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Businessballs - business contracts legal terms Category: Legal > business contracts legal terms Date & country: 10/01/2008, UK Words: 121

Wound up
winding-up is the formal procedure for disbanding a company.

Without prejudice
a term used by solicitors in negotiations over disputes where an offer is made in an attempt to avoid going to court. If the case does go to court no offer or facts stated to be without prejudice can be disclosed as evidence. Often misused by businesses during negotiations when they actually mean subject to contract.

Warranties
promises made in a contract, but which are less than a condition. Failure of a warranty results in liability to pay damages (see the financial terms below) but will not be a breach of contract unlike failure of a condition, which does breach the contract.

Vendor
the person who is selling a property.

Void
a void contract is one that cannot be performed or completed at all. A void contract is void from the beginning (ab initio

Vendee
the person to whom a property is sold.

Unfair terms
some terms are made unfair by legislation and will not be enforced by the courts and may even be interpreted against the person who included them in the contract. The legislation mainly protects consumers, but can also apply where there is a business-to-business contract in which one party is significantly more powerful than the other.

Underwriter
a person who signs as party to a contract. Now usually only applied to insurance contracts where the underwriters are those who agree to bear all or part of the risk in return for the premium payments. Underwriters at Lloyd's of London are also known as names.

Uberrima fides
utmost good faith. The concept that a party to certain types of contract must act in good faith and declare all relevant facts to the other side even if they do not ask. This only usually applies to insurance contracts where the insured person must declare all known risks. It is an exemption to the general contract rule of caveat emptor.

Tenure
the way in which a property is held eg freehold tenure or leasehold tenure.

Trademark
a registered name or logo that is protected by law. Trademarks must be granted through the Patent Office.

Trespass
a wilful act or active negligence that causes an injury to a person or the invasion of their property.

Tenancy
the temporary possession or occupancy of property that belongs to another. It also refers to the period of a tenant's possession.

Sublease
a lease that is given by a tenant of part or all of the leased premises, to another person for a period shorter than the original lease, while still retaining some interest.

Stamp duty
a tax on transactions. Only applied to specific types of transactions eg dealings in land and buildings, shares and ships.

Subject to contract
words used on documents exchanged by parties during contract negotiations. They denote that the document is not an offer or acceptance and negotiations are ongoing. Often the expression without prejudice is used when subject to contract is meant.

Shareholders' agreement
an agreement between all of the shareholders about how the company should be run and the application of the rights of the shareholders. This acts as a contract between the shareholders. The company itself is not bound by it, as it is not a party to the agreement.

Service contract
directors and officers of a company are usually given service contracts that are different to a contract of service or employment contract. This is because directors and officers are not always employees and the effect of employment law is different.

Search
an inspection carried out to establish whether any legal restraints, planning applications or aspects of legal ownership might affect the purchase of a property. Solicitors will look into land registry and local government records when pursuing this.

Restrictive covenant
is often included in long-term contracts and contracts of employment to stop the parties working with competitors during the period of the agreement and for some time thereafter. However, unless carefully written the courts will see them as being a restraint of trade and not enforce them.

Repossess
to take possession again of a property or goods after non-payment of money owed. This might follow a court order.

Repudiation
has two meanings in contract law. The first is where a party refuses to comply with a contract and this amounts to a breach of contract. The second is where a contract was made by a minor (person under the age of 18) who then repudiates it at or shortly after the age of 18. Then the repudiation voids the contract rather than causing a breach of con …

Registered Office
the official address of the company as stated on the register at Companies House. Any documents delivered to this address are considered to be legally served on the company.

Remedy-Remedies
payments or actions ordered by the court as settlement of a dispute. The most common is damages (a payment of money). Others include specific performance (of an action required in the contract), injunction (see the general contract terms above) and rescission

Redemption of shares
where a company issues shares on terms stating that they can be bought back by the company. Not all shares can be redeemed, only those stated to be redeemable when they were issued. The payment for the shares must generally come from reserves of profit so that the capital of the company is preserved.

Reasonable wear and tear
damage sustained in the course of normal use.

Receivership
the appointment of a licensed insolvency practitioner to take over the running of a company. A creditor with a secured debt appoints the receiver. The job of the receiver is to recover the debt either by taking the security and selling it or by running the business as a going concern until the debt is paid off (see liquidation).

Quorum
the minimum number of people needed at a meeting for it to proceed and make any decisions.

Ratification
giving authority to an act that has already been done. A company general meeting resolution can ratify an act previously done by the directors; or a principal can choose to ratify the act of an agent that was beyond the specified power of the agent.

Quid pro quo
something for something. The usual definition of consideration (see the general contracts terms above) in a contract, on the basis that each party should offer something to the other.

Quit
for a tenant to move out of rented premises.

Proxy
a person who acts on behalf of another for a specific purpose, or the form used to make such an appointment. In a company a shareholder can appoint a proxy to attend a meeting and vote on their behalf.

Pro tanto
for so much. Means to the extent specified, but not more.

Pro tempore (pro tem)
for the time being.

Pro rata
for the rate. Divided in proportion to some existing split. For example, a pro rata share issue is offered in proportion to the number of shares each shareholder already has.

Premises
a building or part of a building usually including the adjacent grounds.

Prima facie
at first sight. A prima facie fact is one that seems to be correct, but may subsequently be proved wrong by other evidence.

Partnership
when two or more people or organizations join together to carry on a business.

Party wall
a wall that divides two separate premises, which is the joint responsibility of both owners.

Partition
the division into parts of property held jointly, or the sale of such property by a court with division of the proceeds.

Pari passu
equal and even. This relates to shares to denote that newly issued shares have the same rights and restrictions as those of the same class already existing.

Parent company
where one company owns more than 50 per cent of the voting rights of another company it is the parent of that company which in turn becomes its subsidiary. It can also occur where the parent has less than 50 per cent but can control the board of directors of the subsidiary: that is, it has the power to appoint and remove directors without referring …

Occupancy
holding, possessing, or occupying premises.

Occupant
someone who occupies a particular place.

Offer
an offer to contract must be made with the intention to create, if accepted, a legal relationship. It must be capable of being accepted (not containing any impossible conditions), must also be complete (not requiring more information to define the offer) and not merely advertising.

Notice to quit
a notification or communication to a tenant to leave specified premises usually for a breach of terms of the lease.

Non est factum
not my act. This is a denial by a person that they were actually involved in some action or dealings. In a contract, it can occur if a party denies that they signed the contract

Non-executive director
a director who does not work directly for a company but advises the other directors. Non-executive directors have the full powers and authority of any other director and can bind the company to any contract.

Non compos mentis
not of sound mind. A person who is not of sound mind will not have full capacity to enter into a contract.

Nemo dat quod non habet
no one can give what they do not have. The principle that a seller cannot pass on a better right to the property than they actually have. So, if goods are stolen, the buyer does not get ownership even if there was no indication that they were stolen.

Mala fides
bad faith, opposite of bona fide.

Misrepresentation
where one party to a contract makes a false statement of fact to the other which that other person relies on. Where there has been a misrepresentation then the party who received the false statement can get damages for their loss. The remedy of rescission (putting things back to how they were before the contract began) is sometimes available, but w …

Loss of use
circumstances where a property cannot be occupied in the normal way, through the negligence or wrongdoing of another party.

Liquidation
the formal breaking up of a company or partnership by realising (selling or transferring to pay a debt) the assets of the business. This usually happens when the business is insolvent, but a solvent business can be liquidated if it no longer wishes to continue trading for whatever reason (see receivership in the financial terms below).

Limited liability
usually refers to limited companies where the owners' liability to pay the debts of the company is limited to the value of their shares. It can also apply to contracts where a valid limitation clause has been included in the terms.

Liability
a person or business deemed liable is subject to a legal obligation. A person/business who commits a wrong or breaks a contract or trust is said to be liable or responsible for it.

Lease
a contract by which an owner of property conveys exclusive possession and use of it for a specified rent and for a specified period

Legal duty
the responsibility to others to act according to the law.

Landlord
the owner of property that is leased or rented to others.

Jurisdiction
a jurisdiction clause sets out the country or state whose laws will govern the contract and where any legal action must take place. Don't forget that England and Scotland have different legal codes, and this may need to be specified.

Joint and several liability
where parties act together in a contract as partners they have joint and several liability. In addition to all the partners being responsible together, each partner is also liable individually for the entire contract

Joint venture
an agreement between two or more independent businesses in a business enterprise, in which they will share the costs, management, profits or benefits arising from the venture. The exact shares and responsibilities will be set out in a Joint Venture Agreement.

Invitee
a person, such as a customer, who is present in a place either by the express or the implied invitation of the occupier. This normally means that the occupier has to exercise reasonable care to protect the safety of the invited person.

Insolvency
the situation where a person or business cannot pay its debts as they fall due (see bankruptcy, liquidation and receivership).

Inter alia
among other things. This is often used in contracts to indicate that what is being specifically referred to is part of a larger group without having to name all the elements.

Injunction
a remedy sometimes awarded by the court that stops some action being taken. It can be used to stop another party doing something against the terms of the contract. Injunctions are at the court's discretion and a judge may refuse to give one and award damages instead

Indenture
a deed or other document to which two or more parties are bound.

Indemnity
a promise by a third party to pay a debt owed, or repay a loss caused, by another party. Unlike a guarantee, the person owed can get the money direct from the indemnifier without having to chase the debtor first. Insurance contracts are contracts of indemnity: the insurance company pays first, and then tries to recover the loss from whoever caused …

Incorporate
inclusion in, or adoption of, some term or condition as part of the contract. It differs from its company law definition where it refers to the legal act of creating a company.

Implied terms
are terms and clauses that are implied in a contract by law or custom and practice without actually being mentioned by any party. Terms implied by custom and practice can always be overridden by express terms, but some terms implied by law cannot be overridden, particularly those relating to consumers (see exemption clauses).

Id est (ie)
that is. Is followed by a definition or list of items or options that relate to a preceding statement or condition. Differs from exempli gratia (eg)

Holdover Tenancy
a tenancy that arises when someone remains in possession of a property after the expiration of the previous tenancy and is recognised by the landlord by accepting rent.

Habitable
suitable and fit for a person to live in and free of any faults that might endanger the health and safety of occupants.

Guarantee
a secondary agreement by which one person promises to honour the debt of another if that debtor fails to pay. Banks and other creditors often call on directors of small companies to give their personal guarantees for company debts. A guarantee must be in writing. The guarantor can only be sued if the actual debtor can't pay, in contrast to indemnit …

Going concern
accounting idea that a business should be valued on the basis that it will be continuing to trade and able to use its assets for their intended purpose. The alternative is a break-up basis, which sets values according to what the assets could be sold for immediately

Freehold
outright ownership of a property. This type of tenure contrasts with leasehold where the leaseholder has the rights to occupy a property for a specified period of time.

Franchising
commercial agreements that allow one business to deal in a product or service controlled by another. For example, most car manufacturers give franchises to sell their cars to local garages, who then operate using the manufacturer's brand.

Floating charge
a form of security for a debt. Instead of naming a specific property, which can be taken by the creditor if the debtor defaults (as in a fixed charge like a mortgage), a class of goods or assets is named, such as the debtor's stock. This allows the debtor to trade in the assets freely, but if the debtor fails to make repayments then the floating ch …

Fixture
a permanently fixed piece of furniture or equipment incorporated into a property. Removing it would cause damage to buildings or land, and is therefore regarded as legally part of it.

Express terms
the terms actually stated in the contract. These can be the written terms, or verbal ones agreed before or at the time the contract is made (see implied terms).

Exemption clauses
clauses in a contract that try to restrict the liability of the party that writes them. These are split into exclusion clauses that try to exclude liability completely for specified outcomes, and limitation clauses that try to set a maximum on the amount of damages the party may have to pay if there is a failure of some part of the contract. Exempt …

Exempli gratia (eg)
for example. One or more examples from a greater list of possibilities. Compares with id est (ie), that is, which indicates a full, definitive list of all possibilities.

Exclusion clauses
clauses in a contract that are intended to exclude one party from liability if a stated circumstance happens. They are types of exemption clauses. The courts tend to interpret them strictly and, where possible, in favour of the party that did not write them. In customer dealings, exclusion clauses are governed by regulations that render most of the …

Exchange
the exchange of agreed, signed contracts. The transaction between the seller and the buyer is then legally binding, and completion (including the final transfer of money) usually takes place two to four weeks later.

Ex post facto
because of some later event. Where a later event or occurrence interferes with an earlier agreement.

Ex parte
on behalf of. An action, usually a legal action, taken by a party on someone else's behalf.

Ex gratia
out of grace. A gift made without any obligation on the part of the giver or any return from the receiver.

Eviction
the dispossession of a tenant of leased property by force or through the legal process.

Equity
the monetary value of a property after any claims, such as a mortgage, are taken away.

Encroachment
when a building or some portion of it, or a wall or fence, extends beyond the land of the owner and illegally intrudes upon that of an adjoining owner.

Employment contract
a contract between an employer and an employee. This differs from other contracts in that it is governed by employment legislation

Easement
an interest in land owned by another that entitles its holder to a specific limited use or enjoyment eg the right to cross the land, or to continue to have an unobstructed view over it.

Due diligence
the formal process of investigating the background of a business, either prior to buying it, or as another party in a major contract. It is used to ensure that there are no hidden details that could affect the deal.

Disclaimer
a written document denying legal responsibility, or a limitation of rights that might otherwise be claimed.

Deed
a written document by which a person transfers ownership of real property to another. A deed must be properly executed and delivered in order to be effective.

Debenture
a formal debt agreement. It refers to both the agreement and the document that verifies it. It is usually issued by companies and is generally supported by security over some property of the debtor. If the debtor defaults, the creditor can take and sell the property. Debentures are often transferable, so the creditor can sell it and there are marke …

De novo
start afresh. Starting a new contract on the same basis as the old.

De jure
in law. According to law, the opposite of de facto.

De minimis
short for de minimis non curat lex: the law does not concern itself with trifles. It basically means insignificant or too small to bother with.

De facto
in fact. The opposite of de jure (in law). Having a practical effect different from the legally accepted or expected situation. For example, a person who deliberately or negligently gives the impression to another party of being a company director, can be treated as a de facto director. So any agreement or statements will bind the company they make …