Contractual Consideration Definition
In a legal contract, consideration is defined as something of value that each party to the contract agrees to exchange for something else of value. Both parties must be willing and able to exchange what they are offering in order to create a binding agreement. Consideration can take many forms, including money, goods, services, or a promise to do or not do something.
For example, consider a situation in which two people agree to trade their cars with each other. In this case, the consideration would be the car that each person is receiving from the other. Without this consideration, there would be no contract; one person could simply back out of the deal at any time.
While most contracts involve two parties exchanging goods or services of some kind, it is also possible for one party to provide consideration by promising to do (or not do) something. For example, someone might agree not to sue another person in exchange for that person paying them an agreed-upon sum of money. In this case, the consideration from the second person would be the promise not to sue; without that promise, there would be no contract.
