What Does “Consideration” Mean in a Contract?
Something of value exchanged between parties that makes a contract legally binding.
Detailed Explanation
Consideration is a fundamental requirement for a valid contract - each party must give something of value. It can be money, services, goods, or even a promise to do (or not do) something. Without consideration, you typically have a gift, not a contract.
The "adequacy" of consideration generally doesn't matter legally - courts won't void a contract just because one side got a better deal. What matters is that something was exchanged.
Example in a Contract
“NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:”
Why It Matters
Without consideration, a contract may not be enforceable. If you're only receiving promises without giving anything in return, you might have difficulty enforcing those promises later.
Related Terms
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