Key Business Contract Terms
Part of the Business Contracts Kit For Dummies Cheat Sheet
If you’re dealing with business contracts, you need to be able to speak the language. Some common contract terms you may encounter while doing business are defined in the following list:
Boilerplate: Standard contract terms, usually found at the end of the contract, that are important but that do not reflect the essence of the deal. Examples of boilerplate terms include provisions describing notice, governing law, or payment of attorneys’ fees.
Breach: A claim by one party to a contract that the other party has failed to perform as required under the contract.
Conditions: Provisions in a contract that deal with the certain events happening or not happening. Conditions are like triggers that, when pulled, cause some other part of the contract to come into effect.
Consideration: A benefit or right that the parties to a contract exchange with each other in order to form the contract. Consideration can be a promise to do something (such as a promise to pay money or to lease your office space) or a promise not to do something (a promise not to lease your office space to your neighbor’s biggest competitor), but whatever the parties exchange with each other, each party’s consideration must be something of value to it.
Damages: A type of remedy for a party’s breach of a valid contract. Damages usually involve an award of money to the injured, non-breaching party.
Recitals: Language at the beginning of the contract that describes why the parties are entering into the contract. Recitals are not always legally enforceable, so always repeat significant contract terms in the body of the contract after words such as the parties agree as follows.