Essential Contract Law Terms Explained in Plain English

Before you sign anything, understand these key contract law terms — offer, acceptance, consideration, breach, and more.

1. 1
   Offer

   A proposal to enter into a binding agreement on specific terms.
2. 2
   Acceptance

   Agreeing to the exact terms of an offer, creating a binding contract.
3. 3
   Consideration

   Something of value exchanged by each party to make a contract binding.
4. 4
   Breach of Contract

   Failure to do what a contract requires, without a valid legal excuse.
5. 5
   Force Majeure

   An unforeseeable, uncontrollable event that excuses contract performance.
6. 6
   Indemnification

   A promise to compensate someone for losses, damages, or legal costs they suffer.
7. 7
   Liquidated Damages

   A fixed amount both parties agree in advance the breaching party must pay.
8. 8
   Statute of Frauds

   A law requiring certain contracts to be in writing to be enforceable in court.
9. 9
   Arbitration

   A private dispute resolution process where an impartial third party (arbitrator) hears evidence and makes a binding decision instead of going to court.
10. 10
    Mediation

    A dispute resolution process where a neutral third party (mediator) helps the parties negotiate and reach their own settlement agreement.
11. 11
    Specific Performance

    A court order forcing someone to actually do what they promised in the contract.
12. 12
    Warranty

    A promise that something is true or will work as described.
13. 13
    Rescission

    Unwinding a contract entirely, returning both parties to their positions before the deal.
14. 14
    Novation

    Replacing an old contract with a new one, with all parties' agreement.
15. 15
    Material Breach

    A significant failure to perform a contract obligation that defeats its core purpose.

This guide is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.