Consideration
Definition
Something of value given by both parties to a contract that induces them to enter into the agreement.
Deep Dive
In contract law, consideration is a fundamental element that signifies something of value exchanged between the parties to an agreement, serving as the inducement for each party to enter into the contract. It represents the "bargained-for exchange," meaning each party agrees to give up something or undertake an obligation in return for something from the other party. Without valid consideration from both sides, an agreement typically lacks the legal enforceability required to be considered a binding contract. This "something of value" can be a promise to perform an act, a promise to refrain from an act, the delivery of goods, or the payment of money.
Examples & Use Cases
- 1A software developer agrees to create a custom application in exchange for a client's payment of $10,000
- 2A landlord promises to lease an apartment to a tenant, and the tenant promises to pay monthly rent
- 3Two companies settle a dispute where one promises not to sue the other in exchange for a confidential monetary payment