Hire an M&A Professional to Sell Your Business


Definition - What does Consideration mean?

Consideration is the concept of legal value in connection with contracts. It is anything of value that is promised to another when making a contract. It can take the form of money, physical objects, services, promised actions, abstinence from a future action, and much more. Consideration to create a legally enforceable contract entails either a detriment to the promisee, or a benefit to the promisor. Without consideration, a contract may be determined to be non binding and invalid.

"Quid pro quo" is a Latin phrase that literally means "something for something." The phrase usually indicates an exchange of goods or services of roughly equivalent value. Quid pro quo may also be referred to as consideration.

Divestopedia explains Consideration

Under the notion of pre-existing duties, if either the promisor or the promisee already had a legal obligation to render such payment, it cannot be seen as consideration in the legal sense. For example, if A signs a contract to buy a car from B for $5,000, A's consideration is the $5,000, and B's consideration is the car. Additionally, if A signs a contract with B such that A will paint B's house for $500, A's consideration is the service of painting B's house, and B's consideration is $500 paid to A.

From a legal perspective, consideration indicates that a good or service has been traded for something of equal value. In particular, it is used explicitly to indicate that there are goods or services being delivered and that an acceptable payment is to be made for these goods or services. Consideration is one of the most common Latin legal terms used. In any transaction - legal, political, or otherwise - it is helpful to know the balance of the value of the service or good and the financial compensation being offered.

Connect with us

Divestopedia on Linkedin
Divestopedia on Linkedin
"Divestopedia" on Twitter

Sign up for Divestopedia's Free Newsletter!

Email Newsletter

Join thousands of others with our weekly newsletter


  • Equicapita: Equicapita
    Equicapita's model is to acquire established, private small and medium sized enterprises (“SMEs”) located primarily in Western Canada.
  • Evolution Capital: Evolution Capital
    Leaders in growing small business.