10 Commonly Found Terms in Contracts That You Should Understand

Every person will encounter contracts, whether it be related to education, business, or other activities that need agreements between people or groups involved. A contract is an agreement made between two or more “parties” (individuals or companies that enter into agreements) that is binding and enforceable under the law. IT can either be verbal, written, or a combination of both.

When entering into a contract, it is important that you understand all the details in it so you can deliver on your end of the agreement and protect yourself from any unfair activity. There are many complicated terms in law (some are still even in Latin!), but here are ten commonly found terms in contracts that you should learn.


“Bonafide” (pronounced as “bone-na-fayd”) is a Latin term that translates to “in good faith.” This term implies a high level of trust between parties, meaning that both are entering into the agreement without any bad or hidden motives. Bonafide can also be used as an adjective to describe anything real, authentic, or made with good intentions, such as a bonafide student, bonafide contract, or a bonafide offer.


A “breach” refers to a violation of a contract, the law, or a standard. When a party breaches a contract (officially called a “breach of contract”), that means that they have failed to uphold their part of the deal. This can lead to the contract being ended and having the party that breached the agreement pay for damages (payment or award to compensate for loss).

For example, you enter into a contract wherein you must give security service to a company for 12 months. If you fail to offer the service for that duration (e.g., you cut the service short or withhold the service to the company), then that is a breach of contract.


“Conditions” are the major terms in a contract. These are the basis of any agreement. When one of them is broken, then it becomes a breach of contract. For example, an employment contract condition may be that the employee cannot enter into similar work with the company’s competitors during their employment. 

Warranties, on the other hand, are similar to conditions but are less important. Unlike conditions, when warranties are failed, these do not necessarily lead to a breach of contract. Instead, it only adjusts in price or the awarding of damages.


Something that is “confidential” is something that is secret, and therefore should not be disclosed to anybody outside those who are concerned (usually the parties in a contract). Contracts sometimes define some parts to be confidential. These can be operational information, trade secrets, or any other sensitive information.

Confidentiality agreements (also known as non-disclosure agreements) are a type of contract which aims to protect confidential information. The parties involved are bound to keep whatever information shared in their agreement—and whatever operations happen about it—secret, to never pass it on to anybody else.


“Deliverables” is a collective term for all the tangible items that parties are obliged to supply based on a contract’s conditions. These are often bound by an agreed date in which the supplying party must complete all transactions.

For example, a fruit vendor and a farmer enter into a contract wherein the farmer must supply 20 cartons of apples to the vendor within 30 days. The deliverables, in this case, are the 20 cartons of apples.


Contractual liability refers to an agreement between parties to pay for any loss or damages that the other may experience during the contract duration. It can also be used as the term “liable,” which describes a person or business with legal obligations (or has entered contractual liability). If a person breaches a contract, he or she is said to be liable (or responsible) for the damages done.


A “proxy” is a representative or a person who acts on behalf of another individual for a specific purpose, usually in relation to voting. For example, a high-ranking official in the company can appoint a proxy (such as their assistant) to attend meetings and vote on their behalf. In contracts, you can choose a proxy to fulfill some conditions should you not be able to do them yourself.


“Term” can mean two things when it comes to contracts. It can refer to the period when the contract is valid (e.g., a contract may operate for a term of two years, after which it becomes invalid). On the other hand, it could also generally refer to any clause in a contract; this is how it is used in “terms and conditions” and “terms of the agreement,” for example.


A contract is “void” when it cannot be practiced or completed, usually when one or all parties cannot perform the conditions stated in the contract based on a mistake or legal problems. A void contract then becomes unenforceable in law, starting from the time it was created. That means that it becomes null and is considered as if the agreement was never made in the first place.


To “waive” something means intentionally and willingly forfeit one’s rights or claims. In contracts, this means that you agree to voluntarily give up your rights or claims without holding the other party liable for any consequences because of it. 

A “waiver” then is a part of the contract where one agrees to anything being waived.


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Jica Simpas is a writer based in Metro Manila, Philippines. She has over two years of writing experience in producing travel and food-related content. She is currently exploring new writing ventures to expand her practice.