Attorney at Law


Lia Kopin-Green
December 7, 2022

What is a Consideration?

Considerations, which are frequent in business law, are one of the most important elements of a contract. The definition of a consideration is based on the legal concept of “bargained-for exchange.” According to this mechanism, each party involved in the contract receives a certain benefit in exchange for something of value. Considerations may also relate to the promise that you will not do something you have the legal rights to do, or alternatively, the promise that you'll do something that you have the legal rights not to do. As considerations are one of the main components of a valid contract, contracts without considerations may not be deemed binding.

Key Takeaways

  • Considerations are a crucial component in a binding contract. A contract without considerations may be enforceable if it has a substitute. 
  • In legal terms, considerations are referred to as “bargained-for exchange.” this means that both parties will get something they want and have agreed to in exchange for something of value.
  • The purpose of a consideration is to ensure that all parties benefit from the existence of a contract.

How Considerations Work

Contracts play a major role in our everyday life. Whether you have agreed to do something in exchange or a payment, purchased something in a store or rented an apartment, chances are, you have entered into plenty of contracts in your lifetime. According to United States contract law, in order for a contract to be enforceable and binding, it must include all six of these elements:

  • Offer
  • Acceptance
  • Consideration 
  • Mutuality
  • Capacity 
  • Legality

When it comes to valid contracts, offer and acceptance come as a packaged deal. According to these concepts, a contract is initiated by one party making an offer and another party choosing to accept the offer. The value given for the offer and acceptance can then be defined as the consideration.

Since these legal terms can seem quite confusing, let’s take a look at a simple example of considerations in contracts. Suppose that someone offers to sell their car to a friend for $10,000. If the friend accepts the offer, the $10,000 will serve as consideration for the car.\

It should be noted, however, that economic benefit is not necessarily required for a consideration to be enforceable. U.S. federal law recognizes various types of considerations, including providing a service, giving up an existing benefit or refraining from engaging in a particular activity or benefit. 

Bottom Line

Contracts are prevalent in a number of fields in business law. Therefore, all business owners, whether they run a large corporation or a small business, should be familiar with the concept of considerations. Having your contract reviewed by a professional attorney might be helpful if you're unsure whether a consideration element is included. In any case, you should always have an experienced lawyer look over any important contracts before signing them. Get in touch with one of our top tier attorneys today at Attorney At Law.

Ask a Lawyer

Ask your own question and get advice from expert attorneys
Ask Question

Featured Business Law Lawyers

Shaw & Crowson, P.A.

42 years in practice
Bankruptcy, Business Law
View Profile

Law Office of Fawn Singletary

36 years in practice
Bankruptcy, Business Law
View Profile

Eastburn and Gray, P.C.

147 years in practice
Bankruptcy, Business Law, Personal Injury
View Profile

Blason-Aguilar Law

20 years in practice
Alimony, At-Fault Divorce, Child Custody, Child Support, Contested Divorce
View Profile

Massi & Massi Attorneys At Law

8 years in practice
Auto Accidents, Personal Injury, Premises Liability
View Profile

Platinum Injury Law

7 years in practice
Auto Accidents, Personal Injury, Wrongful Death
View Profile


Are you looking for an attorney? Do you have questions about a legal case you are facing? Contact us now and we will put you in touch with a lawyer for free.

Related Posts

Holding Company
Lia Kopin-GreenDecember 27, 2022
Certificate of Incorporation
Lia Kopin-GreenDecember 1, 2022
Condition Precedent
Lia Kopin-GreenDecember 1, 2022
Joint Venture
Lia Kopin-GreenDecember 27, 2022
Attorney At Law is changing how clients connect with lawyers. By providing an innovative platform to lawyers who want to expand their practice’s reach, AAL is bringing law practices into the future.
6142 Innovation Way
Carlsbad, California 92009
Some of the content of this website may be considered attorney advertising under the rules of certain jurisdictions. The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship.
crossmenuchevron-upchevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram