What does consideration in a contract signify?

Consideration in a contract signifies the payment made in exchange for promised obligations. It represents something of value that is exchanged between the parties involved in the contract, which can take the form of money, services, goods, or a promise to refrain from some action. This principle ensures that each party has a stake in the agreement, thereby making the contract binding and enforceable. Without consideration, a contract may be deemed void because there is no exchange, which undermines the legal enforceability of the agreement.

In the context of contract law, consideration is essential because it distinguishes a contract from a mere gift—where one party gives something without expecting anything in return. The presence of consideration signifies that both parties are committing to their respective roles under the contract, creating a mutual obligation.