What is consideration?
In most states, a contract will not be recognized as valid and enforceable unless it includes an exchange of consideration between the parties. Consideration can be defined as a right, interest, or benefit that one party in the contract gives to the other party. This is sometimes referred to as the quid pro quo. The exchange of consideration induces or motivates each party to enter into the contract.
Without an exchange of consideration, a promise may not be enforceable. If a neighbor promises to give you his car for free, for example, this promise will generally not be enforceable because it lacks consideration. If a neighbor offers to sell you his car for $1,000, on the other hand, your delivery of the money constitutes consideration to make the contract valid and enforceable.
Consideration may consist of a promise to do a certain act or thing, for example, to pay a sum of money or to deliver certain goods or services. Consideration might also consist of a promise not to do a certain act or thing that the party otherwise has a lawful right to do, for example, to go to work for a competitor company or to bring a lawsuit to redress some grievance.
Consideration must normally have a value, although the value need not be measured in monetary terms. A promise to do something in the future may constitute valid consideration. However, past consideration is generally not sufficient to support a contract. In other words, the law will not normally uphold a contract where the only consideration is some past act or service that was already performed and/or delivered for free.
Please Note: Rabin Kammerer Johnson provides these FAQs for informational purposes only, and you should not interpret this information as legal advice. If you want advice as to how the law might apply to the specific facts and circumstances of your case, please contact one of our attorneys.