Consideration | Practical Law
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Practical Law Glossary Item 7-503-9758
(Approx. 3 pages)
Something of value to which a party is not already entitled, given to the party in exchange for contractual promises. Consideration can take various forms, including a:
Promise to do something.
Promise to refrain from doing something.
Consideration is one element critical to the formation of a contract and it must be legally sufficient for the contract to be enforceable. For example, an employer's promise to pay an employee for earned commissions at the time of an employment termination is not sufficient consideration for a release of claims because employees are already legally entitled to receive payment for earned commissions. Conversely, commencing employment (and in some cases even
) is often sufficient consideration for binding an employee to certain promises, including
. However, state law varies on this issue. For more information, see
Practice Note, Non-Compete Agreements with Employees: Jurisdiction-Specific Limitations on Non-Competes
Contract Law Requirements
Non-Compete Laws: State Q&A Tool, Question 8