What is consideration in a contract?

Consideration in a contract is a legal term used in contract law in Texas and across the United States. It refers to the exchange of something of value between the parties to a contract. For example, money, goods, services, a promise to do something, or an agreement not to do something. In other words, both parties are “considering” the value of the exchange. The consideration must be of value to both parties to be legally binding. Consideration must also be something that was not previously promised or owed. Without consideration, a contract is not enforceable in a court of law. Put simply, consideration makes a contract binding. For example, if one party agrees to buy a car for $20,000, the other party agrees to sell it, and each party provides consideration for the exchange, then the contract is legally binding. Consideration must be an essential element of any contract, and it must be given freely without any type of duress or coercion. In other words, the parties must agree without being pressured or forced. Consideration must also be something of real value, and not something that is vague or insignificant. In Texas, a contract is legally binding when each party provides consideration, or something of value in exchange for the other. All parties must be clear on what is expected of them, in order for the contract to be valid and enforceable. Consideration is an essential element in every contract, and it is important to understand its importance before entering into a contract.

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