Legal language glossary

Acknowledgement of service

A form filed with the court to confirm that a defendant has received court proceedings. Filing it does not mean the defendant agrees with the claim — it just starts the clock on their formal response deadline.

Arbitration

A private alternative to court proceedings where the dispute is decided by one or more arbitrators rather than a judge. The outcome is an award, which is usually final and binding with very limited grounds for appeal. Institutional arbitration (ICC, LCIA, AAA) can cost tens of thousands of pounds in filing and administrative fees before a hearing date is set.

See also: Dispute resolution, Mediation

Assignment

The transfer of rights or obligations under a contract to a third party. Most contracts prohibit assignment without the other side's written consent. An assignment clause in a technology agreement can determine who owns the software, data, or IP if either business is sold or restructured.

See also: Change of control, Novation

Boilerplate

Standard legal clauses that appear at the end of most commercial contracts — entire agreement, governing law, severability, waiver, notices, counterparts. "Boilerplate" does not mean unimportant: these clauses govern how the rest of the contract is interpreted and enforced, and they are negotiable.

See also: Entire agreement clause, Governing law

Breach

A failure to perform an obligation under the contract. A material breach is serious enough to give the innocent party the right to treat the contract as ended. A minor breach may only give rise to a damages claim, not a right to terminate. What counts as "material" is often disputed, which is why a well-drafted contract defines it.

See also: Cure period, Termination for cause

Change of control

A clause that gives one party rights — usually to terminate or consent — if a majority of shares in the other party changes hands. It is typically triggered by an acquisition, merger, or sometimes a significant funding round. Founders should check whether a fundraise could accidentally trigger a change of control right held by a key customer or supplier.

See also: Assignment

Consequential loss

Losses that do not flow directly from the breach but arise as a consequence of it — lost profits, lost business, reputational damage. Most commercial contracts exclude liability for consequential loss on both sides. A one-sided exclusion that only protects the supplier is a red flag.

See also: Liability cap, Indemnity

Counterparts

A clause confirming that the contract can be signed in separate copies, each of which is equally valid. It means both parties do not need to sign the same physical document. Electronic counterparts clauses confirm that e-signatures are also effective.

Cure period

The window of time a party in breach has to fix the problem before the other party can terminate. A 30-day cure period is standard in many commercial contracts. A contract with no cure period — allowing immediate termination for any breach — is heavily one-sided.

See also: Breach, Termination for cause

Deed

A formal document executed with particular formalities — signed, witnessed, and delivered — rather than simply signed like an ordinary contract. Deeds are used for transfers of land, IP assignments, powers of attorney, and some guarantees. A deed does not require consideration to be enforceable, which is why it is used when one party receives nothing directly in return.

Dispute resolution

The process agreed in the contract for dealing with disagreements — typically escalating from negotiation to mediation to arbitration or court proceedings. A multi-tier dispute resolution clause with mandatory escalation can delay any formal claim by months. Check whether it applies to undisputed debt and urgent injunctions, or carves those out.

See also: Arbitration, Mediation

Entire agreement clause

A clause confirming that the written contract is the complete agreement between the parties and replaces all prior negotiations, representations, and understandings. It prevents a party from relying on things said in pre-contract discussions that did not make it into the final document. It does not protect against fraudulent misrepresentation.

See also: Boilerplate, Representations and warranties

Estoppel

A legal principle preventing a party from asserting something inconsistent with a position they have already taken, particularly if the other party has relied on that position to their detriment. Promissory estoppel can prevent a creditor from enforcing a strict contractual right after they have led the debtor to believe they would not. Estoppel arguments are raised in court; a waiver clause in the contract is designed to prevent them arising.

See also: Waiver

Force majeure

A clause excusing a party from performance when an extraordinary event outside their control prevents it — wars, natural disasters, pandemics, government actions. The clause matters in its detail: what counts as a force majeure event, how long it must last before either side can terminate, and whether it covers events that merely make performance more expensive rather than impossible.

Governing law

The law that applies to the interpretation and enforcement of the contract. In a UK contract it is typically English law or Scots law. Where the parties are in different countries, the governing law clause determines which country's courts have jurisdiction and which country's rules apply to a dispute. A foreign governing law clause can significantly increase the cost of enforcement.

See also: Jurisdiction

Indemnity

A contractual promise to compensate another party for specified losses. Unlike a damages claim, an indemnity is typically payable on demand without proof of loss and sits outside the normal rules on remoteness of damage. An indemnity that falls outside the liability cap creates potentially uncapped financial exposure — which is why the interaction between the indemnity clause and the cap needs to be checked explicitly.

See also: Liability cap, Consequential loss

Intellectual property (IP)

Legal rights protecting the products of the mind: patents (inventions), copyright (original works), trade marks (signs distinguishing goods and services), and design rights (appearance of products). An IP assignment transfers ownership; a licence grants permission to use without transferring ownership. In a software contract, check whether the IP clause assigns the custom work to you or merely licences it back.

See also: Work made for hire

Jurisdiction

Which country's courts have the authority to hear a dispute. The governing law clause picks the applicable law; the jurisdiction clause picks the courts. The two are usually aligned but can differ — for example, English law applied in Singapore courts. An exclusive jurisdiction clause means neither party can sue in a different court; a non-exclusive clause leaves that option open.

See also: Governing law

Liability cap

A ceiling on the total amount one party can recover from the other under the contract, regardless of how large the actual loss is. Standard caps are set at the total contract value or the fees paid in the preceding 12 months. Carve-outs for death, personal injury, fraud, and wilful misconduct are almost always present. An indemnity that is not subject to the cap can render the cap meaningless.

See also: Indemnity, Consequential loss

Liquidated damages

A pre-agreed sum payable on a specific breach, set in the contract rather than calculated after the event. They are enforceable if they are a genuine pre-estimate of loss. A clause that sets a sum out of all proportion to the likely loss may be challenged as a penalty clause and be unenforceable under English law.

See also: Penalty clause

Material adverse change (MAC)

A clause allowing a party to withdraw from or terminate an agreement if a significant negative change occurs in the other party's business, financial position, or prospects. Common in acquisition and financing agreements. What counts as "material" and "adverse" is heavily negotiated, and MAC clauses are notoriously difficult to invoke successfully.

Mediation

A voluntary, confidential process in which a neutral third party — the mediator — helps the parties reach a negotiated settlement. Unlike arbitration, the mediator cannot impose an outcome. Mediation is typically quicker and cheaper than arbitration or court, and a successful mediation produces a binding settlement agreement. CEDR is the main mediation provider in the UK.

See also: Arbitration, Dispute resolution

Non-disclosure agreement (NDA)

A contract requiring one or both parties to keep specified information confidential. A mutual NDA binds both sides; a one-sided NDA only binds the party receiving information. Key issues are the definition of confidential information, the standard carve-outs (publicly available, independently developed), the duration, and whether there is a residuals clause.

See also: Residuals clause

Novation

The transfer of the entire contract — both rights and obligations — from one party to a new party, with the agreement of all three parties. Unlike an assignment, which only transfers rights, a novation releases the original party from their obligations entirely. It requires the consent of the counterparty, which is why it is sometimes described as replacing the old contract with a new one.

See also: Assignment

Penalty clause

A contractual clause imposing a payment on breach that is disproportionate to the likely loss and designed to deter breach rather than compensate for it. English courts will not enforce a genuine penalty clause. The test, restated in Cavendish Square Holdings v Makdessi [2015], is whether the clause is out of all proportion to the legitimate interest of the innocent party in performance of the contract.

See also: Liquidated damages

Representations and warranties

Statements of fact about the business, assets, or contract that a party confirms are true at the date of the agreement. A breach of warranty gives the other party a damages claim. A misrepresentation — a false statement that induced the other party to enter the contract — can entitle them to rescind the contract. The entire agreement clause limits reliance on pre-contract representations but does not affect claims for fraud.

See also: Entire agreement clause

Residuals clause

A carve-out from a confidentiality obligation allowing a party's employees to use information they have retained in their "unaided memory" after exposure to confidential material. It effectively allows employees to carry knowledge gained from one client into work for a competitor, and is one of the most significant risks in an NDA for a technology business.

See also: Non-disclosure agreement (NDA)

Severability

A clause providing that if one part of the contract is found to be unenforceable, the rest of the contract remains in force. Without a severability clause, a court finding one provision void could in theory void the whole agreement. A well-drafted severability clause also allows the court to read down an unenforceable provision to the minimum extent needed to make it valid.

Step-in rights

Rights allowing a party — or a third party such as a funder or public body — to take over the performance of a contract if the contracted party fails to perform or becomes insolvent. Common in outsourcing, PFI, and infrastructure contracts. From a supplier's perspective, step-in rights can mean handing control of the project to the client or their appointee without termination.

Termination for cause

The right to end the contract because the other party has breached it — typically a material breach that has not been remedied within a cure period, or insolvency. Termination for cause usually entitles the terminating party to claim damages. What counts as a "material breach" and how long the cure period lasts are key terms to check.

See also: Termination for convenience, Cure period, Breach

Termination for convenience

The right to end the contract without needing to show the other party has done anything wrong, simply by giving notice. A mutual termination for convenience right with reasonable notice (30 to 90 days) is standard in many services agreements. A one-sided right, or a right exercisable with no notice, is heavily in favour of whichever party holds it.

See also: Termination for cause

Time of the essence

A clause making a deadline a condition of the contract, so that a failure to meet it is automatically a repudiatory breach entitling the other party to terminate. Without it, a missed deadline is usually a breach for which damages are available but termination requires showing the delay is so serious as to amount to a repudiation.

Waiver

The voluntary relinquishment of a contractual right, either expressly or by conduct. A no-waiver clause prevents informal conduct — such as accepting a late payment without objecting — from being treated as a permanent surrender of the right to insist on timely payment in future. It needs to be read alongside the principle of estoppel.

See also: Estoppel

Without prejudice

A label placed on a communication — usually a settlement offer or negotiation letter — to prevent it being used as evidence in court proceedings. Genuine without prejudice communications are inadmissible except to prove that an agreement was reached. The label only applies to genuine negotiations; it cannot be used to shield a threat or a statement of existing rights.

Work made for hire

A concept, originating in US copyright law, under which work created by an employee or certain categories of contractor is owned by the employer or commissioning party from the outset rather than the creator. English law does not use this term directly: under the Copyright, Designs and Patents Act 1988, works created by an employee in the course of employment belong to the employer, but a contractor's works belong to the contractor unless assigned in writing. A US-style "work for hire" clause in an English contract is treated as an assignment.

See also: Intellectual property (IP)