What does "consideration" refer to in a contract?

Consideration in a contract refers to the value exchanged between the parties involved. This concept is fundamental to contract law, as it is one of the essential elements that must be present for a contract to be enforceable. Consideration can take various forms, such as money, services, or other benefits, and it represents what each party stands to gain from the agreement. This mutual exchange is what distinguishes a contractual relationship from a mere promise; without consideration, a promise would generally be unenforceable under the law.

In contracts, both parties must provide something of value, which creates a binding obligation. For instance, in a sale of goods, the seller provides the product while the buyer provides payment. Each party's consideration acts as a motivating factor for entering the agreement, making it a critical aspect of any valid contract.