Key contract terms are the major provisions of a contract, which spell out contractual obligations, violating them can result in a breach of contract and lead to a legal action.

It's common knowledge that a legally binding contract puts several relevant factors into consideration. Some examples of such factors are:

  • Offer.
  • Acceptance.
  • Legal capacity to contract.
  • Mutuality of agreement.
  • Lawful subject matter.
  • Valuable consideration.
  • Mutuality of obligation.

Though every contract is unique, all business contracts have certain terms in common. However, not all key contract terms are in every contract because contracts will usually include terms that are relevant to their specific subject matters.

It's a recommended exercise to go over the terms of a contract repeatedly and ask as many questions as possible. It's also a good thing to trust your instincts when you perceive some things aren't quite adding up in the contractual terms. The more you read contracts, the better you'll become at telling when they're a perfect fit and when something is wrong. Besides, the practice of reading contracts will better acquaint you with the legal working structure of your business.

Confidential Terms

Usually, contracts will add terms obliging the parties to safeguard the confidential data of each other. When contracts require the inevitable exposure of one party's confidential information to another, confidential terms become some of the key contract terms.

Payment Terms

The payment terms of some contracts are easy to describe. They go something like, “X requester hereby pledges to pay Y service provider so and so amount of money for doing XYZ.” However, the terms of payment evolved from the simple, “ABC pays XYZ a certain amount of money for service rendered,” to a complex, “gross revenue, net revenue, adjusted net revenue, adjusted gross revenue, revenue share,” and so on. Things can get even more complex when chargebacks occur.

Therefore, it's good practice to get a lawyer and an accountant to review the payment terms of a contract before proceeding with transactions. Sometimes, terms of payment that define the how, the who, and the what elements of payment are tricky. So, to see if you're on the right track, make sure your terms of payment provide answers to the following questions:

  • Who is paying how much?
  • When is the payment due?
  • What duties are performed before the payment?
  • What is the payment type? (cash, wire transfer, check, promissory note, or something else)?
  • How will an untimely contract termination affect payment?


Disclaimers help contracting parties achieve one of the most vital functions of their agreement, which is to decrease uncertainties and minimize risks. That explains why virtually every contract contains a disclaimer, which curbs liability.


A warranty is the same as a guarantee. Therefore, when you offer warranty for something, you agree to subject yourself to legal liabilities that go beyond a contract breach. Warranty terms align with disclaimers and indemnities. The major thing to remember when you read a warranty clause is that you can't offer a warranty for something you cannot guarantee.

For example, if you cannot guarantee that you'll run a mile every morning, don't accept a contract that states, “I warrant that I'll run a mile every morning.”

Terms of Dispute Resolution

At the beginning of contract negotiations, parties typically don't take dispute resolution terms seriously. Instead, they tend to focus mostly on level of payment, clearly stating the scope of the product supplied or the service rendered, negotiating indemnification and warranty provisions, and considering payment mechanisms, all of which are important.

However, it's highly advised to make sure your contract includes suitable terms that cover dispute resolution from the outset. That way, in case a dispute happens, there'll be clear pointers for all parties to follow to a resolution.

Force Majeure

A force majeure clause excuses contracting parties from carrying out their contractual obligations when an unpredictable, unfortunate event beyond their control happens. Note that the force majeure clause isn't pinned to any precise legal definition. Therefore, with the help of a qualified lawyer, parties should provide a precise force majeure definition that specifically applies to their unique contract. Some instances of force majeure are explosions, fire outbreaks, strikes, terrorism, riots, and natural disasters.

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