Consideration refers to something of value that is given by one party to another in exchange for a promise or performance. In contract law, consideration is an essential element for a contract to be legally binding.
Under the principle of consideration, both parties to the contract must give or promise to give something of value. This means that there must be a bargain, where each party benefits from what they have given or promised to give.
For example, suppose that John promises to sell his car to Jane for $5,000. In this scenario, John`s promise to sell the car is considered consideration, and Jane`s promise to pay $5,000 is also consideration. Both parties must receive something of value for the contract to be valid.
There are certain rules that apply to consideration in contract law. First, consideration must be legally sufficient. This means that it must be something that the law recognizes as valuable. Money, property, services, and promises to do something or refrain from doing something are all examples of legally sufficient consideration.
Second, consideration must be bargained for. This means that both parties must have agreed to the exchange of consideration. There must be an intention to create a legally binding agreement, and both parties must have had the opportunity to negotiate the terms of the contract.
Third, consideration must be given by the parties themselves. This means that consideration cannot be given by a third party who is not a party to the contract. For example, if John promises to give his car to Jane, but his friend Tom pays Jane the $5,000, this would not be valid consideration, as Tom is not a party to the contract.
Finally, consideration must be present at the time the contract is formed. This means that consideration cannot be promised in the future, and it cannot be based on a past event. For example, if John promises to sell his car to Jane on the condition that she repairs his house next year, this would not be valid consideration, as it is based on a future event.
In conclusion, consideration is an essential element of contract law. Without it, a contract is not legally binding. Both parties must give or promise to give something of value, and the consideration must be legally sufficient, bargained for, given by the parties themselves, and present at the time the contract is formed. Understanding the principle of consideration is critical for anyone entering into a contract, as it ensures that the contract is enforceable and legally binding.