# Consideration

Source: https://contracko.com/glossary/consideration

# Consideration

In common law, the value each party gives that makes a contract binding.

## Definition

Consideration is a common-law requirement: a contract is only enforceable if each side provides something of value, such as money, goods, or a promise to act. It explains why a bare promise without anything in return is generally not binding under English or US law. Dutch civil law has no direct equivalent. The old causa (oorzaak) requirement was abolished, and a contract is binding on the basis of offer and acceptance and a lawful, determinable obligation.

## Example

> In a US contract, a company's promise to pay €10,000 is supported by the consultant's promise to deliver a report; each is consideration for the other.

## Why this is a business risk

For businesses operating under English or US law, missing consideration can make a contract unenforceable, particularly when modifying an existing agreement without giving anything new in return. Dutch companies entering cross-border deals should be aware that their counterparts may insist on formal consideration language even when Dutch law does not require it.

## How to manage it

- When contracting under English or US law, verify that both parties provide something of value; a nominal sum ("£1") is sufficient but must be genuine.
- For contract amendments under common law, include a recital of consideration or use a deed to avoid enforceability problems.
- If the governing law is Dutch, you can omit consideration language, but explain the difference to common-law counterparties to avoid confusion.

### How Contracko helps

Contracko stores contracts governed by different legal systems in one searchable repository, making it straightforward to see which agreements are subject to common-law requirements. The AI review summarises governing-law clauses so cross-border teams know which legal framework applies to each contract.

## Relevant for

[Legal Services](https://contracko.com/industries/legal-services)[Consulting](https://contracko.com/industries/consulting)

## Related clauses

- [Entire Agreement Clause](https://contracko.com/clause-library/entire-agreement)
- [Payment Terms Clause](https://contracko.com/clause-library/payment-terms)

## Related terms

- [Counterparty](https://contracko.com/glossary/counterparty)
- [Clause](https://contracko.com/glossary/clause)
- [Representation](https://contracko.com/glossary/representation)

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## Frequently asked questions

Common questions about this term.

- **Q:** Do Dutch contracts need consideration?
  **A:** No. Consideration is a common-law concept; Dutch law instead requires offer and acceptance and a lawful, determinable obligation, with no need for mutual exchange of value.

- **Q:** What happens if a contract amendment has no consideration under English law?
  **A:** The amendment may be unenforceable as a bare promise. The classic solution is to execute it as a deed, which is binding without consideration under English law.

- **Q:** Is past consideration valid?
  **A:** Generally no under common law: something already done before the promise was made cannot be consideration for it. The act and the promise must be part of the same transaction.

- **Q:** Does a gratuitous promise create a binding contract under Dutch law?
  **A:** It can. Dutch law does not require consideration, so a one-sided promise to pay or perform can be binding if the requirements of offer and acceptance are met and the obligation is lawful and determinable.

- **Q:** Why is consideration still written into Dutch-governed contracts with English parties?
  **A:** Often because the English party uses a standard template drafted under English law. It does no harm under Dutch law and removes a potential argument if the governing-law choice is ever challenged.

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