Our Contract Management Glossary provides essential definitions and explanations for key terms and concepts used in contract management, as well as examples of real use cases.

Understanding these terms is crucial for effectively navigating and managing contractual agreements. 

It is reviewed, updated and enriched regularly.

Acceptance criteria: Specific conditions that must be met for deliverables to be accepted. Example: A software must pass all specified tests before acceptance.

Addendum: A written addition to a contract that modifies or supplements its original terms. Example: Adding a new product line to an existing supplier agreement.

Amendment: A formal alteration to a contract, mutually agreed upon by all parties. Example: Extending the contract duration by six months.

Arbitration: A form of alternative dispute resolution where a neutral third party makes a binding decision on a contractual disagreement. Example: Resolving a payment dispute between a vendor and client through an arbitrator.

Audit trail: A chronological record of contract-related activities and changes. Example: Documenting all revisions made during contract negotiations.

Automatic renewal: A clause that extends the contract for a specified period unless terminated by either party. Example: A software subscription that renews annually unless canceled.

Benchmarking: Comparing contract performance against industry standards or best practices. Example: Evaluating a supplier's delivery times against market averages.

Breach of contract: Failure to fulfill the terms or obligations specified in a contract. Example: A contractor missing a project deadline stipulated in the agreement.

Change order: A written authorization to modify the original scope of work in a contract. Example: Requesting additional features in a software development project.

Clause: A specific provision or section within a contract that defines a particular aspect of the agreement. Example: A confidentiality clause protecting sensitive information.

Compliance: Adherence to the terms, conditions, and regulations specified in a contract or by law. Example: Ensuring all safety protocols are followed in a construction contract.

Contract abstract: A summary of key terms and conditions extracted from a full contract document. Example: A one-page overview of a 50-page lease agreement.

Contract analytics: The use of data analysis tools to extract insights from contract data. Example: Identifying trends in pricing across multiple vendor contracts.

Contract lifecycle management (CLM): The process of managing a contract from initiation through award, compliance, and renewal. Example: Using software to track all stages of a contract's life.

Contract repository: A centralized storage system for all contract-related documents and information. Example: A cloud-based database storing all company contracts.

Deliverable: A tangible or intangible product or service that must be provided as specified in the contract. Example: A report due at the end of a consulting engagement.

Due diligence: A comprehensive appraisal of a business or person prior to signing a contract. Example: Reviewing a potential supplier's financial stability before engagement.

Electronic signature: A legally binding way to indicate agreement to a contract using electronic means. Example: Signing a contract via DocuSign.

Escalation clause: A provision that allows for an increase in prices or wages under certain conditions. Example: An annual 3% increase in service fees.

Force majeure: A clause that frees both parties from obligation if an extraordinary event prevents one or both parties from performing. Example: Excusing delivery delays due to a natural disaster.

Indemnification: A contractual obligation of one party to compensate another for losses or damages. Example: A manufacturer agreeing to cover costs if their product causes harm.

Key performance indicator (KPI): Measurable values used to evaluate the success of a contract or contractor. Example: On-time delivery rate for a logistics contract.

Liquidated damages: A predetermined amount a party agrees to pay if they breach a contract. Example: A set fee for each day a project is delayed beyond the deadline.

Master service agreement (MSA): A contract that sets forth standard terms and conditions for future related agreements. Example: An overarching agreement with a supplier covering multiple future projects.

Milestone: A significant point or event in a project or contract. Example: Completion of the foundation in a construction contract.

Non-disclosure agreement (NDA): A contract that protects confidential information shared between parties. Example: Protecting proprietary information during a business negotiation.

Novation: The act of replacing an original party or obligation in a contract with a new one. Example: Transferring a lease agreement to a new tenant.

Obligation management: The process of tracking and ensuring fulfillment of all contractual duties. Example: Monitoring payment schedules and delivery dates.

Performance bond: A surety bond issued to guarantee satisfactory completion of a project. Example: A contractor providing a bond to ensure project completion.

Redlining: The process of marking up a contract draft to show changes, additions, or deletions. Example: Using track changes in a Word document during contract negotiations.

Renewal notice: A notification sent to parties about the upcoming expiration and renewal terms of a contract. Example: A reminder sent 30 days before a subscription service contract ends.

Risk management: The identification, assessment, and prioritization of risks in a contract, followed by coordinated efforts to minimize them. Example: Identifying potential supply chain disruptions and creating contingency plans.

Service level agreement (SLA): A commitment between a service provider and a client, defining the level of service expected. Example: Guaranteed response times in an IT support contract.

Statement of work (SOW): A document that defines project-specific activities, deliverables, and timelines. Example: Detailed project scope for a marketing campaign.

Termination clause: A provision that outlines the circumstances under which the contract can be ended before its natural expiration. Example: Allowing early contract termination with 30 days' notice.

Version control: The management of changes to documents, programs, and other information. Example: Tracking different iterations of a contract during negotiations.