Consideration

In one sentence

Something of value exchanged by each party to make a contract binding.

Plain English

Consideration is what each side gives up or promises to give up in a contract. It's the reason both parties are willing to make the deal. Consideration can be money, property, a service, a promise to do something, or even a promise not to do something. Without consideration from both sides, there's no enforceable contract—it's just a promise that the law won't force anyone to keep.

Ad slot

Example

You agree to sell your used bicycle to a friend for $50. Your consideration is the bicycle; your friend's consideration is the $50. Both sides are giving something of value, so the contract is binding.

Used in a sentence

“The court ruled that the contract lacked consideration because one party had promised to do nothing in return.”

Related terms

Offer

A proposal to enter into a binding agreement on specific terms.

Acceptance

Agreeing to the exact terms of an offer, creating a binding contract.

Unilateral Contract

A contract where only one party makes a binding promise in exchange for the other's performance.

Promissory Estoppel

A doctrine that enforces a promise even without a formal contract if someone relied on it.

Legal Capacity

The legal and mental ability to enter into a binding contract.

Legality of Object

The requirement that a contract's purpose and subject matter must be legal and not against public policy.

Offeror

The person who makes an offer to enter into a contract.

Offeree

The person who receives an offer and has the power to accept or reject it.

This page is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.