Contract Law

Chinnaya v. Ramayya

(1882) ILR 4 Mad 137

Facts

An elderly woman transferred property to her daughter, Chinnaya.
The transfer was made subject to a condition that Chinnaya would pay an annual allowance to the woman’s relative, Ramayya.
Chinnaya accepted the property on that basis.
She also executed an agreement promising to make the stipulated annual payment to Ramayya.
After the transfer, Chinnaya failed to pay the promised amount.
Ramayya sued to recover it.
Chinnaya argued that Ramayya had provided no consideration to her.
She contended that the property had come from the elderly woman, not from Ramayya.
Therefore, according to Chinnaya, the promise in Ramayya’s favour was unsupported by consideration.

Whether consideration for a promise may move from a person other than the promisee.
Whether Ramayya could enforce the promise even though she personally provided no consideration.

Section 2(d) of the Indian Contract Act provides that consideration may move from:
the promisee; or
any other person.
Indian law therefore differs from the strict English rule that consideration must move from the promisee.
It is sufficient that:
the act was done at the promisor’s desire;
the act formed part of the bargain;
valid consideration moved from someone.
However, this rule does not entirely abolish privity of contract:
a stranger to consideration may sue if they are a party to the contract;
a complete stranger to the contract ordinarily cannot sue unless an exception applies.

Chinnaya received valuable property from the elderly woman.
The transfer was not unconditional.
It was made on the understanding that Chinnaya would pay Ramayya an annual allowance.
The property transfer therefore supplied the consideration for Chinnaya’s promise.
It did not matter that Ramayya herself had not transferred the property.
Section 2(d) expressly allows consideration to move from “the promisee or any other person.”
The court treated the transfer and promise as connected parts of the same arrangement.
Chinnaya could not accept the property while rejecting the burden attached to it.
She had obtained a legal and economic benefit in exchange for her promise.
Ramayya was also not merely an unknown outsider.
The promise to pay was made specifically in her favour, and she was treated as entitled under the arrangement.
The important doctrinal point is that Indian law separates:
privity of consideration; and
privity of contract.
Lack of consideration directly from the plaintiff does not defeat a claim if valid consideration moved from another person and the plaintiff is legally entitled under the promise.

The Madras High Court held that the promise was enforceable.
The transfer of property by the elderly woman constituted valid consideration for Chinnaya’s promise to pay Ramayya.
Consideration did not need to move directly from Ramayya.
Use this case for: under Section 2(d), consideration may move from the promisee or any other person.