What is consideration?
Consideration is something of value exchanged by the parties that makes a contract enforceable.
Consideration is something of value exchanged by the parties that makes a contract enforceable.
Where the word "Consideration" comes from
The doctrine comes from English common-law writs, where a promise was enforceable only if something was given in exchange for it. It remains a core requirement of contract formation in every American jurisdiction.
Why Consideration matters
Without consideration, a promise is usually just a gift and not legally binding. The exchange requirement separates bargains, which the law enforces, from gratuitous promises, which it generally does not, and it is why every enforceable deal has something moving from each side.
Common confusion about Consideration
Consideration is value exchanged, not fairness. A bad deal can still have valid consideration, because courts do not weigh the adequacy of the bargain; one dollar can support a promise to sell a car, as long as the exchange is real and bargained for.
A real-world example of Consideration
You promise to mow a neighbor's lawn for twenty dollars. The twenty dollars is consideration, which is why the promise is enforceable if you do not show up, and your promise to mow is consideration for the neighbor's promise to pay.
A worked example of Consideration
An uncle promises his niece a car for her birthday but changes his mind before giving it. Because the niece gave nothing in exchange, the promise lacks consideration and is unenforceable. If the niece had promised to help with the uncle's business in return, the deal would be binding, and the uncle could not simply withdraw, which shows how the exchange requirement separates gifts from contracts.
How Consideration works in practice
When you want a promise to be legally binding, make sure each side gives something of value and write down what it is. In business, a signed agreement that states the exchange, such as payment for services, is far easier to enforce than a vague promise. If you are relying on a gift, treat it as a gift and expect no remedy if it falls through.
Questions about Consideration
Is a promise to give a gift enforceable?
Usually not, because there is no consideration.
Does consideration have to be money?
No — it can be an act, a promise, or even forbearance.
What is “past consideration”?
A prior act; it is generally not valid consideration for a new promise.