Future Business Leaders of America (FBLA) Business Law Practice Exam

What is the legal term for the exchange of benefits and detriments in a contract?

1. Obligation

2. Consideration

3. Agreement

4. Affirmation

The correct answer is: Consideration

The correct term for the exchange of benefits and detriments in a contract is consideration. In contract law, consideration refers to the value that is exchanged between parties when making a contract. This can include money, services, goods, or even a promise to act or refrain from acting in a certain way. Consideration is fundamental to the formation of a legally enforceable contract, as it demonstrates that each party is contributing something of value, which is necessary for mutual assent. Consideration distinguishes enforceable contracts from mere promises or gifts, where there is no expectation of a return benefit or detriment. For a contract to be valid, the consideration must be lawful and sufficient, although it does not need to be of equal value between the parties. The other terms do not capture the essence of this concept. "Obligation" refers to a duty established by law or contract but does not specifically relate to the exchange aspect. "Agreement" refers to the mutual understanding and assent between parties but does not encompass the concept of value exchange. "Affirmation" relates to confirming or validating something, which is not directly related to the idea of exchange in a contract. Thus, consideration is the term that accurately describes the exchange of benefits and detriments necessary to form a