Concept of a Contract
A contract is an agreement that is enforceable by law. A contract therefore has legal implications for the parties who enter into a contract. A mere agreement is not legally binding and therefore neither of the parties is liable if anyone breaks the agreement.
What makes a contract different from an agreement?
A contract requires not only an agreement between parties but also something of value must be passed from one party to the next to make the contract binding. For example, you offer to sell a friend your used text books for $1000.00. After inspecting your textbooks the friend agrees and pays $1000.00. The $1000.00 paid here is the consideration i.e. something of value that is passed from one party to the next. Consideration is the price paid for a promise. You promised to let your friend have your textbooks if he paid $1000.00. This $1000.00 makes the agreement binding. You are therefore obligated to deliver the books to your friend and cannot decide to sell the books to someone else or to ask for a higher price.
Your neighbour asks you to mow his lawn after which he will pay you $200.00. You accept this offer and mow the lawn. The work done here is an act of forbearance. You are giving something of value to your neighbour to receive payment for the job. The consideration in this case is the work done by you. It is the price that you have paid for the promise to be paid money for the job. Consideration passes from promise to promise.