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.