# Para 5(e) of Schedule II – Obligation to Refrain, Tolerate, or Do an Act
Para 5(e) of Schedule II declares certain obligations as a supply of services. It has three limbs:
## Three Limbs of Para 5(e)
### 1. Agreeing to refrain from an act
A person agrees NOT to do something in exchange for consideration.
- Examples: Non-compete agreements; agreeing to limit construction height; halting production temporarily for compensation.
### 2. Agreeing to tolerate an act or situation
A person agrees to PERMIT/PUT UP WITH something for consideration.
- Examples: Allowing hawkers on the pavement; tolerating loudspeakers from a nearby venue with compensation.
### 3. Agreeing to do an act
A person agrees to perform a specific act (beyond legal obligation) for consideration.
- Examples: Installing zero-emission equipment voluntarily (no legal mandate) in return for payment.
## Conditions to Qualify under Para 5(e)
For an activity to fall under Para 5(e), BOTH conditions must be satisfied:
### Condition 1: Express or Implied Contract Must Exist
- The act of refraining/tolerating/doing must be under an agreement or contract (express or implied).
- One party must be under a contractual obligation to the other.
- The agreement may be standalone OR part of another contract.
- Important: A mere flow of money between parties does NOT presume the existence of a contract.
### Condition 2: Consideration Must Flow in Return
- Some consideration must flow from the other party to the first party in return for refraining/tolerating/doing the act.
- Without consideration linked to the obligation, there is no supply under Para 5(e).
## Practical Application
If money flows but there is no contractual obligation to refrain/tolerate/do, it is NOT a Para 5(e) supply. Examples: liquidated damages, penalties for breach, forfeiture of earnest money – these are compensation, not consideration for tolerating breach.