Free Tool

Contract glossary

Plain-language definitions of the legal terms you'll find in contracts. Search by keyword or browse A-Z.

Showing 217-240 of 263 terms

Confidential Information

Confidential information is any data, knowledge, or material that a party discloses under a duty of secrecy. Contracts define it explicitly, covering documents, trade secrets, financial records, customer lists, business plans, and technical know-how, so both sides know exactly what must be protected and what falls outside the obligation.

Term and Termination

A 'Term and Termination' clause defines how long a contract lasts (its term) and the conditions under which either party can end it early (termination). It covers the initial duration, renewal options, notice periods for ending the relationship, and what obligations survive after the contract ends.

Memorandum of Understanding (MOU)

A formal document outlining the terms and details of an agreement between two or more parties before a binding contract is finalized. An MOU signals mutual intent, both sides agree on the broad strokes, but the document usually isn't legally enforceable unless it contains specific binding language.

Purchase Agreement

A legally binding contract between a buyer and seller that sets out the terms and conditions for the sale of goods, assets, or property. It specifies what is being sold, the price, payment terms, delivery conditions, warranties, and what happens if either party fails to perform.

Settlement Agreement

A legally binding contract that resolves a dispute between parties without going to trial. Both sides agree to specific terms, typically a payment, action, or concession, in exchange for releasing claims against each other. Once signed, the dispute is considered resolved and neither party can sue over the same issue.

Term Sheet

A non-binding document that outlines the key terms and conditions of a proposed deal before a definitive agreement is drafted. Term sheets are common in investment, lending, and business acquisition contexts, they establish the framework for negotiation without committing either party to the transaction.

Vesting Schedule

A timeline that determines when an individual earns full ownership of an asset, typically stock options, equity grants, or retirement contributions. Until vesting occurs, the asset belongs to the company. Vesting schedules incentivize long-term commitment by releasing ownership gradually over time.

Grace Period

A specified window of time after a payment or obligation is due during which the obligated party can still perform without penalty or being considered in default. Grace periods are a built-in cushion, they acknowledge that real-world timing isn't always perfect and prevent technical defaults from triggering serious consequences.

Notice Period

The amount of advance warning one party must give before taking a specified action, typically terminating a contract, ending employment, or exercising a right. Notice periods protect both parties by ensuring neither is blindsided, allowing time to prepare for transition, find replacements, or wind down obligations.

Right of First Offer

A contractual right requiring one party to offer an asset or opportunity to the rights holder before offering it to third parties. Unlike a right of first refusal (which lets you match a third-party offer), a right of first offer gives you the first chance to make a bid, before anyone else even sees the opportunity.

Merger Clause

A contract provision stating that the written agreement represents the complete and final understanding between the parties, superseding all prior negotiations, discussions, and agreements, whether written or verbal. Also called an 'integration clause' or 'entire agreement clause,' it prevents either party from claiming the deal includes promises made outside the four corners of the document.

Option to Renew

A contractual right (not obligation) that allows one party to extend the agreement for an additional term under specified conditions. Unlike automatic renewal, an option to renew requires the holder to actively exercise the option, typically by providing written notice before a deadline. The renewal terms (price, duration, conditions) are usually predetermined in the original contract.

Waiver of Jury Trial

A contractual provision in which the parties voluntarily give up their right to have disputes decided by a jury, agreeing instead to have a judge (bench trial) resolve any litigation arising from the contract. Jury waivers are common in commercial agreements because bench trials are generally faster, more predictable, and less expensive.

Good Standing

A legal status confirming that a business entity (corporation, LLC, partnership) has met all state requirements, filed annual reports, paid franchise taxes, maintained a registered agent, and is authorized to conduct business. A certificate of good standing (also called a certificate of existence or certificate of status) is the official proof.

Preliminary Agreement

An agreement reached during negotiations that establishes certain terms while acknowledging that a final, comprehensive contract has not yet been executed. Preliminary agreements fall on a spectrum from non-binding expressions of intent to partially binding commitments that obligate the parties to negotiate in good faith toward a definitive agreement.

Letter Agreement

A binding contract formatted as a business letter rather than a traditional legal document. One party writes a letter outlining the terms, and the other party signs it to indicate acceptance. Despite the informal format, a properly drafted letter agreement is just as legally enforceable as a multi-page contract, it simply strips away the legalese and gets to the point.

Cease and Desist

A formal demand, usually in letter form, ordering someone to stop (cease) a specific activity and not resume it (desist). While not a court order itself, a cease and desist letter signals that legal action will follow if the behavior continues. Think of it as a final warning before a lawsuit.

Negligence

The failure to exercise the level of care that a reasonably prudent person or business would exercise in similar circumstances. In contract law, negligence matters because it's often the standard used to determine liability when something goes wrong, did the party act carelessly, or did they meet a reasonable standard of care?

Act of God

An event caused by natural forces beyond anyone's control, earthquakes, hurricanes, floods, volcanic eruptions, or severe storms, that could not have been predicted or prevented. In contract law, an Act of God typically excuses a party from performing their obligations if the event makes performance impossible or impracticable.

Tort

A wrongful act, other than a breach of contract, that causes harm to someone and creates a legal right to sue for compensation. Torts include negligence, fraud, defamation, trespass, and intentional interference with business relationships. While contracts deal with broken promises, tort law deals with broken duties that exist independent of any agreement.

Affidavit

A written statement of facts made under oath and signed before a notary public or other authorized official. An affidavit is a legal declaration that the statements within it are true to the best of the signer's knowledge. Lying in an affidavit constitutes perjury, a criminal offense.

Right to Cure

A contractual provision giving a party that has breached or defaulted the opportunity to fix (cure) the problem within a specified timeframe before the other party can terminate the contract or pursue remedies. It's a second chance built into the agreement, a recognition that not every breach should be a deal-breaker.

Surety

A party that guarantees the performance or obligations of another party. If the principal (the party with the obligation) fails to deliver, the surety steps in to fulfill the obligation or compensate the aggrieved party. It's a three-way relationship: the principal (who owes the duty), the obligee (who is owed the duty), and the surety (who guarantees the duty will be met).

Need a contract with these terms?

Create a professional contract in minutes with all the essential clauses - no legal expertise needed.

Create your contract free

No credit card required