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Contract Terminology & Glossary

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It is essential to familiarize yourself with the most common contract terms since they are a part of our daily lives.


Lindsey Ehlman is on the content team at ApproveMe. She’s an MVP legal junkie, professional paralegal with over 6+ years experience and currently pursuing her doctorate of law. In this guide, Lindsey will outline how companies and individuals can craft, negotiate and execute a win-win (and enforceable) contract.

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Contracts are EVERYWHERE! It is essential to familiarize yourself with the most common contract terms since they are a part of our daily lives. Contracts for your business are even more critical, and you want to be sure you have a knowledgeable understanding of what goes into your contracts and ensure you are protected. Contracts are basically a promise to do something in exchange for something of value. If you need to hire a consultant for help on a marketing project, you are hiring them in exchange for their expertise and professional knowledge. 

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Letter Definition
Ab initio  “From the Beginning”
Acceptance When an offer is accepted, all parties must unambiguously and mutually consent to the exact terms agreed upon, binding the contract. Acceptance is the second required element of a contract. 

  • Any offer can be withdrawn BEFORE acceptance
  • Once accepted, a contract is binding for all parties to the agreement.
Acts of God A legal term-of-art refers to unforeseen circumstances that excuse the other party from performing their contractual duties that are out of their control. This includes situations such as natural disasters, threats of terrorism, and pandemics (COVID-19).
Addendum Keeps all of the terms of the original contract and adds new ones.
Adhesion Contract The term “adhesion” comes from the notion that the party with the weaker bargaining power must “adhere” to the terms of the contract. It is drafted by a party that holds a substantially greater bargaining power over the other party with less bargaining power. They are known as “standard form contracts” or “boilerplate contracts.” They are more streamlined and cut out room for negotiations of the terms 

(ex. Insurance contact, internet and phone agreements, loan agreements, etc.).

Agent An individual delegated to act on behalf of another (principal).
Amendment A modification of the original agreement and that updates the prior terms of the contract. Original contracts are also amended because the parties have decided to negotiate new terms to update the existing agreement.
Anticipatory Breach When one party speculates that the other party may breach the contract by failing to perform or fulfill the contract, the suspecting party can ask for assurances if they believe the other party does not intend to perform their duties under the contract.
Arbitration  A provision in a contract is a form of alternative dispute resolution (ADR). In an Arbitration, the parties use an independent third party arbitrator to settle contractual disputes without going to court.
Assignment When one party to an agreement transfers their contractual obligations and/or benefits of the agreement to another party.
Boilerplate Standard contract provisions using universal legal language. They are usually found at the end of a contract. 
Bona Fide “In Good Faith”
Bona Vacantia Property that is vacant 
Breach When one party to the contract fails to perform their contractual duties (material or partial breach)
Capacity Evaluates the party’s capacity to enter into a contract considering the individual’s age, mental competency, or lack of free will.
Caveat Emptor “Buyer Beware”
Compensatory Damages The “Actual Damages” extend to the non-breaching party’s loss because of the breach. General damages are the most prevalent type of damages awarded in breach of contract claims.
Conditions Provisions in an agreement that specify what will happen in response to a particular circumstance. If a condition in a contract is broken, the contract has been breached.
Conditions Precedent Events that must take place BEFORE a party to an agreement is required to perform or uphold their end of the bargain. (ex. A party agrees to build a deck if the owner of the house supplies the wood. Until the wood is provided, the other party is not required or will be able to build the deck.
Confidentiality  An agreement between the parties to protect privileged information that has to be disclosed to another party. 
Consequential Damages  “Special damages” cover the non-breaching party’s loss as a result of special circumstances which the breaching party was already aware of when the contract was formed.
Consideration  The incentive or value to perform. (Quid Pro Quo). The parties must exchange something beneficial and valuable to the other. This is the third required element of an enforceable contract.
Counterparts A general contract provision that provides documents signed in counterparts (separately), each of which will be considered an original, but together, will be deemed to be the same agreement. A signed copy of a contract delivered by facsimile, email, or other means of electronic transmission shall be regarded to have the same legal effect as delivery of an original signed copy of a contract.  
Damages An award for a breach of contract (ex. monetary, punitive, restitution, recession, injunction, specific performance, etc.)
De Facto “In Fact”
Deliverables Tangible items that the contractor or supplier is required to furnish under the contract. It may include finished works, projects, plans, goods, or any other related documentation under the contract. 
De Novo “Start Afresh”
Dispute Resolution  A contract provision that sets forth the process to resolve disputes. This includes alternative dispute resolutions (ADR), such as arbitration and mediation.
Electronic Signatures  The contract or any related documents in connection with an agreement are signed when a party’s signature is delivered electronically. These signatures must be treated in all respects as having the same force and effect as original signatures.
Employment Agreement A formal written agreement between an employer and an employee.
Enforceability  Ensures the promise between the parties is upheld. It allows for a variety of remedies if one or more of the parties breach the contract.
Entire Agreement A boilerplate term that protects the parties by expressing the contract represents the parties’ sole and entire agreement.
Ex Parte “On Behalf Of”
Express Terms Terms actually stated in the agreement.
Force Majeure  A general contract provision that excuses a party from not performing their duties under the contract due to unforeseen circumstances that are out of their reasonable control (“Acts of God”).
Fraud & Duress A defense to a breach of contract action whereby the defendant claims that the plaintiff misrepresented or concealed the truth of a material fact which induced them to enter into the contract. The defense of duress means that a party was threatened to sign the contract and deprived of their own free will.
Governing Law Sets the State where the contract shall be governed by the laws of that respective state without regard to the conflict of law provisions of that state. 
Guaranty One party guarantees a second party’s obligation to a third party. They are liable for payment or performance if another individual fails to fulfill their contractual duties as specified in the agreement. 
Habitable Condition is fit and suitable for tenancy and free of any defects, which may endanger the health and safety of its occupants.
Implied Terms Terms that are implied by law, customs, and standard practices without expressly being mentioned by the parties.
Indemnity  A promise by an outside third party to pay outstanding debt. Additionally, an obligation to repay any loss caused by another party to the agreement. This is different from a guarantee because the party who is owed the money is allowed to collect from the indemnifier without first going after the debtor.
Indemnification or Release A general contract provision that allows a party to seek reimbursement they are forced to pay to a third party as a result of any injuries or property loss caused by another’s actions.
Independent Contractor  An independent contractor, or “freelancer” performs work or services to another individual or entity as a nonemployee.
Injunction A remedy that immediately stops further action from being taken.
Intent Each party’s intention to form a contractual relationship.
Interalia  “Among Other Things”
Intellectual Property Provison Details who owns the intellectual property rights from the work product
Jurisdiction Sets the state or country whose laws shall govern the contract where any and all legal action must take place
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Landlord The owner of a leased property 
Legal Duty The obligation of others to act under the law
Legal Fees A general contract provision that designates which party will be entitled to recover attorneys’ fees, legal fees, or other related costs associated with disputes or legal action. 
Lease A contract by which a landlord transfers exclusive use and possession of the property and in exchange for its use sets a specified rent amount for a set duration of time after which the rented property transfers back to the landlord.
Liability  A party’s liability that is answerable to a legal obligation.
Limited Liability  A general contract provision that permits the parties to reduce (limit) or eliminate the possibility for damages, including consequential, direct, incidental, special or indirect liability.  A limitation clause can also incorporate a cap on damages. 
Mala Fides “In Bad Faith”
Meeting of the Minds A legal term-of-art where the parties show they have a clear and mutual understanding of their respective contractual obligations.
Mediation  A type of alternative dispute resolution (ADR) to settle a legal dispute through active participation of a third party neutral mediator who works to resolve conflict and assist the parties to agree on a fair result.
Misrepresentation  One party asserts a deceitful statement of fact to the other party which the other party relies on.
Monetary Damages Damages that can be recovered by the plaintiff in the amount they would have received had the contract been completely performed, including any lost profits.
Mutual Mistake A defense to a breach of contract action that requires the defendant to prove that both parties made a mutual mistake related to the subject matter of the contract, which would ultimately make the agreement invalid.
Offer An agreement to do something or a promise not to do something. The offer is the first required element of a contract. 
Offeree  The person an offer is extended to
Offeror  The person extending  an offer
Parties The individuals or entities responsible under the terms of the agreement
Partnership Two or more organizations or individuals join to form and carry on a business.
Pro Rata “For the Rate”
Pro Tanto “For so Much”
Promise A future commitment created for a contract to exist.
Promisee The person a promise is extended to
Promisor  The person offering a promise
Punitive Damages “Exemplary Damages” that are implemented to deter or punish the defendant for their behavior. However, punitive damages are rarely awarded in contract claims. These types of damages are awarded on top of compensatory damages.
Quid Pro Quo “Something for Something”
Recitals  The “preamble” of a contract that provides basic background information and expresses the overall purpose of the agreement.
Remedies Court-ordered actions or payments as a settlement of a dispute
Rescind The cancellation of a contract
Restitution  Acts to restore the non-breaching party to the exact position they were in before entering into the contract. 
Restrictive Covenant  Also known as a non-compete, prohibits the parties from working with competitors during the agreement and a specific time after the end of the business or employment relationship.
Scope of Services Details each party’s responsibilities and expectations.
Severability A general provision that holds the rest of the contract in full force in the event a court deems one or more of its provisions unenforceable, void, or unconstitutional.
Specific Performance When monetary damages are not adequate enough to compensate the plaintiff, the court may require the violating party to perform their obligations under the agreement.
Statute of Frauds The legal requirement for certain types of contracts to be in writing (memorialized). A common mnemonic is MY LEGS

  • – Marriage (including any promise made in connection within the marriage)
  • Y– Year (contracts that cannot be finished in less than one year) 
  • – Land (any transaction dealing with the sale of land)
  • – Executor’s Agreements 
  • – Goods (the sale of goods over $500)
  • S – Surety (third-party’s responsibility of debts, “co-sign”)
Statute of Limitations  The time allotted for a person to bring legal action in a court of law. Statute of Limitations (SOL) vary from state to state and claim to claim. 
Sublease A lease that is provided by a tenant of part or all of the rented property to another tenant for a shorter period of time and the original lease.
Tenant  A party’s temporary occupancy or possession of property that belongs to a landlord.
Termination A general contract provision that spells out what causes the contract to end (expiration of time or “for cause.”
Time is of the Essence  A legal term-of-art reiterating that a certain time, date, or deadline is vital and mandatory under the agreement. 
Unconscionable  The terms of the agreement are so egregious and unfair that it “shocks the conscious.” 
Uniform Commercial Code (UCC) Anything relating to the sale of goods is governed by the Uniform Commercial Code (UCC)
Void A contract that cannot be completed or perform at all. It is void from the starts (ab initio). Contracts are commonly void where the contract is based on a mistake, it is illegal, or one party lacks the capacity to enter into a contract. 
Waiver A general contract provision that governs how a party to the agreement can waive a right and, in turn, what happens when a party to the contract waives that right. 
Warranties A promise that is not a condition of the agreement. A warranty represents that a product is free of defects, and the company agrees to fix any covered defect for a specified duration of time in the future (ex. 1-year warranty or lifetime warranty). A warranty for a service agreement holds that the service provider agrees to meet its obligations in a timely and satisfactory workmanlike manner generally accepted within the industry.


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