Consideration in contract law is the value or benefit given by each party in exchange for the other party’s value or benefit—such as money in exchange for products or services, or mutual promises exchanged.

Consideration is often referred to as the bargained-for exchange in which one consideration is exchanged for another consideration.

A mere promise to do or refrain from doing something that lacks consideration in the form of a value or benefit provided by the other party (a return promise) is not a contract and is generally not enforceable. One exception to this rule may be if one party promises to do or refrain from doing something, and the second party relies on that promise to its detriment (by spending money, for example), the detrimental reliance may create an enforceable contract.

And if the consideration for a contract is so insubstantial that it is worthless, the contract is said to be illusory and is not enforceable.

The existence of consideration is what distinguishes an enforceable contract from a promise to make a gift. Because a gift is a voluntary, gratuitous transfer of property from one person to another—without something of value promised in return—the failure to fulfill a promise to make a gift is not enforceable as a breach of contract, as there is no consideration for the promise to make the gift.

In California, consideration is a fundamental component of a valid contract. It refers to something of value that is exchanged between the parties, which can be money, services, or mutual promises. The consideration must be something that the parties have bargained for as part of the agreement. Without consideration, a promise is typically not enforceable as a contract. However, California recognizes an exception under the doctrine of promissory estoppel. If a party relies on a promise to their detriment, such as incurring expenses based on that promise, the promise may be enforced even without consideration. This is to prevent injustice due to the reliance. Contracts with consideration that is deemed illusory or so insignificant as to be worthless may be considered unenforceable for lack of sufficient consideration. Lastly, promises to make a gift are not enforceable contracts in California because they lack consideration; a gift is a voluntary transfer without the expectation of receiving something in return.