What does consideration in contract law refer to?

Consideration in contract law is a fundamental concept that refers to something of value that is exchanged between the parties involved in a contract. This exchange is essential because it distinguishes enforceable contracts from mere gifts; for a contract to be valid and binding, both parties must provide something of value, which could be money, services, goods, or a promise to do or refrain from doing something.

By requiring consideration, the law ensures that there is a mutual benefit and commitment between the parties. For instance, if one party agrees to sell a car (the service or good), and the other agrees to pay a certain amount of money (the value exchanged), both parties have provided consideration necessary for the contract to be legally enforceable. This notion reinforces the principle of reciprocity in agreements and underscores the importance of mutual consent in contractual relationships.