How to Interpret a Contract (Contract Legalese Translator)

Here are some common terms you may find in an agreement, and brief definitions of each. Be sure to check out our full Guide to the Law on Contracts.

See more general legal terms at our Glossary of Legal Terms.

Act of God: An unexpected and uncontrollable natural event or force, such as a flood or earthquake, that causes unavoidable damage or prevents fulfillment of contractual obligations. Also known as force majeure.

Agent: A person or entity authorized to act on behalf of another person or entity, known as the principal, in legal or business matters.

Amendment: A formal change or modification to the terms of an existing contract.

Arbitration: A method of resolving disputes outside of court, where a neutral third party, known as an arbitrator, hears the arguments from both sides and makes a binding decision. See more at our Guide to Arbitration and Alternative Dispute Resolution.

Assignment: The transfer of rights, interests, or obligations from one party to another under a contract or agreement.

Binding: Creating a legally enforceable obligation or agreement.

Breach: The failure to fulfill or comply with the terms or conditions of a contract, resulting in a violation of the agreement.

Clause: A specific provision or section within a contract or legal document that outlines particular rights, obligations, or conditions.

Consideration: Something of value, typically money or a promise, exchanged between parties to a contract as a basis for entering into the agreement.

Covenant: A legally binding promise or agreement between parties that sets out specific rights and obligations.

Dispute resolution: The process for resolving disagreements or conflicts between the parties. See our Guide to Exercising and Enforcing Your Legal Rights and Resolving Disputes in the U.S.

Force majeure: A clause in a contract that excuses or relieves the parties from performing their obligations due to unforeseen and uncontrollable events, often referred to as “acts of God” or natural disasters.

Governing law: The laws of a particular jurisdiction that will be applied to interpret and enforce the contract.

Indemnification: The act of compensating or protecting one party against losses, damages, or liabilities incurred by another party.

Injunction: A court order that prohibits (enjoins) a person or entity from engaging in a particular action or compels them to take a specific action to prevent harm or enforce rights.

Integration clause: Also known as a “merger clause” or “Entire Agreement,” it is a provision in a contract that states that the written agreement contains the entire understanding between the parties, superseding any prior oral or written agreements.

Jurisdiction: The particular court or location where a dispute may be heard and decided. See also governing law.

Liability: Legal responsibility or obligation for one’s actions or debts, often involving the requirement to compensate or make restitution for harm caused.

Limitation of liability: A contractual provision that sets a cap or restriction on the amount of damages or losses for which a party can be held responsible.

Remedy: The course of action or relief available to address a breach or violation of contract.

Representations and warranties: see Warranties and representations, below.

Severability: The ability of a contract to remain partially enforceable even if certain provisions are found to be invalid or unenforceable.

Survival: The continuation of certain rights, obligations, or provisions beyond the termination or expiration of a contract.

Time is of the essence: A phrase used in contracts to emphasize that punctual or timely performance is crucial and failure to meet specified deadlines may result in a breach of the agreement.

Venue: The geographical location where a legal case will be heard or decided.

Waiver: The intentional relinquishment or abandonment of a right or claim, typically done through an explicit statement or action. May also refer to allowing the other party to a contract to get out of their obligations, whether just once, or into the future as well.

Warranties and representations: Statements or assurances made by one party to another regarding the truthfulness, accuracy, or condition of certain facts or circumstances, which may become legally enforceable promises or guarantees.

Work made for hire: A legal doctrine that determines the ownership of intellectual property, stating that work created by an employee or commissioned under certain circumstances is considered the property of the employer or person who commissioned it. Also known as “work for hire.” See more at our Guide to Copyright Law.