Contracts vary in their structure, complexity and goals, but they can safely be defined as legally binding agreements between two or more parties made voluntarily. They are frequently multi-layered and subject to endless back and forth negotiations before they are finally executed, but they share a similar language that helps streamline their creation. It is important to always read and understand exactly what is expected of you before signing a contract, but with a handy glossary of basic contracting terms, you can get know at a glance the terms you’ll see more than once during the contracting process.
Agent: An Agent is a person who agrees to act on behalf of another, known as a principal, during the contracting process. This person, or Agent, is authorized to legally bind the principal and negotiate the Terms & Conditions of a contract on the principal’s behalf.
Breach of Contract: A Breach of Contract is the failure by one party to abide by the Terms & Conditions of an executed contract, thereby potentially voiding the entire contract. There can be serious legal ramifications associated with a Breach of Contract.
Consideration: The Consideration in a contract is the “quid pro quo” of the agreement. In other words, it is the price agreed to by both parties, whether in monetary terms or anything considered of value to both parties. It is a contract requirement, and usually the reason parties come together to negotiate a contract in the first place.
Terms & Conditions: The Terms and Conditions of a contract are the requirements that all parties to the contract must agree to in order to make it binding. Some Terms and Conditions are general and common to all contracts, and some are specific to each agreement. Contract Terms & Conditions include the identities of the parties, important dates, and payment terms.
By understanding the language of contracting, all parties involved can be active participants in the negotiation process. It makes the process less daunting, and more interactive, especially when using contract management software. Knowledge is power in contracting.