Consideration

Definition: Consideration is the bargained-for exchange that supports a contract. It can be a promise, an act, or giving up a legal right, rather than only a cash payment.

Example

In a sale agreement, the buyer’s promise to pay and the seller’s promise to convey the property provide the exchange.

Keep the distinction clear

An earnest-money deposit is not the only possible consideration. Do not confuse the required exchange with a promotional incentive or the amount deposited in escrow.

Related terms

Contract · Bilateral Contract · Earnest Money

Keep studying

Valid, Void, Voidable, and Unenforceable Contracts

References: Cornell LII: consideration

Pronunciation (US): kuhn-sid-uh-RAY-shun (capitals show stress)

Pronunciation reference: Merriam-Webster