Basic terms you’ll encounter during the contracting process
You may already know that the language used in contracts tends to be similar, no matter what you are selling. This is done to simply make the whole process of putting a contract together much easier. We believe it is useful to know some of this basic language, which is why we have provided a glossary of the important terms you need to know that will crop up during the contracting process. This will help you develop the best relationship possible with your vendor as you make more and more purchases with the growth of your business.
Likewise, the language used in contracts also tends to be generic, regardless of what is being sold, so that contracts can be put together easily and quickly. We think it’s helpful to know some of this language, to help you develop the best possible relationships with your vendors. Here is a glossary of all the important terms you need to know.
The Contracting Process. Basic Terms You Need To Know
Agent. An agent, otherwise known as a principle, is a person nominated to act on behalf of someone else during the contracting process. This individual is permitted to both negotiate terms and legally bind the contract on behalf of someone else.
Breach and remediation. Something will need to exist if either party decide to break their terms outlined in the contract. In the case of long term contracts, it may be possible for either party to withdraw early, as long as a suitable time has passed, and with enough notice to the other party.
Consideration. This refers to the price which has been agreed between both parties. It doesn’t necessarily have to refer to money, although in most cases, it is. Consideration is a major part of the contract and a key reason why two parties join forces and negotiate from the beginning.
Terms and conditions. These are rules which must be abided by from both parties to make the contract legally binding. Some terms and conditions are generic, whereas others can be very specific, covering things like deadlines, costs and contact details for both parties.
Goods and services. This is considered one of the most important terms used in contracting because it outlines the goods and services being provided. It is important to be very specific from the start so that no disagreements or misunderstandings take place further down the line.
Prices and payment. This term has a number of separate components. These typically include the total cost of all goods and services, methods used to pay for them, dates payments need to be made by, and any consequences that happen as a result of making a payment late.
Confidentiality and proprietary information. When the contract ends, you’ll need to know who owns the final product. State who owns the intellectual property to cover this. Also, make sure the contract contains a confidentiality statement to protect against unwanted sharing of data.
Limitation of liability. Contracts can contain multiple disclaimers, meaning that if either party were to take legal action against the other, they may not be permitted to do so. Limited liability can be specified so that if anything did go wrong, that party wouldn’t be held legally responsible.