What is consideration in the context of contracts?

In the context of contracts, consideration refers to something of legal value that is offered by one party and accepted by another. This can be money, services, goods, or a promise to refrain from doing something. The essence of consideration is that it provides the incentive or value that motivates both parties to enter into the agreement. For a contract to be enforceable, it is essential that there is consideration exchanged between the parties, signifying that each party is giving something of value.

Consideration is crucial because it differentiates a contractual agreement from a mere gift or a non-binding promise. An agreement without a financial transaction, a verbal agreement between friends, or a promise to perform a duty may lack the essential element of consideration if there is no mutual exchange of value. In summary, consideration establishes the legal framework for the obligations that arise from a contract, confirming that an agreement is not just a casual promise but a binding commitment between parties.