Below are definitions for key legal terms you will see in contracts, including Puget Sound’s Template Agreements and Contract Review Checklist.

Deliverable:

  • Deliverables are the tangible good(s) or material(s) resulting from the service(s) to be provided by the Contractor (Vendor).

Warranties:

  • Warranties are assurances, promises, or guarantees by one party that a particular statement of fact is true and may be relied upon by the other party.
  • Warranties are commitments by one party to the other party.

Intellectual property (IP):

  • IP is generally comprised of four categories:
    • Trademarks;
    • Copyrights;
    • Patents; and
    • Trade Secrets.
  • In general terms, the law protects a party’s IP from unauthorized use by others.
  • Examples of IP include: music, literature, and other artistic works; discoveries and inventions; designs; software code; logos.

Limitation of Liability:

  • Limitation of liability refers to a written statement that serves as a disclaimer to limit conditions or instances under which the disclaiming party may be held liable for loss or damages.

Damages

  • Damages are generally divided into two categories: (i) Direct Damages and (ii) Consequential Damages.
  • Direct damages:
    • In general, direct damages are the difference between the value of the performance received and the value of the performance promised as measured by contract or market value.
    • Rather than punish the non-performing party, direct damages are designed to put the injured party in the position they would occupy if the other party delivered the performance promised in the contract.
    • Direct damages do not include incidental, indirect or consequential damages, such as lost profits or loss of goodwill.
    • Direct damages flow directly and immediately from the act of the part, rather than being from some of the consequences of such act.
  • Consequential damages:
    • Consequential damages are those damages that are not a direct result of an act, but a consequence of the act.
    • To be awarded consequential damages in a lawsuit, they must be a foreseeable result of an act.
    • An example of consequential damages might be lost revenue because a Contractor’s online registration website did not function properly and individuals could not register and pay the fee for an event.

Indemnification:

  • Indemnification occurs when one party takes on the obligation to pay for losses or damages that have been or may be incurred by another party.
  • Indemnification is also one party making the other party “whole” (give equal to what they have lost) or protected from losses which have or will occur.
  • In a contract, the source(s) and extent (limits) of the losses or damages that will be indemnified should be specified.
  • Indemnification may be unilateral (one party indemnifying the other) or reciprocal (each party indemnifying the other).

Strict liability:

  • Strict liability is when a party is responsible for the damage and loss caused by that party’s acts and omissions (failure to act) regardless of culpability (moral or legal responsibility).