In contract terms, what does "consideration" generally refer to?

Consideration in contract law refers to something of value that must be exchanged between the parties involved in a contract for it to be legally binding. This exchange ensures that each party is contributing something of value, which can take various forms such as money, services, goods, or a promise to perform or refrain from a specific action. The presence of consideration is essential because it distinguishes a contractual agreement from a gift; without consideration, a contract is generally not enforceable.

The requirement of mutual consideration establishes a reciprocal obligation, meaning that both parties must provide something of value. This concept reinforces the idea of fairness in contractual agreements, ensuring that neither party benefits solely at the expense of the other.