What are contract terms?

23rd Nov 2009 by Tobias John Sterling

Simply put, the terms of a contract are the things that the parties to the contract agree to do. For example, "The buyer must pay the deposit to the seller on the date of this contract" (note that terms such as 'buyer,' 'seller' and so on would be defined in the definitions section of the contract). Importantly, to fail to fulfill a term of a contract is to breach the contract. This allows the other party to take legal action over the breach, which could lead to a court making an order for 'specific performance' -- that is, ordering the first party to fulfill the terms of the contract as written. This is why it's important to distinguish actual terms of the contract from 'mere puffery' (a statement like "we have the best pizza in the world" is clearly mere puffery as opposed to a serious claim) or from representations. Representations are statements made during contract negotiations to induce the other party to agree which don't for one reason or another become terms. As mere puffery and representations aren't terms of the contract, not fulfilling them doesn't allow the other party to get a remedy such as damages or specific performance.

This answer is the subjective opinion of the writer and not of FinancialAdvisory.com