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Contract glossary
Plain-language definitions of the legal terms you'll find in contracts. Search by keyword or browse A-Z.
Showing 121-144 of 263 terms
Milestones
Milestones are checkpoints in a contract that trigger something, usually a payment, a review, or the next phase of work. They tie money to progress instead of time, so nobody's paying upfront for work that might never get done.
Mitigation of Damages
The legal duty of an injured party to take reasonable steps to minimize their losses after a breach. You can't just sit back, watch the damages pile up, and expect the other party to pay for all of it.
Moral Rights
Rights that protect the personal and reputational interests of a creator, separate from copyright ownership. They include the right to be credited as the author (attribution) and the right to prevent modifications that harm the creator's reputation (integrity).
Mutual Assent
Mutual assent, or 'meeting of the minds', means both parties understand and agree to the same terms. No contract exists without it. If you thought you were buying 100 units and they thought they were selling 10, there's no mutual assent.
Mutual NDA vs One-Way NDA
A mutual NDA (bilateral) binds both parties to keep each other's information confidential, both sides share and both sides protect. A one-way NDA (unilateral) only protects one party's information while the other party receives it. The right choice depends on whether information flows in one direction or both.
Mutual Release
A legal agreement where both parties simultaneously release each other from all claims, obligations, and liabilities arising from their prior relationship or contract. It's a clean break, both sides agree to walk away with no further ability to sue each other over the covered matters.
NDA (Non-Disclosure Agreement)
An NDA is a contract that says 'keep this secret.' You share confidential information, and the other party promises not to share it, use it for unauthorized purposes, or let it leak. Mutual NDAs protect both sides. One-way NDAs protect just one.
Net Terms
Payment terms that specify how many days the buyer has to pay an invoice after receiving it. 'Net 30' means payment is due within 30 days. Some terms include early payment discounts, '2/10 Net 30' means a 2% discount if paid within 10 days, otherwise the full amount is due in 30.
Non-Circumvention
A clause that prevents one party from bypassing the other to deal directly with their contacts, clients, or sources. It protects the party who makes introductions from being cut out of the deal.
Non-Compete Clause
A non-compete clause stops you from working for a competitor or starting a competing business for a set time after the contract ends. They're controversial, increasingly restricted by law, and, depending on where you live, might not be enforceable at all.
Non-Disparagement
A clause that prohibits one or both parties from making negative or damaging statements about the other. Common in settlement agreements, employment contracts, and partnership dissolution agreements.
Non-Solicitation
A non-solicitation clause stops you from poaching your former employer's clients, customers, or employees for a set period after you leave. It's narrower than a non-compete, you can work wherever you want, you just can't take people with you.
Notarization
The process of having a notary public verify the identity of the person signing a document and witness the signature. Notarization doesn't validate the content of a document, it confirms that the person who signed it is who they claim to be.
Novation
Novation replaces one contract (or one party) with a completely new one. The old contract dies. The new one takes its place. Unlike assignment, which transfers rights while keeping the original contract alive, novation wipes the slate clean.
Offer and Acceptance
The two-step foundation of any contract. One party makes an offer (a clear proposal with specific terms), and the other party accepts it (agrees to those exact terms). A valid contract requires both. A counteroffer kills the original offer.
Pari Passu
A Latin term meaning 'on equal footing.' In contracts, it means two or more parties or obligations rank equally, no one has priority over the others. Common in debt agreements and investment term sheets.
Parol Evidence Rule
A rule that prevents parties from using prior or contemporaneous oral agreements to contradict the terms of a written contract that's intended to be the final agreement. If it's not in the written contract, it generally doesn't count.
Payment Terms
The conditions under which payment is due, including amount, timing, method, and consequences for late payment. Common formats include Net 30 (payment due within 30 days of invoice), milestone-based payments, and payment on completion. Clear payment terms prevent the most common source of contract disputes.
Penalty Clause
A contract provision that imposes a punishment, usually a large payment, for breach, where the amount isn't related to the actual damages suffered. In the U.S. and England, penalty clauses are generally unenforceable. Courts prefer liquidated damages (pre-agreed reasonable estimates of actual loss).
Performance Bond
A guarantee, typically issued by a surety company or bank, that a contractor will complete a project according to the contract terms. If the contractor defaults, the bond pays for completion. Common in construction and government contracts.
Personal Guarantee
A legally binding promise where an individual agrees to be personally responsible for a business's debt or obligation if the business can't pay. It pierces the corporate veil voluntarily, you're putting your personal assets (home, savings, car) on the line to back your company's promise.
Power of Attorney
A legal document that authorizes someone (the agent or attorney-in-fact) to act on another person's (the principal's) behalf. Powers of attorney can be broad (general) or limited to specific actions. They can be effective immediately or triggered only if the principal becomes incapacitated (springing).
Privity
The legal relationship between parties to a contract. Only parties with privity, those who signed the contract, can enforce it or be bound by it. Third parties generally can't sue or be sued under a contract they weren't part of.
Pro Rata
A Latin term meaning 'in proportion.' In contracts, it describes how something, money, rights, obligations, is divided proportionally among parties based on their share, ownership percentage, or time period.
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