consideration
Consideration means the mutual exchange of promises or obligations between the parties to a contract. It is a necessary element to the creation of a valid contract.In other words, for a contract to be enforceable, both parties must assume some obligation that binds them, rather than make a promise that is gratuitous, meaning it leaves them free to perform or not at their own discretion.
For example, an agreement made between a home owner and a house painter that the painter will paint the homeowner's house contains a contract exchange of consideration sufficient to form a binding contract: the home owner's payment of money in exchange for the painter's service of painting the house. The order of the events does not affect the validity of the consideration, meaning the homeowner's promise to pay (if the painter paints before billing the home owner) is just as valid a form consideration as the payment itself (if the painter paints after the home owner pays the painter's bill).
Some examples of typically inadequate consideration in the house painting example would be:
- If the homeowner offers to pay the painter only after the painter has painted the house with no expectation of being paid, that is not consideration, and this is not a contract that the painter can enforce should the home owner decide not pay;
- If the homeowner says "I might pay you to paint my house," the lack of a firm commitment means no consideration has been offered, and, without more, the painter does not an enforceable contract at that point should the home owner decide not pay;
- If the painter already had an obligation to paint the house for a certain sum, and then the home owner offers to pay an additional sum without the painter doing more than was already promised in exchange for the previously agreed-upon sum, the home owner's promise to pay more is typically not enforceable as a contract because the painter already had a duty to perform under the contract for the original sum.
In many jurisdictions, written contracts carry a presumption of adequate consideration unless proven otherwise. For example, see Vickrey v. Maier. Also in many jurisdictions, courts are hesitant to consider whether the consideration offered was adequate, explaining that the adequacy of the consideration was for the parties to the contract to consider and decide at the time they enter into the contract; but, “gross inadequacy” of the consideration might be evidence of fraud or other problems in the forming of the contract, such as mistake of fact. For example, see Herbert v. Lankershim.
[Last reviewed in September of 2025 by the Wex Definitions Team]
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