Consideration is a fundamental element of a legally binding contract, referring to something of value exchanged between parties. It ensures that each party receives a benefit or suffers a legal detriment in return for the promise made.
Essential for Contract Enforceability – A contract must involve an exchange of value (e.g., money, services, goods, or a promise to act or refrain from acting).
Legal Reciprocity – Both parties must give and receive something of value to make the contract valid.
Distinguishes Contracts from Gifts – A gift is voluntary and does not require consideration, whereas a contract does.
A. Lawfulness – A contract must be lawful, but lawfulness is a requirement, not something exchanged.
C. Agreement – An agreement is part of a contract, but without consideration, an agreement is not legally binding.
D. Discharge – Discharge refers to ending a contract, not forming one.
IIA’s GTAG on Contract Management Risks – Highlights consideration as a key contract principle.
COSO’s Internal Control Framework – Covers contract law fundamentals in risk management.
Common Law and Uniform Commercial Code (UCC) – Define consideration as an essential element of a contract.
Why Consideration is the Correct Answer?Why Not the Other Options?IIA References:
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