Kathmandu School of Law Review

P-ISSN : 2091-2110, E-ISSN : 2773-8159, DOI : 10.46985, Publisher : Kathmandu School of Law, Nepal
Annual flagship journal of Kathmandu School of Law, Nepal

Volume 8, Issue 2, November 2020
Articles

The Position of Consideration in Nepal: A Study of Theories, Cases, and Laws

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  • Laxmi Sapkota
Laxmi Sapkota
Laxmi Sapkota is an Assistant Professor at Kathmandu School of Law
DOI: https://doi.org/10.46985/kslr.v8i2.2151

Published 2021-07-27

How to Cite

Sapkota, L. . (2021). The Position of Consideration in Nepal: A Study of Theories, Cases, and Laws. Kathmandu School of Law Review, 8(2), 35–49. https://doi.org/10.46985/kslr.v8i2.2151
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Abstract

Lawful consideration is one of the essential elements of a valid contract. However, The National Civil Code, 2017 A.D. (2074 B.S.) has not included a definition of consideration, and it has not stated the necessity of consideration in Nepal in a particular section. Nevertheless, it seems that the Code has realized the importance of lawful consideration in the provisions of contracts of rent, wage and hire purchase. The Code has also stated unjust enrichment, under which one party should not enrich himself or herself at the cost of others or other’s property. Conversely, the now-repealed Contract Act, 2000, in its section 2(d), had defined consideration and stated that consideration must be lawful in section 13(k). In the cases decided by the Supreme Court of Nepal (Bhagwan Lal Shah v. Harka Lal Giri and Chitra Bahadur Karki; Proprietor of Manakamana Construction and Concerns Pvt. Ltd v. Maniram Aggrawal, Proprietor of Aggrawal Industries Pvt. Ltd.), the Supreme Court has issued the precedent stating the importance of consideration in Nepal in regard to Contract Act, 2000 which has now been repealed and replaced by The National Civil Code 2017. Additionally, different theories of the contract like bargain theory, realistic interpretation, theory of reciprocity, ‘nundum pactum’ theory and ‘no consideration no contract’ theory also emphasize the importance of consideration in Contract. Finally, this research paper has proven that consideration is essential in Nepal, thereby stating the theories of consideration, the legislative provisions, and the cases. Furthermore, the researcher came to the conclusion that the lawful consideration is essential in Nepal and it should be dealt with like oxygen to humans and whether written or not, must be implicitly understood. The word ‘consideration’ not explicitly being mentioned in law should not create confusion that a contract can happen without lawful consideration.

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References

  1. Arbind Majamdar on behalf of Damodor Ropeway and Construction Company v. Nepal Government, Finance Ministry, NKP 2073 (2016), volume 5, Decision no. 9591, laid down the principle that ‘The contract is the agreement drafted by the concerned parties of the contract that is binding to them’; Bijay Kumar Basnet v. Mayor Keshav Sthapit, Kathmandu Metropolitan, NKP 2059, laid down the principle that an, agreement between two or more than two parties with conditions is a contract.
  2. Muluki Dewani Samhita Ain 2074 (The National Civil Code 2017), s. 504(1).
  3. Ibid, s. 504(2).
  4. Ibid, s. 504(3).
  5. Ibid, s. 517; Contract restraining exercising profession, trade or business, a contract in restraint of a marriage other than one prohibited by the law, a contract restraining any one from enjoying the facilities being enjoyed by the public is a void, a contract restraining legal right of any person from being enforced by a court is void., a contract concluded contrary to law or on a matter prohibited by the law in force, a contract made for an immoral purpose or against public order or public interest, a contract which cannot be performed because the parties thereto do not exactly ascertain or know about the matter, in relation to which it has been concluded, a contract the performance of which is impossible at the time of its conclusion or a fictitious contract, a contract which is vague because of its subject matter being incapable of giving a reasonable meaning, a contract concluded by a person not competent to make contract, a contract with an illegal purpose, a contract concluded by mistake of both parties as to the essential fact of the contract at the time of its conclusion.
  6. Chitra Bahadur Karki v. Maniram Aggrawal, NKP 2071 (2014), volume 10, Decision no. 9264; The terms and conditions of the contract should be possible to perform. If the contract is not possible to perform then it is not considered as a contract. Here, this case, the party Chitra Bahadur Karki does not have the right, capacity, or is not the concerned person to give the tender agreement to Maniram Aggrawal. Chitra Bahadur Karki is also one of the competing parties to get the tender. Even if Chitra Bahadur Karki’s offer to get the tender is accepted, he could not give that tender to Maniram Aggrawal. Therefore, the pleading of Chitra Bahadur Karki to give the tender to Maniram Aggrawal is impossible to perform.
  7. Prithivi Bahadur Maharjan v. Birat Bahadur Khadka, NKP 2064 (2007), volume 8, Decision no. 7874.
  8. Online Etymology Dictionary, available at https://www.etymonline.com/word/consideration, accessed on 30 April 2021.
  9. Laxmi Sapkota, Contract Law, Lex and Juris Publication Pvt.Ltd, Bhaktapur, 1st edition, 2019, p. 85.
  10. Ibid, p. 86.
  11. Stone, R., Principles of Contract Law, Cavendish Publishing Limited, London, 4th edition, 2001, p. 49.
  12. The Latin Maxim ‘quid pro quo’ means something in return of something. Consideration may take the form of goods, services, money or financial instruments. Such consideration amounts to a contract in which something is being provided and something of equal value is returned in exchange.
  13. Stone (n 11), p. 49.
  14. Sapkota (n 10), p. 87.
  15. Ibid, p. 88.
  16. Jack Qc Beatson, Anson’s Contract Law, Oxford University Press, New York, 28th edition, 2002, p. 93.
  17. S.B. Karki, B.P. Mishra, & D.N. Parajuli, Business Law BBS 3rd Year, Platinum Publication Pvt. Ltd., Kathmandu, 2016, p. 56.
  18. Steve Thel & Edward Yorio, ‘ The Promissory Basis of Past Consideration’, Virginia Law Review p 1045, volume 78:5, 1992.
  19. Indian Contract Act, 1872, India, s 2(d): 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.
  20. P.S. Atiyah, Consideration in Contracts: A Fundamental Restatement, Australian National University Press, Canberra, 1991.
  21. Don Mayer et al., The Law, Sales, and Marketing, 2012, available at https://2012books.lardbucket.org/books/the-law-sales-and-marketing/, accessed on 30 April 2021.
  22. An act already performed may be valid consideration for subsequent promise if: Act done at promisor’s request; Parties understood at time that the act was to be compensated for;
  23. Roscorla v. Thomas, England and Wales High Court, 1842, 114 ER 496.
  24. Lampleigh v. Braithwait, England and Wales High Court, 1615, 80 ER 255.
  25. Prithivi Narayan Maharjan v. Biraj Khadka, NKP 2064 (2007), volume 8, Decision no. 7874.
  26. The National Civil Code (n 3), s. 406(2).
  27. Ibid, s. 406(3).
  28. Ibid, s. 406(4).
  29. Ibid, s. 408(a).
  30. Ibid, s. 408(b).
  31. Ibid, s. 408(c).
  32. Ibid, s. 408(d).
  33. Ibid, s. 406(1).
  34. Ibid, s. 406(3).
  35. Ibid, s. 406(4).
  36. Ibid, s. 408(a).
  37. Ibid, s. 408(b).
  38. Ibid, s. 408(c).
  39. Ibid, s. 408(d).
  40. Lon L. Fuller & Melvin Aron Eisenberg, Basic contract Law, West Group, 6th edition, p. 6.
  41. Sapkota (n 10), p. 88.
  42. Atiyah(n 20), p. 181.
  43. Henry Winthrop Ballantine, ‘Mutuality and Consideration’, Harvard Law Review p 121, volume 28:2, 1914.
  44. Bhagwan lal Shah v. Harka Lal Giri, NKP 2062 (2005), volume 11, Decision no. 7624.
  45. Chitra Bahadur Karki, Properitor of Manakamana Construction and Concerns Pvt. Ltd v. Maniram Aggrawal, Properitor of Aggrawal Industries Pvt. Ltd., NKP 2071 (2014), volume 10, Decision no. 9264.
  46. The National Civil Code (n 2), s. 610, Explanation: “Goods” means, any property from which benefit may be acquired through consumption, possession or use without diminishing them.
  47. Ibid, s. 610.
  48. Ibid, s. 624(3), Explanation 1 states “Goods” means any movable property that may be let for hire for the purpose of its possession and use.
  49. Ibid, s. 624(3), Explanation 2 states “Hirer” means a person who takes any goods on hire for possession and use according to the hire-purchase contract and also includes his or her successor in the event of his or her death or other third person to receive such goods under the contract.
  50. Ibid, s. 624.
  51. Ibid, s. 640 (1) States that ‘Any person who has attained at least fourteen years of age may be employed in a work with his or her consent. But a person who has not attained sixteen years of age is not employed in a hazardous business or work.’
  52. Ibid, s. 641.
  53. Laxmi Sapkota. ‘Ain ma Antarbirodh’, Nagarik National Daily, Kathmandu, 18 February 2020.
  54. The National Civil Code (n 2), s. 664(1).
  55. Ibid, s. 664(2).
  56. Ibid, s. 664(3).
  57. Ibid, s. 664(4).
  58. Yasasbi Shumsher JBR v. Bhaibars Developers Pvt. Ltd, NKP 2074 (2017), volume 7, Decision no. 9847.
  59. Siddhartha Raj Panday v. Krishna Rana, NKP 2073 (2016), volume 3, Decision no. 9556.
  60. Lakshaman Kumar Yadav v. Rastriya Banijya Bank Limited, Central Office and Others, NKP 2076 (2019), volume 3, Decision no. 10211.