Consideration clause

What is a consideration clause?

A consideration clause is a provision most commonly used in insurance policies that provides information on how much the coverage costs and when to pay. Other industries can also use consideration clauses. In real estate agreements, consideration clauses outline compensation according to the terms of the contract.

What does consideration mean in an agreement?

Consideration is basically when one party promises to do something they are not legally compelled to do, like selling their car, providing a service, etc. in exchange for the promise of being compensated. This promise is the consideration for the service or property.

Deferred consideration

In certain instances, consideration can be deferred. This could be done by spreading out the payment instead of paying everything at once. When acquiring a company, for example, certain payment milestones can be linked to performance goals. This serves to ensure that the buyer receives the promised value they purchased.