Management Notes

Reference Notes for Management

Rules Regarding Consideration – 6 Major Rules Regarding Consideration | Business Law

Rules Regarding Consideration


A consideration is something of value that is given by each party to a contract as a fundamental concept in contract law. A contract’s presence distinguishes it from a mere promise or gratuitous arrangement, which is another crucial element in the formation of a legally binding agreement.

Consideration is the exchange between the parties involved in a contract that has been bargained for. Essentially, it indicates that one party has provided something in exchange for the other party’s promise or performance.

An essential aspect of consideration is reciprocity. Both parties must provide consideration, which signifies a mutual exchange of promises or obligations. This reciprocity distinguishes contracts from unilateral contracts, where consideration is only given by one party upon a specific event occurring. By requiring consideration, parties are sure to enter into contracts voluntarily and intend to be legally bound.

It can take various forms, including money, goods, services, forbearance, or even a promise to do or refrain from doing something in the future. In order to enforce contractual obligations, consideration must demonstrate the parties’ intention to be bound by their promises. In contractual relationships, it ensures fairness, prevents exploitation, and promotes the principle of quid pro quo.

Read more