When it comes to legal documents, contracts are one of the most common pieces of literature. They outline the terms and conditions of an agreement between two parties, and they are legally binding. Contracts can be found in every industry, from construction to entertainment to technology.

One important aspect of contracts is the use of terminology. Every contract has specific terms and points that are crucial to understanding the agreement it outlines. These points are often referred to using specific names that are standard across the legal industry. In this article, we will explore what these points are called.

1. Parties

The parties are the individuals or entities entering into the contract. They can be individuals, corporations, partnerships, or any other legally recognized entities. The parties are listed at the beginning of the contract and are referred to throughout the document.

2. Consideration

Consideration is the value that one party provides to the other in exchange for something else. This can be money, goods, services, or any other valuable item. Consideration is a vital part of any contract because it establishes the exchange that is taking place.

3. Termination

The termination clause outlines the conditions under which the contract can be ended. This can be due to breaches of the agreement, changes in circumstances, or other factors. The termination clause is an essential part of any contract, as it provides an exit strategy for both parties.

4. Governing Law

The governing law clause determines the legal system that will be used to interpret and enforce the contract. This can be the law of a specific state or country, or it can be international law. The governing law clause ensures that all parties are aware of the legal system that will apply to the agreement.

5. Force Majeure

The force majeure clause is a provision that protects the parties in the event of unforeseeable circumstances that prevent the performance of the contract. This can include natural disasters, war, or other events beyond the control of the parties. The force majeure clause can provide relief to the parties in the event of unexpected circumstances.

6. Indemnification

The indemnification clause outlines the responsibilities of each party in the event of damages or losses caused by the contract. This can include liability for personal injury, property damage, or other losses. The indemnification clause is an important part of any contract, as it helps ensure that the parties are held accountable for their actions.

7. Confidentiality

The confidentiality clause is used to protect sensitive information that may be shared between the parties. This can include trade secrets, financial information, or other confidential data. The confidentiality clause ensures that the parties understand the importance of keeping certain information private.


Contracts are essential documents that are used in a wide variety of industries. Understanding the terminology used in contracts is crucial to ensuring that all parties are aware of the terms and conditions of the agreement. The points listed above are just a few of the most common elements found in contracts. If you need to draft a contract, be sure to consult with a legal professional to ensure that all necessary elements are included.