Question

Why is consideration required in every contract? Give an example of an agreement that contains all needed elements of consideration.

Answer 1

There are three main requirements of a contract:

1. Mutual assent

2. Valid offer

3. Consideration

Consideration is the component of a contract which makes it formal. It is the exchange of valuable commodities or services. For example, sale of a property in exchange of money or gold. A contract is valid only if it has consideration, otherwise the deal would be regarded as a gift. Consideration makes both parties obliged in the agreement by incurring some burden on them.

Elements of a consideration are :

1. An offer is made.

2. The offer is accepted.

3. Payment in the form of a valuable of commodity or a service.

4.Mutuality between parties to implement the deal.

5. Both parties must be capable in regards to age and mind.

6. Everything should be in written form .

Example is Sale of a property. In this case, an offer is made by a buyer usually in money form. Then the offer is accepted by the seller. The money in exchange of property here is the consideration. This happens only when both the parties mutually come to a decision of selling and buying. Usually both the parties involved in this are adults who are capable of taking responsibilities of their decisions. The deal is then completed by signing official papers from court that contains all the legal terms and conditions related to the contract.