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Contract glossary
Plain-language definitions of the legal terms you'll find in contracts. Search by keyword or browse A-Z.
Showing 25-48 of 263 terms
Cancellation
Ending a contract and wiping out any remaining obligations going forward. Unlike termination (which may preserve some rights and obligations), cancellation typically aims to undo the deal as if it never happened, though past obligations may still apply.
Capacity
Capacity means you're legally able to enter into a contract. Minors (under 18 in most states), people who are severely intoxicated, and individuals with certain mental incapacities don't have capacity. A contract signed without capacity can be voided.
Cause of Action
A cause of action is your legal reason for suing someone. It's the specific claim you bring, breach of contract, fraud, unjust enrichment, and each one has its own elements you have to prove.
Caveat Emptor
Latin for 'let the buyer beware.' It means the buyer is responsible for checking the quality and condition of goods before purchasing. The seller isn't obligated to disclose defects unless required by law or contract.
Certificate of Insurance
A document from an insurance company that proves a person or business has active insurance coverage. It shows the type of coverage, policy limits, and effective dates, but it's not the actual policy.
Change Order
A written agreement to modify the original scope, price, or timeline of a contract. Change orders document what's changing, why, and how it affects the cost or schedule. They become part of the original contract once signed.
Choice of Law
A contract clause that specifies which jurisdiction's laws govern the agreement. If you're in New York and your client is in Texas, the choice of law clause determines whether New York law or Texas law applies if there's a dispute.
Clause
A clause is one specific section of a contract that deals with one specific thing. Payment terms, confidentiality, termination rights, each of these is its own clause. Think of clauses as the building blocks of a contract.
Clawback
A provision that allows one party to reclaim money or benefits already paid out, usually when certain conditions aren't met or wrongdoing is discovered. The money was yours, until it wasn't.
Collateral
An asset pledged by a borrower to secure a loan or obligation. If you don't pay, the lender can seize the collateral. Your house secures your mortgage; your car secures your auto loan. Same principle in business contracts.
Commencement Date
The date when a contract's obligations officially begin. This might be the day you sign, the day after a condition is met, or a specific future date. It's not always the same as the date you signed the document.
Commercially Reasonable
A standard that means what a sensible business person would do in the same situation, not the absolute best possible effort, but a fair and honest effort given normal business constraints. It's the 'B+ effort' standard, not the 'A+ at any cost' standard.
Condition Precedent
An event or action that must happen before a contract obligation kicks in. Until the condition is met, the party doesn't have to perform. Think of it as a trigger, no trigger, no obligation.
Condition Subsequent
An event that, if it occurs, terminates or modifies an existing obligation. Unlike a condition precedent (which activates an obligation), a condition subsequent turns one off. The obligation is already active, the condition subsequent can shut it down.
Confidentiality Agreement
A confidentiality agreement, also called an NDA, is a contract where one or both parties promise not to share certain information. Mutual NDAs go both ways. One-way NDAs protect just one side's secrets.
Confidentiality Period
The length of time that confidentiality obligations remain in effect after a contract ends. Once the period expires, the receiving party is no longer bound to keep the information secret. Typical durations range from 2 to 5 years, though trade secrets may be protected indefinitely.
Confidentiality Obligation
A contractual duty requiring a party to keep specific information secret and use it only for authorized purposes. Unlike a standalone NDA, a confidentiality obligation is typically a clause embedded within a larger contract, services agreements, employment contracts, or partnership deals. It defines what's confidential, what you can do with it, and how long the duty lasts.
Conflict of Interest
A situation where someone's personal interests or other obligations could interfere with their ability to act in your best interest. In contracts, a conflict of interest clause requires parties to disclose any relationships, financial interests, or competing obligations that could compromise the deal.
Consent
Voluntary agreement to the terms of a contract, given freely and with an understanding of what you're agreeing to. Without genuine consent, a contract can be voided, this includes situations involving fraud, duress, undue influence, or misrepresentation.
Consideration
Consideration is the 'what's in it for me?' of contract law. It's something of value that each party gives up, money, services, a promise, even a promise not to do something. Without it, you don't have a contract.
Constructive Notice
Legal notice that you're presumed to have, even if you didn't actually receive it, because the information was publicly available or legally filed. 'I didn't know' isn't a defense when the information was sitting in a public registry.
Contingency
A condition or event that must occur (or not occur) before a contract becomes binding or before a party is required to perform. It's an 'if/then' in the contract, if this happens, then we move forward. If it doesn't, we can walk away.
Contra Proferentem
A legal rule that says ambiguous contract language is interpreted against the party who wrote it. If you drafted a confusing clause and there's a dispute about what it means, the court will likely side with the other party's interpretation.
Contractual Obligation
A legally enforceable duty created by a contract. When you sign a contract, every 'shall,' 'must,' and 'agrees to' creates a contractual obligation, a promise the law will hold you to. Fail to perform, and the other party can sue for breach. Obligations can be mutual (both parties owe each other) or one-sided.
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