Contract Terms Glossary

The legal jargon you'll run into in contracts — explained in plain English. 26 terms.

Arbitration clause

A term requiring disputes to be resolved by a private arbitrator instead of in court — often waiving your right to a jury trial.

At-will employment

The US default where either you or your employer can end the job at any time, with or without cause or notice.

Auto-renewal

A clause that automatically extends a contract for another term unless you cancel within a set notice window.

CAM charges

Common Area Maintenance charges in a commercial lease — your share of upkeep for shared spaces; watch for uncapped or vaguely defined ones.

Class-action waiver

A term giving up your right to join a group lawsuit, forcing you to pursue claims individually.

Confidential Information

The information an NDA protects. A fair definition is specific and includes standard exclusions (public, independently developed, etc.).

DTSA

The federal Defend Trade Secrets Act (2016), which sets a baseline for trade-secret protection and includes whistleblower immunity.

Force majeure

A clause excusing performance when extraordinary events (disasters, war, etc.) make it impossible.

Governing law

The state whose laws interpret the contract. Note: it can’t always override your home state’s non-waivable protections.

Indemnification

A promise to cover the other party’s losses or legal costs from certain claims. Broad indemnities can be expensive.

Injunctive relief

A court order to stop (or compel) an action. Some contracts make you waive the right to contest it.

IP assignment

A transfer of intellectual property ownership. Watch for clauses that assign more than the work actually created for the deal.

Kill fee

Compensation a freelancer receives if a client cancels a project before completion.

Liability cap

A limit on how much one party can owe the other. Caps like "one month of fees" may not cover real losses such as a data breach.

Limitation of liability

The broader clause that caps damages and often excludes indirect or consequential losses.

Non-compete

A restriction on working for competitors after you leave. Void in some states (e.g. California) and limited in many others.

Non-solicitation

A restriction on soliciting a company’s employees or customers after you leave.

Personal guarantee

A promise to be personally responsible for a business’s obligations — common (and risky) in commercial leases.

Residuals clause

An NDA term letting the other side use information retained in memory — effectively allowing reuse of your ideas. High risk.

SAFE

Simple Agreement for Future Equity — an early-stage investment that converts to shares at a future priced round.

Security deposit

Money a landlord holds against damage or unpaid rent. Many states cap the amount and set a return deadline.

Severance

Pay or benefits provided when employment ends, often in exchange for signing a release of claims.

SLA

Service Level Agreement — a vendor’s commitment to uptime or performance, usually with service credits as the remedy.

Statement of Work (SOW)

A document under a master agreement defining a specific project’s scope, deliverables, and fees.

Warranty of habitability

A tenant’s right to a livable home. In most states it can’t be waived, even if the lease tries.

Work-for-hire

Work owned by the hiring party from creation. For freelancers it is NOT automatic — it requires a written agreement and a qualifying category.