Legal Jargon Buster: 50 Contract Terms Defined in Plain English

Contracts are full of terms that look formal, complicated, or even intimidating. But many of them have precise meanings you can grasp. Below is a reference glossary of **50 common contract terms**, each explained simply so you can read contracts more confidently.

Glossary: 50 Contract Terms You Should Know

1. Indemnify / Indemnification

To promise to compensate someone for losses, damages, or liability—if certain events happen.

2. Hold Harmless

To agree that one party will not be held responsible (liability) under specified conditions.

3. Force Majeure

A clause that frees parties from obligations if extraordinary events (like natural disasters) prevent performance.

4. Severability

A clause stating that if one provision is invalid, the rest of the contract still stands.

5. Material Breach

A serious failure to comply with contractual obligations that undermines the contract’s purpose.

6. Non‑Performance

Failing to perform an obligation (completely or partially), which may or may not constitute a breach.

7. Covenant

A promise or commitment in a contract to do or not do something.

8. Governing Law

The jurisdiction (state or country) whose laws will be used to interpret the contract.

9. Venue / Forum

The specific court or place where disputes under the contract must be litigated.

10. Arbitration

A dispute resolution method where parties submit to an arbitrator or panel instead of court.

11. Consideration

Something of value (money, service, promise) exchanged by parties as the price of the contract.

12. Assignment

Transferring rights or obligations under a contract to someone else.

13. Novation

Replacing a party or obligation in a contract with a new party or new terms, with consent of all parties.

14. Term / Duration

The period during which the contract is in effect.

15. Renewal / Automatic Renewal

When a contract extends or “rolls over” unless one party gives notice to cancel.

16. Termination Clause

A provision that explains how the contract can be ended before its full term.

17. Cure Period

Time given to fix or remedy a breach before the other party may terminate.

18. Confidential Information

Information covered by a confidentiality (non‑disclosure) clause, to be kept secret.

19. Intellectual Property (IP) Rights

Ownership or licensing of copyrights, patents, trademarks under the contract’s scope.

20. License

Permission granted to use something (IP, software) under certain terms.

21. Warranty / Representation

A statement of fact or promise about something (e.g. “We have authority”) that parties rely on.

22. Indemnitor / Indemnitee

The party who indemnifies (pays) and the party who is indemnified (protected).

23. Liquidated Damages

A specified amount agreed in advance for damages in case of breach.

24. Consequential / Indirect Damages

Damages that arise not directly from a contract breach but from its consequences.

25. Limitation of Liability

A clause that caps or limits how much one party can be held liable for under the contract.

26. Exclusions / Carve‑Outs

Specific categories or situations that the liability or indemnity clause excludes.

27. Force Majeure Event

Specific events (e.g., “war, flood, government order”) listed under force majeure clauses.

28. Notice / Notices

A clause that dictates how formal communication or legal messages must be delivered.

29. “As Is” Clause

A statement that property or goods are accepted in their current condition, with no warranties.

30. Entire Agreement / Merger Clause

A clause stating the written contract is the full and final agreement, excluding outside promises.

31. Severability Clause

A clause ensuring that invalid parts do not void the whole contract.

32. Indemnity Trigger

The event (e.g. breach, third-party claim) that activates the indemnity obligation.

33. Dispute Resolution Clause

The clause that indicates how disputes will be handled (arbitration, mediation, court).

34. Assignment Clause

A clause specifying whether rights or obligations may be assigned to third parties.

35. Performance Bond / Guarantee

A security or guarantee ensuring that a party fulfills its obligations.

36. Audit Rights

A clause giving one party the right to inspect documents, books, or performance evidence.

37. Sovereign Immunity / Government Party Clauses

Clauses that adjust standard contract rules when one party is a government or sovereign entity.

38. Payment Terms / Schedule

A clause that dictates when, how, and under what conditions payments are made.

39. Interest / Late Fees

Terms specifying additional charges for late payment.

40. Suspension Clause

A clause allowing temporary suspension of performance due to certain conditions (force majeure etc.).

41. Notice to Cure / Remedial Right

Clause giving breaching party the right and timeframe to fix the issue before penalty.

42. Mutual Indemnification

A clause where both parties indemnify each other under specified conditions.

43. Successors & Assigns

Clause specifying that rights and obligations apply to successors or permitted assigns.

44. Waiver Clause

A clause stating that failure to enforce a provision doesn’t waive future enforcement rights.

45. Survival Clause

Specifies which parts of the contract (e.g. confidentiality, indemnity) survive termination.

46. Payment Assurance / Escrow

A clause requiring funds or assets to be held in escrow or assured as security.

47. Binding Effect

Clause stating the contract binds parties, heirs, and successors.

48. Confidentiality / NDA Clause

Clause that limits disclosure or use of certain information.

49. Liquidated Damages / Penalty

Pre-set damages in event of breach (if valid under law).

50. Force Majeure Notice Requirement

A clause requiring prompt notice from one party when invoking a force majeure event.

Conclusion

These 50 contract terms cover some of the most common—and most confusing—does in agreements. Use this glossary as a reference when reading, negotiating, or drafting contracts. If you want help interpreting any of these in your contract, just upload it and I’ll walk you through what it means for you.