Consideration
Consideration is a central concept in the common law of contracts. It is often called the thing that is exchanged, no matter how minuscule (the classical example being the peppercorn or mustard seed). Consideration can take the form of money, goods, a promise to do something, or anything else that changes the legal position of the promisor. A contract cannot exist without consideration being given by both sides.
Legal analysis of consideration focuses only on a bargained exchange, in other words, only items that are specifically bargained for in the contract can be used as consideration. This protects each party from being sued for something unrelated to the exchange in question.
A contract can only exist if the consideration is both sufficient and adequate. Legal sufficiency of consideration means that both parties suffer a detriment because of the transaction, in addition to any benefit they may or may not receive. illusory promise, or one which the promisor actually has no obligation to keep, does not count as consideration. The promise must be real and unconditional.
- Liquidated debt, or a payment which is fixed and undisputed, cannot be negotiated for consideration. Unliquidated debt, or a payment which is disputed, can be used for consideration.
- In some circumstances, the concept of estoppel can be used as a defence where there is a lack of consideration.
While the concept of consideration is not generally accepted in civil law systems some recognize the similarity between consideration and cause, as some civil codes recognize that all contracts must have a cause, though this is not generally accepted.
