A contract without consideration is void.
The general meaning of the above maxim is that no right of action arises from a contract entered into without consideration. It is one of the most essential elements for the formation of a contract. It means something in return. Consideration is based on ‘Quid Pro Quo’, which in its literal sense means ‘something for something’. Such consideration makes both the parties to the contract or agreement to oblige in doing something or abstains from doing something as per the wish or desire of the other.
Under the Indian Contract Act 1872, Section 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 abstain from doing something, such act or abstinence is called a consideration for the promisee.”
A and B make a contract with each other regarding the sale of house. A sold his house to B on a consideration amount of 50 Lakhs. In such a contract for the sale of a house, the house is a consideration for one party and the amount paid in return is the consideration for the other party.
In Gopaldas, and ors. Vs. Y.J.Shamshudeen, and ors., the Chennai High Court held that the maxim “Ex nudo pacto non oritur action” – Out of a nude or naked pack that is, a bare parol agreement without consideration, no action arises. Out of a promise neither attended with particular solemnity such as belongs to a specialty nor with any consideration no legal liability can arise.
In Sreenivasa General Traders & Ors. Vs. the State of Andhra Pradesh & Ors., the Supreme Court held that there should be an element of consideration for each service rendered in the sphere of a contractual relationship.