What is "Consideration" in a legal contract?

In a legal contract, "Consideration" refers to the value that is exchanged between the parties involved. This concept is fundamental to contract law, as it signifies that each party is providing something of value in exchange for something else, thus making the agreement binding. This can take the form of money, services, goods, or even a promise to refrain from doing something.

When both parties give up something of value, it demonstrates their mutual consent and intent to be legally bound. This exchange is what differentiates contracts from mere promises: without consideration, a contract may not be enforceable in a legal context.

The other options do not fully capture the essence of consideration. Offering a benefit to one party alone does not constitute the mutual exchange that is necessary. Similarly, simply arranging terms does not imply the existence of consideration, nor does formal approval equate to the giving up of value—it is merely an acknowledgment of the contract's terms. Consideration is thus critical for establishing legality and enforceability in agreements between parties.