Consideration is what each side in a contract each side must agree to give up to make the contract legally binding.
In a contract, one party’s Consideration (thing given) is exchanged for another party’s Consideration. Consideration is often referred to as the quid pro quo. For business transactions, this is often the price paid by one side in exchange for the goods supplied by the other.
But Consideration can be anything of value to the other party, and can be negative. For example, someone promising not to exercise a right of access over someone’s land in return for a payment would constitute sufficient consideration to establish a valid contract, even if there was no intention of ever using the right.
Consideration is classified as one of two types: executed – when the promise was performed within the meaning of the contract; or executory – when the promise is not yet performed. A vital element in the law of contracts, Consideration is a benefit which must be bargained for between the parties and is the essential reason for a party entering into a contract.
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