is to be done aftermath is a promise. E.g. X gives a cycle to Y and in return, Y will pay Rs 1000 after one month. Here, what X has done is an act and what Y has done is a promise.
In my opinion Consideration and Reciprocal Promises are two different things. Consideration is defined in Section 2(d) of ICA, 1872 and Reciprocal Promises is defined in Section 2(f) of ICA, 1872.
I would not go what is written in the Bare Act. In simple language, Consideration would generally mean ‘compensation’ for doing or omitting to do any act or deed. It is also referred to as ‘quid pro quo’ means something in return for another thing. Such a consideration should be a lawful consideration. But, Reciprocal Promise means promise in return to promise as a consideration to former promise. Simply speaking, under Reciprocal Promise both parties promise each other to do something in the future. So, the first promise forms the consideration for the second promise and second promise forms the consideration for the first promise. So, both are reciprocal or opposite or against each other.
In my opinion, every consideration is not a reciprocal promise and vice- versa is also not true because there is a major difference between these two. Consideration is a one-way process that means one party has to give something from his side in return to what he got from the other party but Reciprocal Promise is a two- way process that means both parties promises each other to do some act in the future as consideration for each other promise.Consideration and reciprocal promise have almost identical facades but they are different
from each other on many terms. These are the foundations of every agreement and a
contract con not be enforceable without any. In order to understand consideration and
reciprocal promise and the disparities between them, we may need to take three concepts into
consideration. The terms such as promise, reciprocal promise, and consideration are defined
under Section 2 sub-sections (b), (f) and (d) respectively of the Contract Act,1872.
The term Promise means the acceptance of a proposal. So, A offered to help B in her project
and B accepted it, a promise is created. The promise is not enforceable. Hence, B doesn’t hold
any legal obligations for A to comply with if he fails to do so. In other words, a promise only
creates anticipation.
The reciprocal promise involves two promises. The parties to a reciprocal promise may hold
the consideration or any part of it. In the above case, B offers A, a motorcycle. Here, B
commits a reciprocal promise. So, both are obliged to perform certain acts for each other
that are not contingent and mutual which are legally binding. Such promises can be
explicitly made conditional as well which involve contingency of the promise of another
person. It also can be concurrent which includes multiple contingent events from either
party. Both are forms of reciprocal promise and can be treated as exclusive contracts where
consideration from both parties is involved.
In case, where a promisee in order to fulfill the desire of a promisor does, or abstains, or
promises to do an act is called consideration. The promise here has a price that is
enforceable. It does not necessarily have to be beneficial to one party and detrimental to others. So,
an agreement involves both reciprocal promises and consideration to give the effect a valid
contract.What is the difference between consideration and reciprocal promise? Is every consideration a reciprocal promise, or vice-versa?
It seems like consideration and reciprocal promise have a very thin line of difference between them but actually, they differ in many terms. Though they are the essentials of a valid contract, they differ in the way they are carried out. Consideration is a one-way process while the reciprocal promise is a two-way process just as the process of communication. Consideration is giving something in return to the act done while reciprocal promise involves giving consideration to the promisor by the promisee and also giving consideration to the promisee by the promisor. The reciprocal promise involves two considerations from both the parties to the contract to one other while consideration involves giving compensation to one party by the other party. Both of them are explained in Section 2(d) and Section 2 (f) of the Indian Contract Act, 1872. Section 2(d) says: “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.” While Section 2(f) is defined as: “Promises which form the consideration or part of the consideration for each other are called reciprocal promises.” It is also true that every consideration is a reciprocal promise but every reciprocal promise is not a consideration. because of the same above distinctions between them. A reciprocal promise is a wider concept while consideration is a narrower concept. The consideration comes under the big circle of reciprocal promise.
For example- A proposes to sell his car for rupees 10,000 to B. B accepts this proposal. Here, the consideration is rupees 10,000 that B will pay to A for his car and the reciprocal promise is selling of car by A to B.
– PREYANSI ANAND DESAIA contract can be defined as an agreement between parties holding legal importance and there are certain elements on the basis of which contract can be termed valid .One amongst them is consideration and promisee . When both parties agree to provide something of value in exchange can be termed as a consideration . A contract shall be made for a legal purpose and not for an illegal purpose. Section 2 of the Indian Contract Act of 1872 defines what promises are- When someone expresses his willingness to do (or not to do) something, he is said to make a proposal. When the other person (to whom the proposal is made) accepts the proposal, the proposal becomes a promise. Here, the person who made the proposal is the ‘promisor’, and the person to whom the proposal is made is called the ‘promisee’. Reciprocal promise plays a major role is explained in sec 2(f) of the Indian Contract Act, promises which form the consideration or part of the consideration for each other, are called reciprocal promises. The difference between the two terms can be stated as follows. While making a purchase we pay money to the shopkeeper in exchange of goods bought is an example of reciprocal promise .It can also be referred to as quid pro quo . There is a very slight difference between consideration and reciprocal promise consideration implies giving something in return to the act done whereas reciprocal promise involves giving something to the promisor by the promisee and also giving consideration to the promisee by the promisor . This can be explained with an example Mr. Nath decides to sell his house to Mr. Roy for Rs.100000 , here Rs. 100000 is the consideration paid by Mr. Roy to Mr. Nath whereas, in the reciprocal promise scenario Mr. Nath will be giving his house in return of the money that he shall be receiving from the promisee.
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