If you don’t have a legal background, reading a contract can seem like a foreign language. Although a, agreement is written in English, it can seem like jargon for those who are trying to make sense of the wording. 

Before you sign a contract, it is important to understand what you are agreeing to. If you don’t have a trusted attorney available to you, review the following terms that are commonly seen in contracts and used in legal language. 

  • Acceptance. This term refers to the act of a party simply agreeing to another party’s terms. If you are signing a contract, you are accepting the offer and terms of the agreement. If you choose to alter the terms of the deal, then this means you are rejecting the offer and you are providing a counteroffer. 
  • Arbitration. This is where a dispute may occur and it may be necessary to bring in a neutral third party called an arbitrator. This individual will help determine a resolution. There are times where arbitration may be binding which means the parties must follow the arbitrator’s decision. 
  • Breach. If you fail to fulfill the terms of the contract, you are considered to be in breach. For example, if you fail to provide a service or make a full payment, you did not perform the outlined duties as agreed upon.
  • Choice of law and forum. A choice of law clause explains that a contract may dictate the state laws that apply to interpretation as well as enforcement. For example, if California is specified, the law from that jurisdiction will be applied. A choice of forum, on the other hand, is a clause that sets the location for any legal proceedings and mediation. 
  • Date(s). There is no special meaning for this term, however, it is important that you look for descriptive words before the date provided. For example, the start date of the contract indicated in the agreement may be different from the signing date.
  • Force majeure. Sometimes there are events that are beyond control which prevent one or both parties from fulfilling the contract. This clause explains the various situations by which either party can be excused from its obligation to complete the contract. 
  • Indemnification. This clause is also known as a hold harmless provision. This protects parties against any costs or damages that could come from breaching the contract or misconduct by the other party.  Essentially, if you agree to this clause, you will be responsible for your own costs and cannot pursue the other party for reimbursement. 
  • Liquidated damages. This term refers to a pre-set amount of money that needs to be paid in a situation where a party breaches or fails to complete the contract. 
  • Mediation. This is a type of dispute resolution, however, the third party does not dictate how the situation is handled. This mediation will help guide the situation and help you find a solution. 
  • Merger. A merger is where all previous discussions and negotiations are put together into one contract. This could also be called the entire agreement clause.
  • Non-waiver. This clause prevents parties from accidentally waiving their contractual rights through their actions. This ensures that the conditions and terms of the contract can’t be modified just by the actions of the parties. 
  • Offer. An offer is the good or service that the parties have agreed to deliver or exchange.
  • Parties. These are the individuals or businesses that are listed at the beginning as being a “party” to the contract. These parties generally have other titles such as “buyer” or “employee”. 
  • Severability. This clause states that if part or provision of the agreement is thought to be invalid or void by a court decision, rule or statute then the remainder of the contract isn’t affected.  

Overall, it does not take a law degree to review a contract. As long as you understand these top important terms, you will be able to confidently understand what you are agreeing to. However, if you still have questions regarding a contract, you should contact an attorney for assistance. 

If you do not have an attorney, contact us for someone we know and trust.


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