Free Tool
Contract glossary
Plain-language definitions of the legal terms you'll find in contracts. Search by keyword or browse A-Z.
Showing 1-24 of 263 terms
Acceleration Clause
A contract provision that makes the entire remaining balance due immediately if certain conditions are triggered, usually a missed payment or other default. In plain English: mess up once, and everything you owe comes due at once.
Accord and Satisfaction
A legal concept where two parties agree to settle an existing obligation with a new agreement (the accord) and then carry it out (the satisfaction). Once the new deal is performed, the original obligation is wiped clean.
Addendum
An addendum is a new document you tack onto an existing contract to add terms that weren't in the original. Both parties sign it, and it becomes part of the deal, no need to rewrite the whole contract.
Adhesion Contract
A take-it-or-leave-it contract drafted entirely by one party with stronger bargaining power, offered to the other party on a non-negotiable basis. Think of the Terms of Service you click 'I agree' to without reading, that's an adhesion contract.
Agency
A legal relationship where one person (the agent) is authorized to act on behalf of another (the principal). The agent's actions can bind the principal to contracts, obligations, and liabilities, even if the principal didn't directly agree to a specific deal.
Amendment
An amendment changes the existing terms of a contract. You're not adding new stuff, you're rewriting what's already there. A pay raise, a shifted deadline, a new pricing structure, those are amendments.
Anti-Dilution
A clause that protects an investor's ownership percentage from being reduced when a company issues new shares at a lower price. In plain English: it keeps early investors from getting screwed when the company raises money at a lower valuation later.
Apparent Authority
When a third party reasonably believes someone has the authority to act on behalf of a business, even if that person doesn't actually have that authority. The business can be bound by the deal if it created the impression that the person was authorized.
Arbitration
Arbitration is private court. Instead of a judge and jury, a neutral arbitrator hears both sides and makes a binding decision. It's usually faster and cheaper than a lawsuit, but you give up your right to appeal.
Assignment
Assignment is when you transfer your rights or obligations under a contract to someone else. You hand off what the contract gives you, or what it requires of you, to a third party.
Assumption of Risk
A legal doctrine where someone knowingly and voluntarily accepts the risks associated with an activity. If you assume the risk, you typically can't sue for injuries or losses that result from those known risks.
Automatic Renewal Clause
A provision that extends a contract for another term unless one party gives notice before the renewal date. Also called an evergreen clause. If you miss the cancellation window, you're locked in for another cycle, whether that's a month, a year, or longer.
Bailment
When you temporarily hand over your property to someone else for a specific purpose, like dropping off your laptop for repair or storing inventory in a warehouse. The person holding your stuff (the bailee) has a duty to take care of it and return it.
Barter Agreement
A contract where parties exchange goods or services directly instead of using money. You design their website; they provide six months of accounting services. No cash changes hands, but the exchange still has real value, and real tax implications.
Bearer
The person who physically holds a document, like a check, bond, or promissory note, that's payable to whoever has it, rather than to a named person. If a check says 'pay to bearer,' anyone holding that check can cash it.
Bilateral Contract
A contract where both parties make promises to each other. You promise to deliver a website; the client promises to pay $5,000. Most business contracts are bilateral, both sides are committing to do something.
Bill of Sale
A document that records the transfer of ownership of goods from a seller to a buyer. It's proof that the sale happened, what was sold, and for how much. Think of it as a receipt on steroids.
Binding Agreement
A contract that is legally enforceable, meaning a court will hold both parties to its terms. For an agreement to be binding, it needs four elements: offer, acceptance, consideration (something of value exchanged), and the intention to create legal relations. A handshake deal between friends might not be binding if there's no intent to be legally bound. A signed contract with clear terms almost always is.
Blue Pencil Doctrine
A legal principle that allows courts to modify or strike out the unenforceable parts of a contract while keeping the rest intact. Instead of throwing out an entire non-compete because it's too broad, the court can narrow it down with a 'blue pencil.'
Boilerplate
Boilerplate clauses are the 'standard' sections at the end of most contracts, governing law, severability, entire agreement, force majeure, notices. They look boring. They're not. These clauses quietly control some of the most important aspects of your deal.
Bona Fide
Latin for 'in good faith', it means genuine, legitimate, and without intent to deceive. A bona fide offer is a real offer, not a fake one. A bona fide purchaser is someone who bought something honestly, not knowing there was a problem with the seller's right to sell it.
Breach of Contract
A breach of contract happens when someone doesn't do what they agreed to do. You hired a designer to deliver logos by March 1, and it's March 15 with nothing in your inbox, that's a breach.
Breach of Warranty
A breach of warranty occurs when a promise or guarantee made in a contract turns out to be false or unfulfilled. Unlike a breach of contract (failing to do something), a breach of warranty means a representation about the state of things, quality, condition, ownership, or compliance, was wrong. The other party can claim damages for the gap between what was promised and what was delivered.
Burden of Proof
The obligation to prove your claims in a dispute. In contract cases, the person claiming a breach usually has the burden of proving it happened. If you can't prove it, you lose, even if the breach actually occurred.
Need a contract with these terms?
Create a professional contract in minutes with all the essential clauses - no legal expertise needed.
Create your contract freeNo credit card required
Why understanding contract terms matters
Contracts are binding legal documents, and the specific language used carries real consequences. Understanding terms like "indemnification," "force majeure," and "severability" helps you know what you're agreeing to before you sign.
This glossary covers the most common terms found in NDAs, freelance contracts, service agreements, leases, and business contracts. Each definition is written in plain language - not legalese.
This glossary is for informational purposes only and does not constitute legal advice.