What is meant by consideration in the context of a valid contract between two parties?

In the context of a valid contract, consideration refers to the value that each party agrees to give or exchange as part of the agreement. This could be money, services, goods, or anything of value which each party benefits from or is obligated to provide. The principle of consideration is essential because it ensures that both parties have provided something of value, thereby creating a binding legal obligation.

This means that for a contract to be enforceable, there must be an exchange that supports the contract – both parties must have something at stake. For instance, in a sales contract, the buyer provides payment while the seller provides the goods. This mutual exchange is what underpins the contract and gives it legal standing.

In contrast, the other options touch on important concepts associated with contracts, such as fairness, good faith, and legal capacity; however, they do not specifically define consideration. Fairness and good faith involve the manner in which the parties conduct themselves and uphold their contractual obligations but do not relate to the necessity of an exchange of value. Legal capacity refers to the ability of parties to enter into a contract, which is a separate concept. Therefore, the correct understanding of consideration highlights it as the foundational element that supports and validates the contract itself.