Key Terms
FORMATTING NOTE
Bold and underlining work better than italics alone for capturing the reader's attention.
EXAMPLE
Property purchase contracts where the escrow amount changes between drafting and signing (usually due to accrued interes
Why definitions matter
They give parties a reference point to check compliance. Did the seller deliver the specific goods as defined?
What needs a definition
Material terms of the transaction — goods, services, quantity, quality, price. Industry-specific terms also belong here.
COVENANT
A formal promise to perform. This section states exactly what each party will do — who pays what, who delivers what, whe
ACTIVE
"Buyer will pay Seller ten dollars." Clear. No ambiguity.
PASSIVE
"Seller shall be paid ten dollars." By whom? What happens if payment is not made?
CONDITIONS
Things that must occur BEFORE performance is due. Conditions are usually NOT enforceable unless expressly stated in the
Best practice
Identify each condition AND set a timeline for when performance is due after the condition is met.
MATERIAL BREACH
A substantial breach of contract that: (1) excuses the non-breaching party from further performance, AND (2) gives the n
Definition
A clause entitling the WINNING party in contract litigation to recover their attorney fees from the losing party.
Why it exists
In installment contracts, without an acceleration clause the non-breaching party would have to file a separate lawsuit f
Benefit
Saves time and money in litigation because the damages amount is already agreed upon.
REPRESENTATIONS
Statements of fact made to INDUCE someone to enter the contract. Usually made BEFORE signing.
WARRANTIES
Express promises in the CONTRACT that GUARANTEE something in furtherance of the contract.