Acceptance: An agreement to an offer, which results in the creation of a contract.
Accord and satisfaction: An agreement between two parties, in which one party accepts an alternate form of compensation (satisfaction) to discharge a debt, duty, or obligation.
Agent: An individual appointed to act on behalf of another individual (the principal) to enter into a contract with a third party.
Alien corporations: A business that is incorporated in a foreign country.
Arbitration: A situation in which an independent, neutral third party settles disputes between two parties to avoid going to court.
Board of directors: A body of individuals elected by stockholders to be the governing body of an incorporated business. A board of directors is required of every public company.
Breach of contract: When one party fails to perform a task, duty, or obligation outlined in a contract.
Conditions: The terms of a contract; when conditions are not met, it is considered breach of contract.
Confidentiality agreement: An agreement between two or more parties that binds them from revealing the confidential information disclosed between them to any other parties. Also called a non-disclosure agreement (NDA).
Consideration: What two or more parties agree will be exchanged, bargained for, received as a result of a contract.
Consumer: Individuals who buy goods or services.
Corporation: An artificial entity that exists only under the law, which has its own identity apart from its shareholders and members.
Due diligence: The careful investigation of the background of a business or individual prior to entering into a contract with that party.
Employment contract: An agreement between employer and employee that outlines the rights and responsibilities of both parties.
Exemption clauses: A term in a contract that exempts or limits one party’s liability should the contract be breached.
Express terms: The terms expressly stated in a contract. Contrast with implied terms.
Fiduciary: An individual or entity, such as a bank or trust company, that manages money or property on behalf of someone. Bound to a certain standard of care in how they govern these assets.
Franchising: A commercial agreement that gives an individual or business the right to operate and share the profits of another business under a brand name.
Fraud: Intentional misrepresentation of facts in order to prompt another person to act, resulting in injury or damage.
General partnership: An arrangement in which two or more individuals agree to equally share profits, liabilities, and assets in a business. See limited partnership.
Implied contract: An agreement in which the terms are implied by acts or conduct, rather than written down in a formal contract.
Implied terms: The terms implied by custom or practice without being put in a contract. Contrast with express terms.
Incorporate: The legal process of forming a corporation.
Independent contractor: An individual or business that provides certain services or goods temporarily under a contract for a set fee. The independent contractor is not an employee.
Injunction: A court-ordered decree that stops action from being taken.
Joint and several liability: When two or more parties are held liable for an act, and each party can be pursued for the full amount of the damages. For example, if three parties are deemed liable, the plaintiff can choose to only go after the first party for the full amount. However, that first party can turn to the other two to help cover the compensation or be forced to pay the amount in full.
Liability: Legal responsibility for one’s actions.
Limited liability: Legal protection that stipulates the maximum amount an individual in a business can be held responsible for in the case of a lawsuit or bankruptcy. For instance, stockholders in a corporation will lose their investment, but will not be held liable for the corporation’s entire debt.
Limited partnership: A partnership with two kinds of partners — at least one general partner, who manages the business and can be held personally liable for the company, and limited partners, who provide financial support and are not held personally liable for the company. See general partnership.
Liquidation: The elimination of a company, usually by the sale of a business’s assets, payment of bills and debts, and division of the remaining funds to shareholders, investors, or partners.
Non-disclosure agreement: See confidentiality agreement.
Offer: The proposal to enter into a contract.
Parent company: A company that owns, manages, or controls other companies (subsidiaries) by owning the majority of voting shares in those companies.
Partnership: A form of business managed by two or more individuals who share in managing duties and split the profits.
Principal: An individual or entity who appoints another party to act on their behalf.
Proxy: An individual who acts on behalf of another individual or entity at a meeting. In corporations, a proxy can vote on behalf of an investor at a meeting.
Ratification: Confirmation of an act that has been executed.
Repudiation: Refusal to perform a duty or obligation outlined in a contract.
Restrictive covenant: An agreement that limits one party from acting in a certain way. A non-disclosure agreement is an example of a restrictive covenant, as it limits parties from divulging confidential information.
Service contract: An agreement contracting an individual or business for services rather than goods.
Shareholders’ agreement: A contract between shareholders that outlines their obligations and rights and delineates the company’s bylaws. This is only an agreement between the shareholders; the company is not bound to it, as a corporation is considered its own entity.
Sole proprietorship: A business owned by one individual, who has sole control of management and is responsible for all debts related to the business.
Trademark: A name or logo associated with a business that is registered and protected by law.
Void: Something that is rendered null and not legally binding.
Warranties: A guarantee in a contract that promises everything in the agreement is true and reliable.