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Money or other payment provided in exchange for an act or service that helps a business. Consideration may be cash in which case, it is more like a sale or payment-in-kind. For example, a person may receive a certain amount of equity in a business in exchange for giving or allowing the business to use the person's intellectual property.


Something of value provided by one party to another. For example, a person might provide an idea or labor to a business in exchange for shares of ownership.


  1. something of value which is offered by a party to a CONTRACT in exchange for something of value received. Consideration usually takes the form of a monetary payment in exchange for GOODS or SERVICES received, but could involve, for example, the direct exchange of one product for another (as in BARTER).
  2. the sum of money paid by an investor to purchase SHARES, STOCKS, etc., or the proceeds from selling such securities before allowing for stockbroker's commission and other transfer expenses.


An act or a promise given by one person in exchange for an act or a promise from the other.The values do not have to be equal, and it has been said that one may promise to give a barleycorn in exchange for the promise to deed a castle,and it will be sufficient.It is a common misperception that earnest money is the component that makes a real estate contract enforceable. In reality, the promise to buy, and the promise to sell, is sufficient consideration. Consideration is an essential element for contract enforcement.

Consideration substitutes. Sometimes the law will permit enforcement of a contract even though one side or the other did not give consideration, if there was an allowed consideration substitute. The most common one is detrimental reliance, in which one person promises to do a thing gratuitously and another worsens his or her position in reliance on that promise. Under ordinary circumstances this would be a mere promise to make a gift, and unenforceable. Because of the detrimental reliance, however, it may become an enforceable contract.

Adequate consideration. If this is required by law, the consideration must be reasonably close to the value of the thing promised or exchanged.

Good consideration. The consideration is based on natural duty and affection or a moral obligation, such as property sold for “love and affection.”

Consideration of support. It is not uncommon for elderly parents to transfer property to their children “in consideration of care and support.” In most states, such transfers are voidable if the care and support are not forthcoming.

References in periodicals archive ?
The insurance cases do not, therefore, provide compelling evidence in support of the approach to failure of consideration taken in Rowland v Divall.
Whilst this distinction continued to be drawn between executed and executory contracts there was, in effect, no meaningful role for conferment of rights in the analysis of failure of consideration.
In all of these cases the payee had carried out the factual side of performance in full, but the failure of that performance to confer the desired legal consequences led to the conclusion that there had been a failure of consideration.
One of the first, and most significant, indications that failure of consideration could be conceptualised in terms of a failure to confer legal rights can be seen in the cases on securities for the payment of annuities.
Thus, in Straton v Rastall (100) and Este v Broomhead (101) there was held to be a failure of consideration where a bond and a warrant of attorney had not been properly registered.
The principle that failure of a security for performance could amount to a failure of consideration for the whole transaction was not confined to annuities, as the House of Lords' decision in National Bolivian Navigation Company v Wilson (105) made clear.
The courts' repeated assertion that failure of security can amount to failure of consideration emphatically demonstrates that failure of consideration cannot simply be equated with failure to perform.
The claimant argued that, since he had been deprived of the opportunity to pay the instalments, he had never received the option, and there had, therefore, been a failure of consideration for his initial payment.
More strikingly, there was also a failure of consideration in In re Ames' Settlement[TM] where the couple had been through a valid marriage ceremony and cohabited as man and wife, but the marriage had been annulled twenty years later.
The emphasis on the conferment of legal rights in failure of consideration had been a consistent theme of the previous two hundred years of legal development.
The cases and discussion under the four previous sub-headings have highlighted the emphasis given to the conferment of legal rights in assessing whether there has been a failure of consideration.
In each case it was held that there was no failure of consideration because something of value had been received by the purchaser.

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