Consideration Clause: Meaning & Samples (2022)

Consideration Clause Defined

Consideration clauses are used to define the total amount due for coverage. They are the terms and conditions that determine how payment is made in exchange for mutual consideration. Some consideration clauses include penalty clauses if one party fails to meet their requirements.

Here’s an article about consideration clauses.

Consideration Clause Explained

Consideration clauses are generally used in real estate and insurance contracts. Essentially, they set the terms around how one party pays another party for something valuable, like a house or insurance policy.

They could also be used when selling shares to a buyer under a share purchase agreement. In this case, consideration clauses prove that mutual consideration existed.

This page also discusses consideration clauses.

Purpose of Consideration Clause

The purpose of consideration clauses is to mitigate the potential for a dispute regarding:

• Payment amount
• Payment due dates
• Consideration exchanged
• Limitations
• Penalty amounts

You should make your consideration clauses as specific as possible to reduce the chance for potential conflict in the future.

Consideration Clause Examples

Examples of consideration clauses include:

• Example 1. Receiving real estate property in exchange for payments
• Example 2. Paying an insurance premium for benefits
• Example 3. Working as an employee for a salary
• Example 4. Renting construction equipment for a weekly fee
• Example 5. Purchasing IT services on an annual contract

Consideration clauses are perfect for contracts dealing with more significant transactions above $500. They can help you protect your rights and set the tone for the relationship from the outset.

Consideration Clause Samples

Sample 1 – Purchase and Sale Agreement

NOW, THEREFORE, it is agreed that in consideration of the Title Company issuing its title insurance policy to Buyer effective as of the date closing occurs without making exception therein to matters which may arise between the last effective date of the title insurance commitment issued by the Title Company in connection with Buyer’s title insurance (the “Effective Date”) and the date the documents creating the interest being insured have been filed for record and which matters may constitute an encumbrance on or affect said title, Seller agrees to promptly defend, remove, bond or otherwise dispose of any encumbrance, lien or objectionable matter to title caused by the acts of Seller, its agents or representatives which may arise or to be filed, as the case may be, against the Real Property during the period of time between the Effective Date and the date of recording of all closing instruments, and to hold harmless, and indemnify the Title Company against all expenses, costs, and reasonable attorneys’ fees, which may arise out of Seller’s failure to so remove, bond or otherwise dispose of any said liens, encumbrances or objectionable matters caused by the acts of Seller, its agents or representatives; provided, however, the Title Company shall use good faith and diligent efforts to cause all documents to be recorded as soon as possible but, in any event, no later than three (3) business days after the date hereof and Seller shall have no obligations or liability hereunder with respect to any objections to title which may arise or be filed after such three (3) business day period nor shall SellerHere’s a web page with a consideration clause sample.

Reference:

Security Exchange Commission - Edgar Database, EX-10.52 7 d447090dex1052.htm PURCHASE AND SALE AGREEMENT, Viewed May 10, 2021, <https://www.sec.gov/Archives/edgar/data/1469822/000119312513041312/d447090dex1052.htm>.

Sample 2 – Real Estate Sale Agreement

NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. Assignor hereby assigns unto Assignee, all of the right, title and interest of Assignor in and to the Leases;

TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns from and after the date hereof, subject to the terms, covenants and conditions of the Leases.

2. Assignee assumes the performance of all of the obligations of Assignor under the Leases to be performed from and after the date hereof. Assignee agrees to indemnify, protect, defend and hold Assignor harmless from and against any and all claims, demands, liabilities, losses, costs, damages or expenses including, without limitation, reasonable attorneys' fees and costs (collectively, "Claims") arising out of or resulting from any breach or default by Assignee in its obligations under the terms of the Leases from and after the date hereof, including, without limitation, any breach or default by Assignee or failure by Assignee to comply with any applicable law from and after the date hereof with respect to the security deposits under the Leases that are being transferred to Assignee on the date hereof.
3. Assignor hereby agrees to indemnify, protect, defend and hold Assignee

harmless from and against any and all Claims arising out of or resulting from any breach JAX\1376204_2 -43­

or default by Assignor in its obligations under the terms of the Leases prior to the date hereof including, without limitation, any breach or default under the Leases or failure by Assignor to comply with any applicable laws prior to the date hereof with respect to the security deposits under the Leases.

This Assignment shall be binding on and inure to the benefit of the parties hereto, their heirs, executors, administrators, successors in interest and assigns.

This Assignment may be executed in separate counterparts, which, together, shall constitute one and the same fully executed Assignment.

Reference:

Security Exchange Commission - Edgar Database, EX-10.52 7 d447090dex1052.htm PURCHASE AND SALE AGREEMENT, Viewed May 10, 2021, <https://www.sec.gov/Archives/edgar/data/1469822/000119312513041312/d447090dex1052.htm>.

Sample 3 – Real Estate Purchase and Sale Agreement

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Contracts. Assignor hereby transfers and assigns to Assignee any and all right, title and interest which Assignor may have in the contracts, if any, listed in Exhibit Battached hereto and made a part hereof (collectively, the “Contracts”). By executing this Assignment, Assignee hereby accepts and agrees to perform all of the terms, covenants and conditions of the Contracts on the part of Assignor therein required to be performed, from and after the date hereof, but not prior thereto. Assignor agrees to indemnify, defend and hold Assignee harmless with respect to all liabilities and obligations of Assignor under the Contracts arising or accruing prior to the date hereof. Assignee hereby assumes all liabilities and obligations of Assignor under the Contracts arising or accruing from and after the date hereof and agrees to indemnify, defend and hold Assignor harmless with respect thereto.
2. Successors and Assigns. This Assignment shall inure to the benefit of, and be binding upon, the successors, executors, administrators, legal representatives and assigns of the parties hereto.
3. Governing Law. This Agreement shall be construed under and enforced in accordance with the laws of the State of Texas.
4. No Representations. This assignment is made without any representation or warranty, express or implied, except for those representations and warranties, if any, expressly set forth in that Real Estate Purchase and Sale Agreement between Assignor and [[_____________________________]]dated as of [[_____________, 201__]] (the “Agreement”), all of which are subject to the limitations set forth in the Agreement.

Reference:

Security Exchange Commission - Edgar Database, EX-10.1 2 exh101realestatepurchasean.htm EXHIBIT, Viewed May 10, 2021, <https://www.sec.gov/Archives/edgar/data/1062822/000106282214000046/exh101realestatepurchasean.htm>.

Common Contracts with Consideration Clauses

Common contracts with consideration clauses include the following:

• Insurance policies
• Real estate agreements
• Sales agreements
• Service agreements
• Barter agreements

Consideration Clause FAQs

Consideration clauses are deceptively simple. Check out the consideration clause FAQs below to learn more:

What is a consideration clause in real estate?

Consideration clauses in real estate are used when purchasing a property. More flexible sellers may allow the use of a peppercorn consideration clause or deferred consideration clause that allows low or no down payments.

What is a consideration payment?

Consideration payments are those that are exchanged for something of value. They can be cash, jewelry, real estate, stock shares, and more.

It’s critical to draft your consideration clauses carefully. Legal mistakes can result in a breach of contract claim and paying liquidated damages for an unfavorable ruling.