What is the significance of "consideration" in contract law?

In contract law, "consideration" refers to something of value that is exchanged between parties when entering into a contract. For a contract to be legally enforceable, there must be adequate consideration. This means that each party must provide something of value—this could be money, services, goods, or an agreement to refrain from an action—in exchange for the promise or performance of the other party. Without consideration, a contract is typically deemed unenforceable because there is no mutual exchange to support the obligations promised.

This foundational concept helps to distinguish a legally binding contract from a mere promise or gift, where no exchange of value occurs. It supports the principle that both parties have a stake in fulfilling their contractual obligations, contributing to the overall fairness and fraternity of contractual dealings. The requirement of consideration ensures that there is a tangible commitment from all involved parties, vital for any enforceable agreement in law.