Legal Terminology or Jargon in Contracts

Nowadays more and more lawyers use plain English in contracts, although there are some who still insist on using legalese. At worst this can mean that some contracts are impossible for non-lawyers to read, and is not helped by the fact that the law uses a number of Latin terms. These two elements can make reading contracts a baffling experience for the rest of us! Below are some of the most commonly used legal words and phrases and their explanations:

Best Endeavours

Contracts will often bind one or more parties to using ‘reasonable’ or ‘best’ endeavours to do something. There is no solid definition as to what this actually means, and lawyers have argued whether there is in fact a distinction between ‘reasonable’ and ‘best’ in this context. Broadly speaking, however, it places a burden on a party to a contract to ‘try their best’, or do all that can reasonably be expected of them in the circumstances.

Bona Fide

Bona fide literally means ‘in good faith’. In the context of agreements, this is used to describe the intentions of the parties. In other words, a ‘bona fide agreement’ is one which is entered into honestly and without an intention to defraud. The opposite of ‘bona fide’ is ‘mala fides’ which means ‘in bad faith.’

Dissolution

This refers to the act of bringing an agreement to an end. If an agreement is dissolved, either between the parties or by a court, both parties will be restored to their original positions (as they were before they entered into the contract.) This term is also used in relation to marriages and corporate partnerships, amongst other things.

Force Majeure

This provides a ‘get out clause’ for parties to a contract in the event that an unforeseen event, that was not within their control, prevents them from carrying out their obligations under the contract.

Implied Terms

These are terms that form part of the contract even though they are not expressly included in the text of the contract. Perhaps the most common are those provided in contracts for the sale and/or supply of goods. As an example: if A sells merchandise to B, B would be entitled to assume that A had the legal right to sell him the merchandise – even though this right may not be explicitly spelt out on the contract.

Infringement

This relates to trademarks, which are a form of intellectual property. A trademark is infringed if an unauthorised person has used it, or a very similar trademark, for their own gain.

Inter alia

This is a latin term that means ‘amongst other things.’ For example, the judge went on to say, inter alia, that the contract was unenforceable.

Passing Off

This is a tort in common law that protects the rights of someone who has an unregistered trademark. For example, if Y misleads members of the public into thinking that they are dealing with X trader (when in fact it is Y) in order for Y to make a profit for themselves, X will sue under this tort.

Preamble

A preamble is found at the start of a commercial agreement. There should be no legally binding terms in this part of the contract. It is simply used to provide an introduction by way of background to the agreement, or the nature of the parties to the contract (e.g. X is a manufacturer of goods supplying to Y, a seller of goods.)

Privity Of Contract

This rule forbids third parties from being able to sue or be sued under a contract to which they are not a signatory. It means that only the parties to a contract can sue or be sued under it.

Recitals

The recitals are very similar to the preamble and are situated at the beginning of the contract. The recitals often start with the word ‘Whereas’ and are also known as the ‘whereas clauses.’ This part of the contract should not contain rights or obligations of the parties, but is merely there to explain or introduce the nature of or background to the contractual relationship.

Restrictive Covenant

A restrictive covenant is most often seen in contracts relating to land and employment contracts. In the case of land, it restricts the land from being used or developed in certain ways. In the case of employment contracts, it restricts an employee from doing certain things at the end of his or her employment. This may include not competing with their former employer, not dealing with former clients, not ‘poaching’ former colleagues and not using the former employer’s confidential information for any purpose.

Undertaking

An undertaking is a promise to do, or not to do, something. It is commonly used between lawyers to prove their good intentions. For example, if an original document needed to be served by 4pm, a solicitor could fax it and provide an undertaking that the original would be posted first class that evening.

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