What Is 'Consideration' and Why Does It Matter?

If you've been reading about what makes a contract enforceable, you've probably bumped into the word "consideration." It sounds like it means being thoughtful or polite, but in contract law, it's a technical term — and it's the element that determines whether most casual agreements have any legal backbone at all.

Let's break it down without the legalese.

Consideration in Plain English

Consideration means that each person in an agreement must give something up or provide something of value. It's the "exchange" part of the deal. Without it, you don't have a contract — you have a gift or a promise.

Example of consideration in a business deal: I'll pay you $500, and you'll design my logo. The money is my consideration; the design work is yours. We've both given something up.

Example without consideration: I promise to give you $500 next week. You don't promise anything in return. That's a gift (or a gratuitous promise), and it's generally not enforceable as a contract.

The Three Requirements of Valid Consideration

1. It Must Be Bargained For

The exchange has to be the reason for the agreement. Both sides are giving something because of what they're getting in return. "I'll do X because you'll do Y" — that's a bargain. "I'll do X because I'm a nice person" — that's generosity.

2. It Must Have Some Value

It doesn't have to be fair or equal, but it has to be something. A court won't examine whether the deal was a good one — even $1 can technically be valid consideration for something worth much more. (That said, grossly lopsided terms might raise questions about unconscionability or duress.)

3. It Can't Be Something You're Already Obligated to Do

Promising to do something you're already legally required to do doesn't count as consideration. "I'll follow the law" isn't new consideration because you're already required to follow the law.

Where Consideration Gets Tricky in Casual Arrangements

Here's where it matters for your situation. In a typical casual arrangement, the exchange might look like this:

• Person A provides financial support, gifts, or lifestyle benefits
• Person B provides companionship, time, emotional support, or intimacy

On the surface, this looks like a bargained-for exchange. Both sides are giving and receiving. But courts have historically been very uncomfortable with this framing for several reasons:

The "Companionship as Consideration" Problem

Courts in many jurisdictions are reluctant to recognize personal companionship or intimacy as valid consideration for a contract. The reasoning varies — sometimes it's based on public policy, sometimes on the argument that personal relationships can't be reduced to contractual terms.

This doesn't mean your arrangement is immoral or wrong. It means the legal system wasn't designed to evaluate these exchanges.

The "Past Consideration" Trap

Sometimes arrangements evolve informally before anyone writes anything down. If Person A says, "I've been taking you to dinner for three months, so now you owe me exclusivity," that's not valid consideration. Past actions — things already done before the agreement was made — don't count as consideration for a new promise.

The "Illusory Promise" Problem

If one person's promise is so vague that they haven't actually committed to anything specific, it's considered "illusory" — meaning it looks like a promise but isn't one.

Example: "I'll be available when I can be" isn't real consideration because it doesn't commit to anything. "I'll be available every Saturday from 6-10pm" is specific enough to potentially count.

Practical Implications for Your Arrangement

What this means day-to-day:

You probably don't need to worry about consideration in the legal sense. As we discuss in Why Casual Agreements Aren't Contracts, most casual arrangements operate on trust and mutual goodwill rather than legal enforceability.

Where it becomes relevant:

• If you're trying to make a specific clause enforceable (like a confidentiality clause), it needs its own consideration — a mutual exchange specifically for that promise.
• If a dispute arises and one party claims the other breached an agreement, the first question a lawyer will ask is: "What was the consideration?"
• If the arrangement involves significant financial transfers, understanding consideration helps you distinguish between gifts (no consideration, generally not recoverable) and contractual payments (consideration present, potentially recoverable).

Consideration Scenarios in Casual Arrangements

Scenario 1: Monthly allowance in exchange for regular meetups This looks like consideration on both sides, but courts may not enforce it if they view the "meetups" as personal companionship.

Scenario 2: One person pays the other's tuition in exchange for a promise to maintain the arrangement for one year The tuition is clear consideration. The promise to maintain the arrangement is the tricky part — is it specific enough? Is it enforceable given the personal nature?

Scenario 3: Mutual confidentiality agreement Each person's promise to keep the other's information confidential serves as consideration for the other's identical promise. This is the strongest structure for enforceability because both sides are giving up the same thing.

Scenario 4: "I'll leave my job if you support me financially" Giving up employment is real, substantial consideration. This type of arrangement is more likely to have enforceable elements — and is also a situation where you should consult a lawyer.

How to Strengthen Consideration in Your Agreement

If enforceability matters to you (and for most casual arrangements, it shouldn't be your primary concern), here are practical steps:

1. Be specific about what each person is providing. Vague promises weaken consideration.
2. Separate enforceable clauses from personal terms. A confidentiality agreement with its own mutual consideration is stronger standing alone.
3. Avoid one-sided agreements. If only one person is making promises, there's likely a consideration problem.
4. Document the exchange. Written terms help prove that both parties understood what they were giving and receiving.
5. Don't rely on past actions. New agreements need new consideration, not references to what's already been done.

The Bottom Line

Consideration is the engine of contract law — without it, an agreement is just words. In casual arrangements, the consideration analysis is complicated by the personal nature of what's being exchanged. Rather than trying to engineer enforceability, focus on creating a clear, fair arrangement that both people want to honor. That's worth more than any legal theory.

For more on the legal fundamentals, explore our Enforceability Basics hub.

Disclaimer: This article is for educational purposes only and does not constitute legal advice. The legal treatment of consideration varies by jurisdiction. Consult a qualified attorney for advice about specific agreements.