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 Iowa, as in other states, consideration is a fundamental component of a legally binding contract. Consideration refers to something of value that is exchanged between parties when entering into a contract. It can be money, services, goods, or a promise to perform or refrain from a certain action. The concept of 'bargained-for exchange' is central to the notion of consideration, meaning that each party must provide something of value to the other for the agreement to be enforceable. Without consideration, a contract may be deemed unenforceable. However, there are exceptions, such as when a party relies on a promise to their detriment (promissory estoppel), which can sometimes create enforceable obligations despite the lack of traditional consideration. Contracts with consideration that is deemed illusory or so insignificant as to be considered worthless may also be unenforceable in Iowa. Lastly, promises to make a gift are not considered enforceable contracts in Iowa because they lack consideration; a gift is a voluntary transfer without the expectation of receiving something in return.