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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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.


  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.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson


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.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
Moses was not argued as a case on failure of consideration, but failure of consideration makes two appearances in Lord Mansfield CJ's judgment.
In the case before him, Lord Mansfield was not being asked to consider the precise scope of the concept of failure of consideration, so it is not surprising that he did not explore the matter further.
Later commentators, however, have found a reason to interpret the concept of failure of consideration narrowly in the inspiration which Lord Mansfield probably took from Roman Civil law.
If English law is based on the condictio causa data causa non secuta, failure of consideration must mean failure of counter-performance.
(65) Furthermore, even if, when he referred to 'failure of consideration', Lord Mansfield was taking direct inspiration from Roman law, it does not follow that he must have been thinking specifically of the condictio causa data causa non secuta.
At the very least, we can conclude that if Lord Mansfield had intended to confine failure of consideration to the circumstances in which the condictio causa data causa non secuta would lie, it would have been easy to say so, but he did not impose such restrictions.
Up to this point, this article has shown that, when deciding whether there has been a failure of consideration, there is no compelling reason to focus solely on the receipt of performance, to the exclusion of issues of legal rights.
Cases on insurance contracts provide one of the earliest instances of courts emphasising the conferment of legal rights in their analyses of failure of consideration. As Ben Kremer has shown, (74) courts consistently held that where a premium was paid in respect of a policy that was either illegal, or in respect of which the insurer never went on risk, the payment had been made for 'no consideration'.
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. A court might hold that a payment had been made without consideration (because the agreement was unenforceable), but whether the payment was recoverable turned, in effect, on whether the promised performance had occurred.
(102) Peter Birks, 'Failure of Consideration and Its Place on the Map' (2002) 2 Oxford University Commonwealth Law Journal 1, 4.
(152) The relationship between typical 'knowing receipt' cases and the failure of consideration claim in Spangaro is discussed in detail by Michael Bryan, 'The Liability of the Recipient: Restitution at Common Law of Wrongdoing in Equity" in Simone Degeling and James Edelman (eds), Equity in Commercial Law (forthcoming, 2005).

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