GLOSSARY -- CONTRACT TERMS

Ab Initio
Lat. From the beginning. A contract may be void from the time
it was entered into. The agreement is void ab initio.

Accord and Satisfaction

A term usually used when a contract is settled without exercising
one's full legal rights. When the settlement agreement is signed,
it is called an "accord and satisfaction."

Action
Usually refers to a suit or prosecution. One party to a contract
may take "action" against the other.

Ad Valorem
According to value. An evaluation that is a percentage or other
function of the value of the property. Usually used in contracts
in referring to kinds of levies or taxes.

Agreement
An understanding between two or more parties. When meeting the
legal requirements it becomes an "enforceable agreement." Used
here as synonymous with "contract."

Arbitration
An unofficial procedure for investigating the facts related to a
controversy and reaching a settlement. The proposed settlement
may be binding or non-binding.

Articles of Incorporation
The document by which a corporation is formed under the laws of a
particular state.

Assign
To turn over the rights to or some interest in property to another
party. The document turning over the rights is an "assignment."

Bona Fide or Bona Fides

Lat. In good faith; with integrity and honesty in dealing. The
opposite of mala fides.

Certify
To vouch for a thing in writing; to make known or establish as a
fact.

Consequential Damage
Damage that results as a consequence rather than directly from
some failure to meet an obligation. A machine is guaranteed to
produce 50 parts per minute. If it only produces 20 parts per
minute, that is a direct damage under the guarantee. If the
machine over-heats and burns down the factory, that is a

consequential damage.
Consideration
Something of value in the eyes of the law that justifies a binding
commitment on the part of the party receiving the consideration.
Not to be confused with the motive for making a contract.

Counterpart
A copy of an agreement that is executed by one or more of the
parties to the agreement.

Covenant
A written pledge by one or more parties as to the truth of some
statement or that some particular action will be taken.

DBA
A common abbreviation meaning "doing business as." The abbreviation is usually in lower-case letters: "John Jones dba The Local
Grocery Company."

De Facto
In fact or deed; actually. Words used to accept a past condition
that may have been illegal or incomplete. May refer to a present
condition as actually existing rather than just a paper plan.

Encumbrance
A burden, mortgage, lien, or any debt attached to either real or
personal property.

Force Majeure
Fr. An irresistible or overpowering force. One may be forgiven, by
the terms of an agreement, for failure to perform because of force
majeure, an event that one was powerless to overcome - strikes,
floods, riots, war, etc.
Indemnify
To save another harmless from loss or damage; to give security for
the reimbursement in case of anticipated loss.

Intangible Property
Property or a right that does not have a physical existence. It may
refer to copyrights, patents, accounts receivable, rights of legal
action, trade secrets etc.

Ipso Facto
By the fact itself; by the mere fact.

Mala Fide
In bad faith. The opposite of bona fide.

Namely
A word importing things already included in the previous
reference term. "Including" indicates something additional not
included in the reference term. Using the word "including" to
recite things inherently included in the reference term is a
quick road to a Legal Omelet.

Net Lease
A lease that requires the tenant to pay all or a portion of the
real estate taxes.

Net Net Lease

A lease that includes all of the charges of a net lease plus a
charge for insurance on the building.

Net Net Net Lease

A lease under which the tenant pays all costs associated with the
leased property including, taxes, maintenance, repairs, ground
upkeep, snow removal, etc. Costs associated with maintaining the
building structure are usually excluded.

Offset
A deduction; a counterclaim; a contrary claim by which a given
claim may be reduced or cancelled.

Party
One who undertakes an obligation under a contract and thus becomes
a "party" to the agreement.
Power of Attorney
An instrument authorizing another to act as one's agent or on one's
behalf. The person authorized need not be a lawyer.

Premises
That which is put before. In a contract, the expression "in consideration of the premises," means "in consideration of the things
stated before."

Prima Facie
Lat. At first sight; on the face of it; presumably; so far as it
can be judged from appearances.

Pro Rata
Proportionately; according to a certain rate; in equal ratios.

Reduction to Practice
A term usually used in connection with inventions denoting the
actual building and operation of the device or method embodying
the invention. The filing of a patent application is sometimes
referred to as a "constructive reduction to practice."
Royalty
A payment made of the use of a thing or a right. A payment for a
license under a patent is a royalty.

Said
An over-used word meaning the same as before; in Legal Omelette
terms, "aforesaid."

Subrogation
The substitution of one person (or thing) in the place of another
with respect to rights, claims, or securities. For example, a
person may by agreement give up certain rights and an insurer of
that person may be asked to subrogate its rights so that the
rights of the insurer do not exceed those of that person.
Trust
A right of property held by one entity for the benefit of another.
The owner of property who puts it in trust, loses legal title to
that property. A contract may provide that a party hold property
"in trust" for some particular disposition. The party holding the
property becomes a "trustee" and has certain legal obligations in
connection with care of the property.

Trustee
The one who holds the legal title to the trust property and
administers the assets of the trust, for the benefit of the
beneficiary or beneficiaries, in accordance with a document that
established the trust, sometimes called "A Declaration of Trust."

Trustor
An old fashioned word referring to the one who establishes the
trust. A grantor, donor, creator or founder of a trust.
Vested Interest
A present right or title to a thing that carries with it the right
to sell or trade it, even though the right to actual possession
may be postponed to some future time. This is different from a

"future right."
Warranty
An undertaking or stipulation that certain facts are as stated.