Learn more contract lingo

Breach of contract 

When somebody doesn't do what they said they would in the contract or breaks one of the agreed-upon rules.

Choice of law 

The law that’ll be used to resolve any disagreements about the contract. This is written down in a section of the contract called "Choice of Law". 

Employee vs contractor 

An employee is someone who works for another company and therefore has to follow their rules and guidelines — they get benefits and have less freedom in some regards. A contractor is someone who works for themselves, they set their own hours and get no benefits — they're responsible for processing and paying their own taxes, finding health insurance (in the US), etc.

Exclusivity terms

Any limitations on who the contractor can work with or sell their services to during the term of the contract. 

If you sign an exclusivity agreement, you agree not to work for any other company for a certain amount of time without getting permission from the company you signed the agreement with.

Force majeure 

An unforeseen event that interrupts or prevents either party from fulfilling their obligations under the contract, such as a natural disaster or war.

Indemnification

Indemnification is when one party agrees to pay another party if they lose money because of the first party's actions. 

Jurisdiction

The jurisdiction section of a contract tells which court will have the power to hear any disputes about the contract.

Limitation

Any restrictions on how much money one party can sue for in the event of a breach of contract by the other party.

Liquidated damages

Liquidated damages are a set amount of money that’s agreed upon by both parties in a contract that’ll be paid if one party breaches the contract. This is meant to be a form of financial protection for the non-breaching party in the case of damages that are difficult to calculate. 

Misclassification

Labor laws vary from state to state, but there are some general rules that apply across the country. Independent contractors are usually considered to be self-employed business owners and aren't protected by most labor laws. Employees are considered workers who are under the control of their employer and are entitled to certain benefits and protection.

 Mitigation

Mitigation means acting to lessen the harm caused by a breach of contract. It usually refers to efforts made by one party to lessen the damage caused by another party's breach of contract. This might include attempting to find a replacement supplier or worker or refunding money to customers.

Name and likeness

The name of the contracting parties, as well as any other party involved in the contract, likeness means any representation of a person, including their name, photograph, or signature.

When you use someone's picture or likeness in advertising, you need to get their permission first. This is called using someone's likeness. You can't use someone's likeness without their permission.

Non-solicitation

Non-solicitation is when one party agrees not to try and convince current employees of another company to leave their job and come work for them instead. 

Special Damages

Extra money a party can get if something bad happens because of a breach of contract. 

Warranty

A warranty is a promise made by one party about the product or service they are providing. In a warranty section of a contract, that party promises to do something if something goes wrong with the product or service.

If any of these terms are ones you come across often or struggle to remember their meaning, feel free to define them in your workbook using your own words.