Action for the price A claim for a sum of money promised to be paid under the contract.

Agent A person who is authorized by the principal to enter into contracts with third parties on the principal's behalf.

Arbitration Signing up to arbitration is a bit like paying for private medical treatment; businesses do it because they do not want to rely on the state run system. Arbitration provides an alternative judicial forum where the parties have more control over the procedure and timing of the hearing and, most importantly to commercial parties, the proceedings and judgment are private and confidential (unless they end up in the courts on appeal from the arbitrator!).

Assignment The transfer of some property or right of action from the original owner (the assignor) to the new owner (the assignee).

Avoid Executory contracts (contracts where neither party has performed) may be avoided for misrepresentation. It is not appropriate to talk of recission because there are no benefits to be returned. Avoiding a contract for misrepresenting is different to a contract which is void ab initio (void from the start) e.g. because of a mistake in communication (see chapter 8).

Collateral contract A contract which exists alongside the main contract and which has separate consideration, sometimes provided by a different person, to that in the main contract.

Condition Terms of the contract that give the right to terminate AND claim damages upon breach of the condition.

Constructive notice Applies when a party did not actually have notice of a particular event but the courts deem such notice usually because the party turned a blind eye or was negligent and ought to have had actual notice.

Contra proferentem 'Against the person proffering it, or putting it forward' and the exemption clause will be interpreted against the person seeking to rely on it so as to exclude their liability.

Contractual damages A monetary award aimed at putting the claimant in the position he would have been in if the other party had performed according to the contract.

Cost of cure The amount of money it would cost to pay someone else to complete the unfinished or defective performance.

Costs The court makes a costs order to determine who pays for the money spent on litigation. The court has a discretion to order costs as it sees fit but generally the losing party has to pay a large proportion of the winning parties' costs (and his own costs). Costs can be used to punish a party for wasting time (e.g. for alleging fraud when there was no evidence of fraud).

Damages in lieu of rescission This means that the court may award damages instead of allowing the parties to rescind the contract. Therefore the contract stands valid (it is not rewound) and the representee receives damages.

Damages The obligation to pay damages is a secondary obligation to pay a sum of money which arises in response to breach of a primary obligation (e.g. a contractual obligation or duty of care in tort). Damages for breach of contract are aimed at putting the claimant in the position as though the contract had been performed (see chapter 11 Damages). In contract, tortious damages are aimed at putting the claimant in the position as though the tort had not been committed.

Debtor and creditor A debtor is a person who owes money to his creditor. In a loan contract the borrower is a debtor and the lender is his creditor. The terms have wider meaning and are not restricted to loan agreements; for example, a supplier who provides goods 'on credit' (ie with payment to be made in the future) to a business is a creditor and the business is a debtor as the business owes the supplier the value of the goods.

Delivery warrants Pieces of paper which give the person holding them the right to demand delivery of the goods represented.

Duty defining terms Exclusion clauses traditionally wait for a liability to arise and then act to exclude this liability (see diagram 6.6). Duty defining terms act by defining the parties' obligations in such a way that the liability never arises. In both case one party will succeed in avoiding liability, either by exclusion or by definition.

Entire agreement clause May prevent one of the basic requirements for establishing a misrepresentation (inducement) from ever arising by stating that the parties have not relied upon any representations. More generally, the clause says that the entire agreement is contained in the written contract and all previous negotiations do not form part of the agreement (are not terms) and the 'no reliance' part is added to ensure that these non-terms cannot form misrepresentations.

Estoppel Designed to prevent unconscionable conduct and usually stops someone denying what he has said or done. Its potential scope can be very wide and vague.

Expectation interest The expectation interest equates to the net value of what the innocent party would have received if the contract had been performed.

Forfeiture clause A forfeiture clause provides that a party will lose a sum of money paid in advance (a deposit) if he breaches the contract.

Fraudulent misrepresentation This is established when a person makes a false statement which he knows is not true, has no belief in its truth, or makes recklessly, not caring whether it is true or not (Derry v Peek (1889)).

Garden leave When an employee gives notice (say the three months' required under his contract) that he wants to terminate his contract and his employer tells him not to bother coming to work for those months (mainly because he wants to avoid disruption and the leak of confidential information).

Guarantee A binding promise made by A to B to perform C's obligations owed to B if C fails to perform (e.g. C's failure to pay a debt to B).

Hire purchase Hire purchase is different to an outright sale of goods because the 'buyer' starts off by hiring the goods and paying an instalment fee (usually monthly) and it is only at the end of the term (say three years) that he finally purchases the goods with his final instalment. The total instalments add up to the value of the goods plus an amount for interest (usually a lot so check this before you take out one of these type of 'buy now pay later' deals) and so the effect is as though the 'buyer' had been lent the money and then used it to buy the goods. The point is that title remains with the 'seller' until the very end when the 'buyer' finally stops hiring and purchases the goods.

Innominate terms An innominate term is a third type of term, neither a condition nor a warranty; it is a kind of hybrid term because sometimes its breach gives a right to termination and sometimes it only gives a right to damages, depending on how serious the consequences of the breach are.

Interim injunction This type of injunction is a temporary measure designed to give relief until a full hearing can be arranged and a final order made. It is often used in emergencies where a quick judgment is necessary, for example to stop a newspaper from printing confidential information the next morning.

Invitation to treat Falls short of being an offer capable of binding acceptance; instead it is an invitation for the other party to make an offer, which the former party is free to accept or reject.

Lease An estate (a bundle of property rights) over land for a particular duration of time. It is carved out of the lessor's freehold estate (a bundle of timeless property rights) over the land and gives the lessee the right to uninterrupted occupation of the land for the duration of the lease.

Licence Does not give the licensee property rights in the land; instead it is merely a contract that gives him permission to be on the land.

'Marriage consideration' Marriage, or a promise to marry, could constitute consideration for a promise until it was abolished by the Law Reform (Miscellaneous Provisions) Act 1970 s.1.

Misrepresentation A false statement of fact made by one party to the other which induces that other party to enter into the contract.

Mutuality Can loosely be translated as 'matching;' if one party wants to claim specific performance then the other party must have been able to match this by claiming specific performance himself (it is not necessary that the other party does actually claim specific performance, just that he would have had the option to do so).

Negligence A party is negligent when he breaches a duty to take reasonable care; a claimant must therefore prove fault (in the sense that the defendant did not take reasonable care). The duty can be imposed by law (e.g. the tort of negligence) or by contract (where the parties agree to take reasonable care in performing their promises).

Negligent misrepresentation Established when a person makes a false statement which he may honestly believe to be true but without reasonable grounds for believing it to be true. See s.2(1) Misrepresentation Act 1967.

Nominal damages Usually just a couple of pounds, are awarded by the court to signify that there has been a breach of contract but no loss (or no loss proven).

Option An irrevocable promise by one party to another who may call for performance of the promise at any time up to a specified date.

Payor and payee The payor is the person paying money. The payee is the person being paid.

Penalty clauses Unenforceable because they penalize a party for his breach rather than provide a reasonable estimate of compensation to the other party for his loss (an agreed (or liquidated) damages clause).

Prospectus An information document published by a company when it wants to raise money on the public markets (e.g. by issuing shares on the Main List and admitting them for trading on the London Stock Exchange). It tells potential buyers what the company does and explains the various risks of investing in the company.

Quantum meruit The old name for a claim for the value of work done; the worker is allowed to claim 'as much as it deserves' which equates to 'reasonable renumeration'.

Recission A remedy that allows the parties to unwind the contract. Benefits transferred between the parties are returned to the original party. The aim is to put the parties in the position they were in before the contract. Sometimes a rescinded contract is referred to as set aside.

Reliance interest The extent to which the innocent party is worse off as a result of relying on the contract.

Repudiation A party who repudiates a contract effectively puts his hands up and says: 'I'm not able or don't want to perform anymore. I may have to pay you damages but let's bring this contract to an end.' He is letting the other party know in advance that he intends to breach his obligations and that the other party should accept his repudiation as terminating the contract (terminating any further obligations to perform) and be content with a claim for damages instead.

Restitution interest Focuses on the defendant's gain rather than the claimant's loss. The defendant has to give back or give up some or all of the profits that he made from the breach of contract.

Security Used to reassure a lender that he will get his money back. Security rights are taken over the property of the debtor (security right are therefore rights in rem – see Introduction) and can be enforced (e.g. by selling the property) if the debtor fails to repay the loan.

Set-off You have probably worked a one of these agreement hundreds of times in your life without realizing it. Very simply, if I owe you £20 and you buy goods off me for £15 then we can set-off the value of the goods from the £20 I owe you so that I now only owe you £5. It's easier than me paying you £20 and then you giving me £15 back.

Severable obligations These can be split off from the main obligations under the contract, as though the parties made lots of smaller promises, say to do the work incrementally. Each 'mini-obligation' can give rise to an obligation to pay on performance by the other party of the work required under the 'mini-obligation'.

Strict liability Describes a no-fault obligation; e.g. the obligation on the seller of goods to provide goods which are of satisfactory quality which does not depend on whether the seller is at fault and which is broken even if the reason for the defect is the fault of the manufacturer. The promise to provide satisfactory goods is strict and is not simply a promise to take reasonable care.

Title Has a complex meaning and you are likely to study it in more detail in property or land law. For present purposes, it is sufficient to imagine it as the ultimate and most powerful property rights over goods; whoever holds these property rights is the owner of the goods and can prevent anyone from interfering with his goods.

Trust One of Equity's most distinctive creations; arises where one person, the trustee, is the nominal and legal owner of property but holds it in trust for the benefit of another, the beneficiary, who is otherwise known as the equitable or beneficial owner.

Underwriting Another word for insurance. For example, if a company issues shares (equity) or bonds (debt) then a bank will underwrite the issue and guarantee that the company will get the money it needs even if the share or bond issue fails to raise the necessary amount.

Void contracts Not contracts at all; they have never amounted to a contract and they never will. A label used by the court to signify that the issue of whether there was a contract was in dispute but, on the facts, there was no contract.

Voidable contracts These are best thought of as valid but damaged contracts; the courts have decided that there is a defect in the contract (i.e. in the case of misrepresentation, that the claimant was induced to entered into the contract by a false statement) and so the claimant is given the option to rescind the contract or affirm it and carry on as normal.

Warranty (1st sense) A term of the contract, as opposed to a representation which is not part of the contract. A warranty constitutes a promise or guarantee which, if broken, automatically entitles the other party to damages to make good the promise.

Warranty (2nd sense) Used to describe a term of a contract that is not a condition and gives the right to damages but not termination upon breach of the warranty.