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Consideration is an element of a contract.  That is, to form a contract in the United States there must be consideration, otherwise, there is no contract.

Consideration means an exchange of value between the parties to the contract.  Sometimes, you may see consideration referred to as the “price of a promise”.  That is, in a contract a party usually promises something to the other party and consideration is something of value that is given to induce the promise from the other party.  The parties enter into the contract because they see their agreement as the result of a bargained for exchange – – the parties to the contract each get something out of it.

Consideration will often be a promise to do something for another party that one is not already required to do, or a promise to refrain from doing something that he has a right to do.  A promises to paint a fence in exchange for a promise of $100.  Also, consideration might be engaging in some sort of action for another party in exchange for some sort of benefit (A finds B’s lost dog after seeing a sign promising a reward for finding the dog).

Remember, to form a contract, there must be consideration.  For example, if Patty promises to pay David $100, and David promises to paint Patty’s fence, each party’s promise is supported by consideration from the other party and they have formed a contract.

A promise without consideration is not sufficient to form a contract.  For example, if David promises to paint Patty’s fence for free because he thinks she is a nice person, this is just a promise to give a gift, and is probably not enforceable in court.

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