When two parties enter into a contract, they both have an obligation to perform specific duties or provide certain benefits. In order to ensure that both parties are aware of their responsibilities, a contract must include consideration. Consideration is an essential element of any enforceable agreement, and without it, the contract is not legally binding.

What is Consideration in a Contract?

Consideration is defined as something of value that is given or promised in exchange for something else. It is the exchange of something of value between the parties involved in the contract and serves as the bargaining chip that makes a contract binding. Consideration doesn`t necessarily have to be money, but it can be anything that the parties agree to in the contract.

Consideration is different from a gift because a gift is given with no expectation of reciprocation. In a contract, both parties must exchange something of value, and if one party fails to deliver on their responsibility, the other party has the right to sue for breach of contract.

What is the Function of Consideration in a Contract?

The primary function of consideration in a contract is to make the agreement legally binding. When each party agrees to provide something of value, they are demonstrating their commitment to the contract. This makes it more difficult for either party to back out of the agreement or dispute the terms at a later date.

Consideration also ensures that the parties are entering into the contract voluntarily. If one party were to force the other to sign the agreement without providing something of value in return, the contract wouldn`t be enforceable.

Consideration also serves to protect both parties` interests. When the parties exchange something of value, it ensures that they are serious about the contract and that neither party will take advantage of the other.

In conclusion, consideration is an essential element of any contract. It is the exchange of something of value that makes the agreement legally binding and protects both parties` interests. Without consideration, the contract wouldn`t be enforceable, and both parties would be left vulnerable to disputes and breach of contract claims. So, the next time that you`re crafting a contract, make sure that you include consideration to ensure that your agreement is legally binding and enforceable.