What is consideration in the context of a contract?

In contract law, consideration refers to something of value that is exchanged between the parties involved in a contract. This could take the form of money, services, goods, or other tangible or intangible benefits that are exchanged as part of the agreement. The concept of consideration is crucial because it differentiates a contract from a gift; in a contract, both sides must provide something of value to one another.

When parties agree to exchange consideration, it establishes a mutual understanding that each side is contributing to the agreement, which is fundamental for legal enforceability. This mutual exchange is what gives rise to the binding nature of the contract. Therefore, the definition that identifies consideration as something valuable exchanged between the parties reflects the foundational principle that sustains the legality and enforceability of a contractual agreement.