What is Consideration?

Consideration is A simple contract requires consideration to be given by one or more parties to the contract. The consideration must be worth something, and is usually a dollar amount. Consideration may make the contract binding. Given this principle, some contracts require a nominal amount of consideration to be binding, and it is not unusual to see an amount of $1.00 being used. It is the principle rather than the amount involved that makes the contract binding. Obtaining cover under a contract of insurance does not require consideration (it is an offer and acceptance type of contract evidenced in writing), although a contract of insurance may ultimately be cancelled if consideration is not paid. This is done so that interim contracts of insurance, such as cover notes, may be deemed a legal and proper form of issuing insurance cover.


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