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What is Consideration (in Contract Law)?

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The Daily Ledger · Markets

The court held the promise unenforceable because no consideration had been given in return.

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Overview

Consideration is what each side gives the other to turn a promise into a contract: money, goods, work, or a promise in return. The word has nothing to do with being considerate. Without an exchange there is no contract, which is why a pure promise of a gift usually cannot be enforced. The exchange must exist; it does not have to be a fair one.
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Overview

Consideration is the rule that a contract only counts if both sides put something in the pot. It has zero connection to being considerate. A promise with zilch coming the other way is just a gift, and gifts are legally take-backable right up until they are handed over. Add anything real, cash, chores, even a promise back, and now you have a contract. 😎

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Detail

Consideration is the legal name for what changes hands in a deal: each side must give something of value for a promise to bind. It can be money, an object, work, a return promise, or even giving something up. Courts once enforced an uncle's promise to pay his nephew for staying off alcohol and tobacco until 21, because the nephew surrendered a right he legally had. The rule exists as a filter. The law wants to enforce bargains, not casual generosity, so a promise with nothing coming back, a promised gift, is generally unenforceable until the gift is actually handed over. Two refinements do the most work in practice. First, courts check that consideration exists, not that it is adequate: a house can validly sell for one dollar, which is why contracts recite token payments. Second, past consideration is no consideration. A favour already done cannot be the price of a new promise, because the exchange must be struck as one bargain.
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Detail

Consideration is the rule that a contract has a cover charge, and both sides pay it: toss something in, or the law files your arrangement under nice thoughts. What counts is gloriously broad. Money counts, work counts, a promise counts, and so does giving something up: agreeing not to sue somebody is a perfectly good price. What does not count is last week. You cannot do someone a favour on Tuesday and mint it into a binding IOU on Friday; the price has to be struck as part of the trade. And the law never checks whether you traded well. One dollar can carry a mansion, which is exactly why contracts recite tiny token payments: not to pay anyone, but to make the machine turn over. Bad deal, good deal, the court shrugs. It only asks whether a deal happened. 😎

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Analogy

Consideration works like the rules of the lunch-table trade. Swap your cookie for their crisps and the deal is real: both sides gave, both sides got, and backing out afterwards is a scandal. Announce instead that you will simply give them your cookie tomorrow, and tomorrow you may change your mind; a one-way promise was never a deal, just niceness. Notice what the table never asks: whether the trade was fair. A sticker for a sandwich still counts. Something for something is what makes it binding, not something of equal size.
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Analogy

Consideration is why helping a friend move is payable in pizza. You showed up for boxes and a large pepperoni; that was the deal, and pizza is perfectly legal currency because the law does not price-check. What you cannot do is carry boxes on Saturday and announce on Monday that they owe you fifty bucks. The price gets agreed as part of the deal, not invented after it. And if they only ever promised you pizza someday, out of love? Lovely. Unenforceable. 😎
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Formal definition β€” The same term, explained the usual way

Consideration is a requirement of contract formation at common law, consisting of a benefit conferred or a detriment incurred, bargained for and given in exchange for a promise. It may take the form of payment, property, performance, forbearance, or a reciprocal promise. Courts assess the sufficiency of consideration rather than its adequacy, and a promise unsupported by consideration is generally unenforceable as a gratuitous promise, subject to doctrines such as promissory estoppel.

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