When it comes to the legal world, understanding the terminology is crucial. One such term that is often used in contracts is `consideration`. In the context of contract law, consideration refers to something of value that is promised in exchange for the other party`s promise to do something. Let’s take a closer look at what exactly this means.
The term consideration is described in Section 2(d) of the Indian Contract Act. It states that `when at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing, something, such act or abstinence or promise is called a consideration for the promise`. In simple terms, consideration means that both parties involved in the contract must receive something of value for the agreement to be legally binding.
Consideration can come in various forms, such as money, property, services, promises or anything else that is of value to the parties involved. For example, if you agree to buy a car for $10,000, the money you pay is the consideration for the seller’s promise to transfer ownership of the car to you.
Consideration is not only important in creating a valid contract, but it also ensures fairness in the agreement. The value of the consideration given by both parties should be equal or reasonable. If one party offers little or no consideration, the contract may not be enforceable in a court of law.
It is also important to note that consideration must not be something that the party was already obligated to do. In other words, if you are already legally bound to perform an action, that action cannot be considered as consideration for a new contract.
In conclusion, consideration is a crucial concept in contract law. It ensures that both parties receive something of value in exchange for their promises and helps to create a legally binding agreement. So, the next time you enter into a contract, make sure that you pay attention to the consideration involved to ensure a fair and valid agreement.