An Intro Guide to Contracting
The terminology and acronyms used in the contracting space can often be overwhelming and confusing. However, a solid understanding of these terms is essential for stakeholders in order to help ensure compliance, minimize risk and deliver on contract requirements.
What are contracts? Broadly speaking, a contract is an agreement between parties that creates mutual obligations enforceable by law. Contracts offer protection in a business relationship, especially in the case of a dispute. Contracts do not have to be formal or in writing for them to be binding.
In business, contracts help organizations protect their interests and to negotiate agreements with their clients and vendors. Different types of commercial contracts help both the buyer and supplier of goods and services understand their obligations , rights, and responsibilities in the relationship.
Contracting terminology and acronyms
Different industries and government agencies use specific contracting jargon and acronyms that can be difficult to understand. Some other common terms include the following:
Basics of government contracting
The federal government has strict policies and procedures for how it purchases goods and services from contractors. There are a number of regulations and procurement methods that direct government contracting, including the following:
By knowing the basic terminology and broader concepts behind contracting, stakeholders can be better prepared for what lies ahead.
Essential Contracting Vocabulary
A few words on what are apparently common terms when looking at a contract or what is in an enforceable contract:
PARTY: A Party is a party to the contract, so it’s anyone that is a signatory that is going to have potentially some positive or negative implications arising from the contract. When Parties sue each other, sometimes they refer to themselves as claiming Party vs. claimed Party. Basically it details what’s in the agreement and how Parties are bound by the agreements and obligations of the agreement. So it’s really an orientation to understand who’s agreeing to what.
CONSIDERATION: Consideration is a benefit, detriment, right, or legal obligation that induces a party to an agreement. Consideration is what you are exchanging with another party to enter into an agreement with them.
AGREEMENT: An Agreement is just the document itself that binds a Party or Parties to one another. It’s basically the mutual assent to the agreement with the contents in the contract.
BREACH: A Breach is not the violation of the Agreement itself but the failure to do the duties in the contract, the obligations in the contract. So for example, if there is a payment schedule, the client needs to comply with the payment schedule. If they can’t comply, the other party could potentially have a claim for breach of contract.
Common Contracting Acronyms You Should Know
Contracting can often feel overwhelming due to the many different things going on at once. Even the language of contract negotiation can seem like a foreign tongue dotted with acronyms that take up more space than context. Just like any industry or field, contracting has its own lingo, and while it may be difficult to keep up with all of the terms, it isn’t impossible to learn them all.
An easy way to understand this whole process is to familiarize yourself with some common contracting acronyms and their meanings. This guide will help you do just that.
- RFP = Request for Proposal – RFPs are used when an organization wants to request proposals from multiple vendors for a particular project. Often, this extends to both technical requirements, as well as budgetary limitations that the vendors/contractors must adhere to in order to make the organization’s decision-making process that much easier.
- NDA = Non-Disclosure Agreement – NDAs are often industry-specific agreements that ensure a vendor or any hired staff member to a specific organization can’t share any confidential information. With an NDA, that information could be anything, as long as it’s relevant to the specific business and the request at hand.
- T&C = Terms and Conditions – Similar to a Terms and Conditions document you might see on the web, T&Cs are agreements between a website owner (or other business owner) and a customer/website user. The T&C agreement will include anything from online marketplaces to affiliate programs. This is a binding legal contract that is subject to amendments, but often, the terms stated within the agreement will not change.
There are tons of contracting acronyms out there, but these are a few of the most common ones and should be enough to get you started.
Understanding Legal Jargon in Contracting
Contracts are full of legal jargon, which is a language all its own. These standard terms and phrases serve a specific purpose in a legal document and intentional omissions are made when the goal is to achieve a desired result. Often times, legal jargon is perceived to be complex and difficult, but there is a purposeful reason behind the use of legal terminology . Understanding those terms and what is being asked makes a contract easier to follow, preventing misinterpretations and other potential disputes. Conversely, simplifying contractual terms is beneficial because it gives all parties involved more insight into their obligations under the terms of the agreement.
Tips & Tricks for Navigating Contract Language
Certificate of Insurance Coverage; Additional Insured; Cyber Liability Coverage; Indemnification; Obligation to Purchase Insurance; Hold Harmless; Waiver of Subrogation; Named Insured; Additional Insured; Lender’s Loss Payable Loss Payee; Named Insured; Property Damage; Personal Injury; Bodily Injury; General Liability; Caused in Whole or in Part; Hazard; Professional Errors & Omissions; Occurrence; Claims Made.
In the previous section I provided translations of many of the most common terms and acronyms found in contracting and insurance documents used in the legal profession to help you read and understand your contracts. In this section, I want to provide some practical tips for understanding contracting language:
- Read the contract in its entirety before signing it. If something doesn’t make sense to you, ask questions.
- Request a simplified explanation of any unfamiliar terms, acronyms or jargon.
- Check the contract against your records to ensure your details are correctly spelled out.
- Seek help from trusted contracting professionals and/or legal counsel who have experience with business law, contracts, or relevant areas of law.
- Always use the security of companies who do not require consumers to sign away their rights as an example in your own contracts.
- Know the definitions of words that appear in the contract.
- Understand how omissions can lead to misunderstandings.
- Be aware of common omissions and problems.
- Pay attention to what defines a breach of the contract.
- Make sure that you understand the compensation you will receive if there is a breach of contract.
- Ensure that your contract concedes appropriate liability.
- Once you have read through the contracts available to you, ensure the contract you choose benefits you the most and protects you best.
If at any point you feel overwhelmed or confused, do not be afraid to request assistance. It’s better to ask too many questions and have a contract that protects you well than to be left with an unclear contract that results in headaches and problems down the line.
Learning Resources for Contracting
For those who are interested in learning more about contracting terms and acronyms, the following resources can provide valuable insights into contract law and terminology:
Books
"Understanding Standardized Terms of Business" by Jonathan Green
"Commercial Contracts: A Practical Guide to Standard Terms and Conditions" by Paul Stanley
"Construction Contracts: Law and Management" by John Murdoch and Edward Hughes
Online Courses
"Contract Law: From Trust to Promise to Specific Performance" by Yale University on Coursera
"Contract Law: From Trust to Promise to Specific Performance" by Harvard University on edX
"Learn the Basics of Commercial Law" by Udemy
Websites
ContractsCounsel is a legal services platform that provides legal advice and prior work results with previous clients for a reasonable price.
The International Association for Contract and Commercial Management (IACCM) has a wealth of resources on their website , including a glossary of contract terms and acronyms.
The International Chamber of Commerce (ICC) has a glossary of international commercial terms published in ICC’s "Guide to Incoterms 2010" available for download in pdf format.