Understanding consideration in contracts: what counts as something of value

Value is the currency of contracts. When two parties shake on an agreement, it isn’t just good intentions that bind them. It’s the fact that each side brings something of value to the table. In contract law, the term that captures this idea of “something of value” is called consideration. If you’re navigating the NCCM Program Certification landscape, understanding consideration helps you read agreements with more clarity and spot where a contract truly becomes enforceable.

Let me explain what consideration means in plain terms. Imagine a simple deal: Party A promises to pay $5,000 to Party B for a custom piece of software. Party B agrees to deliver the software by a certain date. In this scenario, the money from Party A and the software delivered by Party B are the tangible exchanges—the value that each party brings. That mutual exchange is consideration. It’s the thing that makes the promise legally meaningful.

Now, you might be wondering: is money always required for consideration? Not necessarily. Consideration can take several forms. It can be money, obviously. It can be services (like a consultant agreeing to provide expertise), goods (a supplier delivering widgets), or a promise to refrain from doing something (a party agreeing not to sue in exchange for a settlement). The common thread is that there’s something of value exchanged, and the exchange is part of what the parties bargained for.

Let’s draw a quick contrast with other contract terms so the picture stays clear. In many discussions, you’ll hear terms like conditions, obligations, and terms all tossed around. Here’s how they differ from consideration:

• Conditions: These are the prerequisites that must be met for a contract to kick into gear or for certain obligations to become due. Think of them as the gating requirements that determine whether the agreement can proceed.

• Obligations: These are the duties each party owes under the contract. They spell out who must do what, when, and by how much.

• Terms: This is the broad umbrella—an umbrella that covers all the specific provisions, including rights, duties, timelines, remedies, and more.

Consideration sits in a slightly different lane. It’s about what each party gains in return for their promise. Without adequate consideration, a contract often isn’t enforceable, because it looks like one side isn’t getting anything in exchange for their commitment. That’s the whole reason consideration matters in the first place.

Why this matters in contract management, especially in the NCCM sphere, is simple: contracts aren’t just about words on a page. They’re about the real-world value and incentives that drive business relationships. If you’re managing contracts, you’ll want to confirm that there’s a genuine exchange behind every promise. You’ll also want to recognize situations where the absence of consideration could undermine enforceability.

A few practical takeaways to anchor your understanding

• Consideration isn’t just money. It can be services, goods, or a forbearance (a promise not to take a certain action) in exchange for something else. For example, a vendor might agree to lower prices for a longer-term contract, and in return, the buyer commits to a multi-year purchase plan. That’s consideration in action.

• It has to be real value, not a gift. A promise to make a charitable donation in the future isn’t consideration if the donor isn’t receiving anything in return now. Similarly, a promise to give something for nothing, with no exchange, usually isn’t enforceable as a contract.

• It needs to be bargained-for. The key idea is that both sides want the outcome because they’re getting something they value. If one side’s promise is purely gratuitous, it’s likely not consideration.

• Past considerations don’t count. If a party did something before entering into the current agreement, that prior act generally isn’t consideration for the new deal. The exchange has to be current and bargained for.

• Look for legal detriment and gain. While not a strict formula for every contract, the concept of “each side giving up or doing something they wouldn’t otherwise do” helps signal valid consideration.

Polish your eye for the fine print with a couple of everyday examples

• Example 1: A software vendor agrees to sell a license for $20,000. In exchange, the customer promises to pay within 30 days and to integrate the software company’s API into their system. The money and the promise to pay are consideration. The integration and the license are the core elements, but the money exchange helps prove there’s value on both sides.

• Example 2: A consultant agrees to provide a six-month advisory service in exchange for a month-to-month retainer plus a sunset clause that ends the agreement early if performance metrics aren’t met. Here, the retainer and the promise to stop earlier if targets aren’t hit constitute consideration, while the ongoing services are the obligations.

• Example 3: A company agrees not to sue in exchange for a settlement payment. The promise to refrain from legal action is consideration, as long as the settlement payment is actually made and accepted.

A few common traps to watch for (and how to avoid them)

• Illusory promises: If one side promises to do something only at their discretion, that may fail the “consideration” test. It’s not enough to say “I’ll do it if I feel like it.” There needs to be a real commitment.

• Pre-existing duties: If a party is already obligated to do something under a prior duty, promising to do it again in the new contract doesn’t always count as new consideration. Sometimes, modifications require new consideration unless the governing framework (like certain interpretations under the UCC) permits a good-faith modification without additional value.

• Past performance: If a promise is based on something already done before the agreement, it’s typically not valid consideration for the new contract.

• Nominal consideration: A token amount that doesn’t reflect real exchange can be problematic. The value should be meaningful in the eyes of the law, not just a cosmetic gesture.

Weaving it into real-world practice

In the world of contract management and professional practice, the concept of consideration shows up in numerous scenarios—from procurement deals to service-level agreements and settlement negotiations. When you review a contract, ask yourself:

• What is each party giving up or delivering in exchange for the other side’s promise?

• Is the exchange fair and, more importantly, legally recognizable as value?

• Do the provisions align with the organization’s risk appetite and governance standards?

If you’re part of a team that negotiates or administers contracts, you’ll also want to keep an eye on how consideration interacts with risk and remedies. For instance, if a party’s payment is delayed, the other side might be entitled to certain remedies—liquidated damages, for example—specifically because consideration was exchanged and the contract defines breach and cure periods.

A brief detour into related concepts makes the larger picture clearer

• Forbearance versus consideration: Forbearance (agreeing not to do something) is perfectly valid as consideration if it’s part of a negotiated exchange. This is a handy tool in negotiations because it creates a leverage point that both sides can appreciate.

• Modifications and consideration: In some legal frameworks, changing the terms of an existing contract may require new consideration. In others, especially in modern commercial practice, good-faith modifications can be enforceable with mutual assent even if the consideration isn’t “new.” The nuance matters, especially in longer-term supplier relationships or complex licensing agreements.

• The role of “terms” in signaling value: When you read a contract, the “terms” section should reflect the expected value exchange—delivery milestones, acceptance criteria, payment schedules, and performance metrics. Clear, well-structured terms make the consideration easier to identify and easier to enforce.

Bringing it all together

Here’s the core takeaway you can carry forward: consideration is the concrete value exchanged to support a contract. It’s the heartbeat of enforceability—the element that signals both sides have a stake in the deal. Without it, promises drift into vague intentions rather than binding commitments. In the NCCM certification landscape, recognizing consideration helps you evaluate contracts not as a wall of text, but as a living agreement that maps out what each party stands to gain.

If you’re studying contract management or governance, this lens is especially useful. It encourages you to read with a curious, practical mindset: What value is really being traded? How does that value drive performance, risk, and compliance? And how can clear consideration definitions prevent disputes down the line?

A closing thought to keep in mind

Contracts are, at their best, a clear, mutual understanding of value. Consideration is the essential proof that such a mutual understanding exists. It’s the quiet but steadfast element that keeps promises from flailing when the tires hit the road—whether you’re handling a vendor agreement, a technology license, or a settlement memo. So next time you skim a clause about promises and duties, pause for a moment. Look for the heartbeat—the value each party brings to the table—and you’ll understand the contract a little better, almost as if you were invited to peek behind the curtain and see how the whole mechanism ticks.

If you’re navigating through the broader terrain of contract management, you’ll likely encounter this concept in many guises. It’s a fundamental building block, one that keeps the gears turning and the relationship operating smoothly. And when you recognize consideration for what it is, you’re not just reading a contract—you’re interpreting a real-world agreement about value, trust, and accountability. That understanding tends to pay off, not only in clearer documents but in smoother negotiations and more predictable outcomes.

Curious about how this plays out across different industries? Consider how a software company and a manufacturing firm approach the same idea. The software firm might weigh licensing fees against support hours, while the manufacturer balances on-time delivery with long-term price stability. In both cases, the underlying thread is the same: there’s something of value being exchanged, and that exchange is what makes the contract more than ink on a page.

If you want, we can map out a couple of real-world contract snippets and annotate them for consideration-based value. It’s a simple exercise, but it often clarifies how this concept shows up in everyday business deals, the kind you’ll encounter in many NCCM roles.