Illinois Leasing Agent Practice Exam

What does consideration mean in the context of a contract?

1. Witnessing the agreement

2. Giving of something of value

3. Verbal agreement between parties

4. Providing legal counsel

The correct answer is: Giving of something of value

In the context of a contract, consideration refers to the giving of something of value by both parties involved in the agreement. This can take the form of money, services, goods, or a promise to act or not act in a certain way. Consideration is a fundamental component of a legally binding contract because it establishes that both parties are offering something in exchange for the other party’s commitment. The principle behind consideration is to ensure that neither party is entering the contract unilaterally; both must be providing a benefit or something of value. This mutual exchange helps create the intention to establish a binding agreement and enforces the notion that contracts should involve a compromise or trade-off. Witnessing the agreement, having a verbal agreement, or providing legal counsel are related concepts in the context of contracts but do not define consideration. Witnessing is about validating the agreement’s authenticity, verbal agreements can lack enforceability without consideration, and legal counsel is about advice and representation in legal matters, not about the contract's terms or its validity. Thus, the concept of consideration is crucial for creating enforceable and balanced contracts.