In contract law, what does "consideration" mean?

In contract law, "consideration" refers specifically to something of value that is exchanged between parties as part of a contract. This exchange can be in the form of money, services, goods, or a promise to perform or refrain from a certain action. Consideration is a fundamental element of a valid contract because it demonstrates that both parties have agreed to give something up in return for the benefits they receive.

For a contract to be legally enforceable, each party must provide consideration, which creates a mutual obligation and underpins the agreement. Without consideration, a contract may be deemed unenforceable, as one party’s promise would lack a corresponding benefit or sacrifice by the other party. Thus, understanding consideration is crucial for recognizing how contracts function and what distinguishes a legally binding agreement from a non-binding one.