Case name & citation: Chinnaya vs Ramayya ILR (1876-82) 4 Mad 137
Jurisdiction: Madras High Court
Year of the case: 1882
The bench of judges: Innes J, Kindersley J
What is the case about?
Many a time, confusion may arise as to what constitutes a valid consideration in a contract. More specifically, can consideration move from a third party or not? The case of Chinnaya vs Ramayya is a good illustration of this point.
Facts of the case (Chinnaya vs Ramayya)
An old lady, A, before her death, granted a certain piece of property to her daughter R (the defendant). The property was transferred by a deed of gift. But the transfer was made subject to a direction given by A. A directed that R should pay an annuity to A’s sister (the plaintiff).
Thus, the terms of the deed stated that in return for such transfer, R will be paying an annuity amount of Rs. 653 to A’s sister, C.
On the same day, an agreement was entered into between R and C whereby R agreed to pay C the sum as directed by her mother, A. The agreement was executed in writing by R in favour of C.
However, after A died, the sum so stipulated was not paid by R (the defendant). She declined to fulfill her promise saying that no consideration had moved from her mother’s sister. C (the plaintiff) thus sued R to recover the amount.
R contended that she was not under an obligation to pay money to C since no consideration was moved from C to her. Moreover, she argued that the plaintiff had no right to compel her (the defendant) to pay the amount.
On the other hand, as regards the transfer of property was concerned, C contended that the consideration for getting the property was a promise to pay the amount annually to the plaintiff.
Whether the plaintiff can bring a lawsuit against the defendant?
Is the defendant bound to fulfill the promise in a contract (with the plaintiff) where the consideration for such promise has been furnished by the defendant’s mother (sister of the plaintiff)?
If Section 2(d) of the Indian Contract Act, 1872 is analyzed, it says that there are certain features that are essential for consideration to become valid and to be acceptable legally. One such feature is that consideration may move from the promisee himself or from any other person. In other words, the act which is to constitute consideration may be done either by the promisee himself or by any other person.
“Any other person” is a person other than the promisee and is technically referred to as a stranger to consideration. When consideration moves from “any other person”, this is sometimes also called the doctrine of constructive consideration.
It signifies that as long as there is a consideration for a promise, it is immaterial as to who has furnished it. A promise will become enforceable if there is some consideration for it. The consideration can even legitimately move from a third party and it is an accepted principle of law in India.
Judgement of the Court in Chinnaya vs Ramayya
By citing the words “the promisee or any other person” in Section 2(d) of the Indian Contract Act, 1872, the Madras High Court held that consideration need not necessarily move from the promisee only. It may move from any other person. Hence, C was entitled to maintain the suit and to recover the amount.
The consideration furnished by C’s sister (the defendant’s mother) was enough to enforce the contract between C and R. It constituted sufficient consideration for the plaintiff to sue the defendant on her promise.
Although consideration was not moved from C, she was a party to the contract and hence, was allowed to sue R.
In other words, the defendant was obligated to pay the amount promised in the contract as the consideration for the same was given to her by the plaintiff’s sister, i.e., the defendant’s mother.
Thus, the agreement of annuity between C and R was enforceable even though the consideration had moved from a third party (R’s mother).
The case of Chinnaya vs Ramayya emphasized the rule of consideration under the contract law. According to it, it does not matter who furnishes the consideration. The consideration shall be valid whether it is moved by the promisee himself or any other person.
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