consideration: in contract law consideration is the term given to an item of value exchanged between the parties to a contract. For example, money passing from a buyer to a seller in exchange for an asset is the consideration for that asset. Consideration is essential to the formation of a legally binding contract. In order for the consideration to be valid it must: be something of value, sufficient (although not necessarily adequate), actually move from one party to the other and must not be something given in the past.