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Contract glossary
Contract terms explained in plain English, with notes where Scots law differs from the law of England and Wales.
A B C D E F G H I J L M N P R S T U V W
A
- AgreementIn a contract, “Agreement” is usually a defined term meaning the whole document,…
- ArbitrationArbitration is a private way of resolving disputes in which an independent arbitrator,…
- AssignmentAssignment is the transfer of contractual rights, such as the right to be paid, from…
B
- BoilerplateBoilerplate means the standard clauses found at the end of most contracts — notices,…
- Breach of contractA breach of contract happens when a party fails to do what it promised, does it late or…
- Break clauseA break clause lets one or both parties end a lease or contract early, on a set date or…
- Business dayA business day is usually defined as a day other than a Saturday, Sunday or public…
C
- Change of controlA change of control clause gives a party rights — often to terminate — if the other…
- Condition precedentA condition precedent is something that must happen before a contract, or a particular…
- Confidential informationConfidential information is information that is not public and has been shared on the…
- Consequential lossConsequential loss is loss that does not flow directly and naturally from a breach but…
- ConsiderationConsideration is what each party gives in return for the other's promise — usually…
- CounterpartsA counterparts clause allows each party to sign a separate copy of the contract, with…
D
- DamagesDamages are money awarded to compensate for loss caused by a breach of contract. The…
- DeedA deed is a document executed with extra formality: in England and Wales it must say it…
- DefinitionsThe definitions clause sets out the meaning of capitalised terms used throughout the…
- DelictDelict is the Scots law equivalent of tort: civil wrongs, such as negligence, that give…
- Dispute resolutionA dispute resolution clause sets out how disputes will be resolved — for example…
E
- Employment statusEmployment status decides whether someone is an employee, a worker or self-employed,…
- Entire agreementAn entire agreement clause states that the written contract contains everything the…
- ExclusivityAn exclusivity clause prevents a party from dealing with others — for example a…
- ExecutionExecution means signing a document in the way the law requires so that it is binding —…
F
- Force majeureA force majeure clause excuses a party from performing when events beyond its control —…
- FrustrationA contract is frustrated when an unforeseen event makes performance impossible or…
- Further assuranceA further assurance clause obliges each party to sign any further documents and take…
G
- Good faithEnglish law has no general duty of good faith in commercial contracts, but courts will…
- Governing lawThe governing law clause states which legal system applies to the contract — for…
H
I
- IndemnityAn indemnity is a promise by one party to reimburse the other for specified losses,…
- InjunctionAn injunction is a court order requiring a party to do, or stop doing, something — for…
- Insolvency eventAn insolvency event clause lists the circumstances — administration, liquidation, a…
- Intellectual property rightsIntellectual property rights include copyright, trade marks, designs, patents and…
- InterdictInterdict is a Scottish court order preventing a party from doing something, such as…
- IR35 (off-payroll working)IR35, or the off-payroll working rules, are tax rules that apply where a contractor…
J
L
- LicenceA licence is permission to do something that would otherwise be unlawful — to use…
- Limitation of liabilityA limitation of liability clause caps how much one party can recover from the other and…
- Limitation periodA limitation period is the time within which a claim must be brought. In England and…
- Liquidated damagesLiquidated damages are a fixed sum payable for a specific breach, such as delay, agreed…
M
- Material breachA material breach is a breach serious enough to justify termination. Contracts often…
- MediationMediation is a voluntary, confidential process in which a neutral mediator helps the…
- MisrepresentationA misrepresentation is a false statement of fact that induces someone to enter a…
N
- Non-compete clauseA non-compete clause stops a party from competing with the other for a period after the…
- Non-disclosure agreement (NDA)A non-disclosure agreement protects confidential information shared between parties,…
- Non-solicitation clauseA non-solicitation clause stops one party from poaching the other's staff or customers…
- NoticesA notices clause sets out how formal notices under a contract must be given — by hand,…
- NovationNovation replaces one party to a contract with another, transferring both rights and…
P
- Payment termsPayment terms state how much is paid, when and how — for example within 30 days of a…
- Penalty clauseA penalty clause imposes a payment on breach that is out of all proportion to any…
- Personal guaranteeA personal guarantee is a promise by an individual — often a company director — to pay…
- Probative (self-proving) documentIn Scotland, a document signed by the granter in front of one witness, who adds their…
R
- RecitalsRecitals are the short background statements at the start of a contract, usually…
- RemediesRemedies are what the law gives an innocent party when a contract is breached —…
- RepresentationA representation is a statement of fact made to persuade someone to enter a contract.…
- Restrictive covenantA restrictive covenant limits what a party can do after a relationship ends — for…
- RetentionIn building contracts, a retention is a percentage of each payment held back until…
S
- ScheduleA schedule is a part of a contract, placed after the signatures, that contains detailed…
- Set-offSet-off allows a party to deduct sums owed to it by the other party from what it owes.…
- SeverabilityA severability clause says that if one provision is invalid or unenforceable, the rest…
- Signature blocksSignature blocks are the sections at the end of a contract where each party signs. They…
- Specific performanceSpecific performance is a court order requiring a party to carry out its contractual…
- Statutory interest on late paymentUnder the Late Payment of Commercial Debts (Interest) Act 1998, businesses can claim…
- Sub-contractingSub-contracting is when a party arranges for someone else to perform some of its…
T
- Term and terminationThe term is how long a contract lasts; termination provisions say how it can end early…
- Termination for convenienceA termination for convenience clause lets a party end the contract without any breach…
- Third-party rightsThird-party rights let someone who is not a party to a contract enforce a term that…
- Time of the essenceMaking time “of the essence” means a deadline is so important that missing it entitles…
- TortA tort is a civil wrong, such as negligence, that gives rise to a claim for damages…