Contract glossary
Clear definitions of the legal terms you meet in everyday contracts, with the Dutch and English equivalents and the law behind them.
Key terms
Clause
A distinct provision in a contract that sets out a specific right or obligation.
Breach of contract
A failure to perform any obligation under a contract without a lawful excuse.
Liability
Legal responsibility to compensate another party for loss caused by an act or omission.
Force majeure
An unforeseeable event beyond a party's control that excuses non-performance of a contract.
Termination
Bringing a contract to an end before or at its natural expiry, by right or agreement.
Intellectual property
Legally protected creations of the mind such as patents, trademarks, and copyright.
GDPR
The EU regulation governing how personal data of individuals must be processed and protected.
Good faith
The duty to act honestly and reasonably in forming and performing a contract.
General terms and conditions
Standardised pre-formulated clauses a party uses across many contracts, governed by strict Dutch rules.
Framework agreement
A master contract setting general terms under which future call-off orders are placed.
Letter of intent
A preliminary document recording parties' intent to negotiate or conclude a future agreement.
Payment terms
The contractual rules governing how, when and in what currency a debtor must pay an invoice.
Bank guarantee
An independent bank undertaking to pay a beneficiary on demand if the debtor fails to perform.
Retention of title
A seller retains ownership of delivered goods until the buyer has paid in full.
Liability limitation
A contract clause that caps or excludes the damages one party can recover from the other.
Tort (wrongful act)
A wrongful act causing harm that gives rise to liability outside of any contract.
Supply chain liability
A principal's liability for wages and taxes that contractors and subcontractors fail to pay.
Bankruptcy
A court-ordered liquidation procedure that seizes a debtor's assets for the benefit of creditors.
Conditions subsequent
A future uncertain event whose occurrence ends an obligation that was already in effect.
Change of control clause
A provision giving rights if ownership or control of a contracting party changes hands.
Mediation
A voluntary process where a neutral mediator helps parties reach their own settlement of a dispute.
Exclusivity clause
A provision committing a party to deal only with the other for defined goods, services or territory.
Obligation of result
A duty to deliver a specific, agreed outcome, not merely to make a best effort.
Service credits
Pre-agreed financial credits a supplier owes the client when service levels are missed.
Tendering
A structured competitive procedure in which suppliers bid for a contract under predefined rules and award criteria.
Procure-to-pay
The end-to-end process from requisitioning goods to paying the supplier invoice, often automated in one workflow.
Due diligence
Investigating a supplier or counterparty's financial, legal and operational standing before contracting.
Contract Management
Structured oversight of agreements from drafting through execution, monitoring and termination.
Contract lifecycle
The full sequence of stages a contract passes through, from request to renewal or expiry.
Vendor lock-in
Dependence on a supplier that makes switching prohibitively costly, complex or risky.
Digital signature
A cryptographically secured electronic signature that authenticates a signer and a document's integrity.
Absenteeism insurance
Cover for an employer's wage-continuation costs during employee sickness absence.
Acceptance protocol
A formal record by which the client accepts delivered work, often listing snags to be remedied.
Acceptance test
A predefined test that delivered goods or software must pass before the client formally accepts them.
Addendum
A supplementary document that adds to or amends an existing contract without replacing it.
Anti-corruption clause
A provision requiring the parties to comply with anti-bribery and anti-corruption laws.
Arbitration
Private dispute resolution by one or more arbitrators whose award binds the parties.
Assignment
Transferring contractual rights or obligations from one party to another.
Audit right
A contractual right to inspect a counterparty's records or processes to verify compliance.
Authorised signatory
A person with legal authority to bind an organisation by signing a contract on its behalf.
Auto-renewal
A clause extending a contract automatically unless a party opts out in time.
Back-to-back contracting
Mirroring obligations from a head contract into a subcontract so terms flow through consistently down the chain.
Bailiff's writ
An official document served by a bailiff, such as a summons or enforcement notice.
Bank guarantee
An independent bank undertaking to pay a beneficiary on demand if the debtor fails to perform.
Bankruptcy
A court-ordered liquidation procedure that seizes a debtor's assets for the benefit of creditors.
Baseline assessment
An initial measurement of performance against which future results and improvements are judged.
Benchmarking clause
A clause allowing prices or service levels to be compared to the market and adjusted accordingly.
Blanket agreement
A long-term purchasing arrangement covering recurring orders at agreed terms over a period.
Boilerplate
Standard, reusable contract clauses that appear in most agreements with little change.
Bonus-malus arrangement
A mechanism rewarding performance above target and penalising performance below it.
Breach of contract
A failure to perform any obligation under a contract without a lawful excuse.
Buildings insurance
Cover for physical damage to a building from risks such as fire, storm and water.
Chain clause (perpetual obligation)
A clause obliging a party to impose the same obligation on any successor, passing it down a chain.
Change of control clause
A provision giving rights if ownership or control of a contracting party changes hands.
Change orders (variations)
Agreed additions to or reductions of contracted work, with corresponding price and time adjustments.
Clause
A distinct provision in a contract that sets out a specific right or obligation.
Collaboration agreement
A contract setting how two or more parties cooperate on a joint project or objective.
Commercial lease
A lease of business premises, governed in the Netherlands by protective statutory regimes.
Compliance clause
A clause obliging parties to comply with applicable laws, standards and policies during the contract.
Condition precedent
A future uncertain event that must occur before a contractual obligation takes effect.
Conditions subsequent
A future uncertain event whose occurrence ends an obligation that was already in effect.
Confidential information
Non-public information shared in confidence that the recipient must protect and not disclose.
Consequential damages
Indirect loss flowing on from a breach, such as lost profit, lost production or reputational harm.
Consideration
In common law, the value each party gives that makes a contract binding.
Consignment stock
Inventory held at the buyer's site but owned by the supplier until it is actually consumed or sold.
Consumer Price Index (CPI)
A statistical measure of average price changes for consumer goods, often used to index contract prices.
Contract archiving
Securely storing expired or signed contracts so they remain retrievable and legally admissible.
Contract automation
Using software to generate, route, sign and monitor contracts with minimal manual effort.
Contract compliance
The degree to which parties actually perform the obligations and terms set out in a contract.
Contract lifecycle
The full sequence of stages a contract passes through, from request to renewal or expiry.
Contract Management
Structured oversight of agreements from drafting through execution, monitoring and termination.
Contract portfolio management
Managing all contracts collectively to optimise value, risk and supplier mix across the organisation.
Contract register
A central, searchable record of all contracts with their key dates, parties and obligations.
Contract renewal
Continuation of an agreement beyond its initial term, by express agreement or automatic extension.
Contract risk management
Identifying, assessing and mitigating the legal, financial and operational risks within contracts.
Contract transfer
Transferring an entire contractual relationship, with all rights and obligations, to a new party.
Contract value
The total monetary value of a contract over its term, used for budgeting, thresholds and risk.
Cost-plus billing
Billing based on actual costs incurred plus an agreed margin, rather than a fixed price.
Counterparty
The other party to a contract from the perspective of the party referring to it.
Cyber insurance
Cover for losses from cyber incidents such as data breaches, hacking and ransomware.
Data portability clause
A provision ensuring data can be exported and transferred in a usable, structured format.
Data processing agreement (DPA)
A GDPR-required contract governing how a processor handles personal data for a controller.
Delivery terms
The contractual conditions governing how, when and where goods or services are delivered.
Deposit agreement
A contract under which assets, funds or documents are held by a custodian under agreed conditions.
Digital signature
A cryptographically secured electronic signature that authenticates a signer and a document's integrity.
Direct damages
Loss that flows immediately and foreseeably from a breach, such as repair or replacement costs.
Direct debit discount
A small price reduction offered to customers who authorise payment by automatic direct debit.
Dispute resolution clause
A provision setting out how, where and by whom contractual disputes will be resolved.
Due diligence
Investigating a supplier or counterparty's financial, legal and operational standing before contracting.
Duty of care
The obligation to act with the prudence and diligence that may reasonably be expected.
Early termination
Ending a fixed-term contract before its agreed end date, typically only on grounds the contract allows.
Effective date
The date on which a contract becomes legally operative and the parties' obligations begin.
Escape clause
A provision letting a party exit or suspend the contract if specified circumstances arise.
Escrow arrangement
A neutral third party holds money, documents or source code, released on agreed conditions.
Exclusivity clause
A provision committing a party to deal only with the other for defined goods, services or territory.
Exit clause
A provision setting out the rights, duties and process when a contract ends or is wound down.
Exit plan
A documented plan describing how services and assets transfer when a contract ends.
Exoneration clause
A clause that excludes or limits a party's liability for damage.
Extrajudicial collection costs
The reasonable out-of-court costs of recovering an unpaid debt, recoverable from the debtor by law.
Fixed price vs. cost-plus
The choice between a guaranteed fixed contract price and billing of actual costs plus a margin.
Force majeure
An unforeseeable event beyond a party's control that excuses non-performance of a contract.
Framework agreement
A master contract setting general terms under which future call-off orders are placed.
GDPR
The EU regulation governing how personal data of individuals must be processed and protected.
General terms and conditions
Standardised pre-formulated clauses a party uses across many contracts, governed by strict Dutch rules.
Ghost licences
Software licences that are paid for but no longer used by anyone in the organisation.
Good faith
The duty to act honestly and reasonably in forming and performing a contract.
Governing law
The body of law a contract designates to interpret and enforce its terms.
Incoterms
Standardised ICC trade terms defining delivery, risk and cost allocation in international sales.
Indefinite-term contract
A contract with no fixed end date, continuing until validly terminated by a party.
Indemnity
A contractual promise to compensate another party for specified losses or third-party claims.
Intellectual property
Legally protected creations of the mind such as patents, trademarks, and copyright.
Intellectual property clause
A provision allocating ownership and use rights in intellectual property created or used under a contract.
ISO 9001
The international standard for quality-management systems, often required of contract suppliers.
Letter of intent
A preliminary document recording parties' intent to negotiate or conclude a future agreement.
Liability
Legal responsibility to compensate another party for loss caused by an act or omission.
Liability limitation
A contract clause that caps or excludes the damages one party can recover from the other.
Licence agreement
A contract by which an owner permits another to use intellectual property under defined conditions.
License
Permission to use intellectual property under defined conditions without transferring ownership.
Liquidated damages
A pre-agreed sum payable on breach, set in advance instead of proving actual loss.
Maintenance contract
An agreement under which a provider maintains equipment, software or premises for a recurring fee.
Market conformity
Whether prices and terms align with prevailing market rates for comparable goods or services.
Material adverse change (MAC)
A significant negative event that lets a party walk away or renegotiate a deal.
Maverick buying
Purchasing outside agreed contracts or procurement processes, undermining negotiated terms and spend control.
Mediation
A voluntary process where a neutral mediator helps parties reach their own settlement of a dispute.
Minimum contract duration
The shortest period a contract must run before either party may terminate it.
Motor vehicle insurance
Insurance for vehicles, ranging from compulsory third-party cover to fully comprehensive.
Motor vehicle liability insurance
Mandatory insurance covering damage a motor vehicle causes to third parties.
Negotiation strategy
A planned approach to bargaining covering objectives, leverage and tactics, to reach the best sustainable deal.
Non-compete
A clause restricting a party from competing with the other for a defined time and area.
Non-disclosure agreement (NDA)
A contract obliging parties to keep shared information secret and use it only as agreed.
Non-solicitation clause
A provision barring a party from approaching the other's staff or clients for a set period.
Notice of default
A formal demand giving a defaulting party a final period to perform before falling into default.
Notice of defect
A buyer's timely complaint that delivered goods or services are non-conforming or defective.
Notice period
The advance warning a party must give before ending or not renewing a contract.
Notification of defects clause
A clause fixing how and within what period a buyer must report defects in performance.
Obligation of result
A duty to deliver a specific, agreed outcome, not merely to make a best effort.
Open-book contracting
A contract model where the supplier discloses its actual costs and margin, enabling transparent pricing.
Order of precedence
A clause ranking contract documents so a higher-ranked one prevails in case of conflict.
Parent company guarantee
A guarantee by a parent company for the contractual obligations of its subsidiary.
Payment default
The state of being in default for failing to pay a due debt, triggering interest and remedies.
Payment terms
The contractual rules governing how, when and in what currency a debtor must pay an invoice.
Pledge
A security right over movable property or claims giving the holder priority on enforcement.
Price escalation
A contractual mechanism allowing the price to rise during the term based on defined cost drivers.
Price indexation clause
A clause that automatically adjusts the contract price to a published index such as the CPI.
Price revision
A renegotiation or recalculation of the agreed price during the contract on defined grounds.
Pro forma notice
A precautionary notice of termination served only to preserve a deadline, pending a final decision.
Procure-to-pay
The end-to-end process from requisitioning goods to paying the supplier invoice, often automated in one workflow.
Procurement audit
An independent review of procurement processes, contracts and spend to test compliance, value and control.
Procurement policy
The internal rulebook setting how an organisation buys: authority, thresholds, ethics and supplier requirements.
Procurement process optimization
Streamlining procurement workflows to cut cycle time, errors and cost while strengthening control and value.
Procurement strategy
The plan setting how procurement will deliver value, manage risk and support business goals across categories.
Procurement synergy
Combined purchasing power from bundling demand across units or entities to secure better terms and prices.
Procurement threshold
A spend value above which stricter procurement rules, such as multiple quotes or formal tendering, apply.
Professional indemnity insurance
Cover for financial loss caused to clients by professional errors, advice or negligence.
Profit leakage
Erosion of contracted value through missed terms, overpayments, unused services or uncaptured savings.
Public/general liability insurance
Cover for damage a business causes to third parties' persons or property during operations.
Purchase conditions
A buyer standard terms governing its purchases, often competing with the supplier sales terms.
Purchase obligation (minimum take)
A contractual commitment to buy a minimum quantity or value over a period, regardless of actual need.
Renegotiation
Reopening an existing contract to adjust price or terms in light of changed circumstances or performance.
Renewal clause
A provision setting out how and when a contract is extended after its initial term ends.
Representation
A statement of fact made to induce a party to enter into a contract.
Rescission
Unwinding a contract so the parties are restored to their pre-contract position.
Retention of title
A seller retains ownership of delivered goods until the buyer has paid in full.
Retroactive effect
A contractual provision applying as if it took effect on a date before it was actually agreed.
RFP / RFQ
Formal documents inviting suppliers to propose solutions (RFP) or quote prices (RFQ) for a defined need.
Right of retention
A creditor right to withhold another property until a related claim is paid.
Right of suspension
The right to withhold one's own performance until the other party performs its obligation.
Seasonal contract
A contract limited to recurring seasonal periods, with obligations active only during the season.
Service contract
A contract under which one party provides defined services to another for an agreed fee.
Service credits
Pre-agreed financial credits a supplier owes the client when service levels are missed.
Service level agreement (SLA)
A commitment defining measurable service performance levels and remedies for shortfalls.
Spend analysis
Systematic review of procurement spend by category, supplier and unit to find savings and consolidation opportunities.
Statutory interest
The interest rate set by law that a debtor owes on a late payment when no rate is agreed.
Subcontractors
Third parties a contractor engages to perform part of the work it owes under the main contract.
Supplier evaluation
Assessing supplier performance against quality, delivery, price and compliance criteria to guide sourcing decisions.
Supplier non-compete clause
A clause restricting a supplier from competing with or supplying competitors of the customer.
Supplier relationship management
The structured management of key supplier relationships to maximise value, performance and joint innovation.
Supplier segmentation
Grouping suppliers by value and risk so management effort and relationship type match their strategic importance.
Supply chain liability
A principal's liability for wages and taxes that contractors and subcontractors fail to pay.
Surety / Personal guarantee
A guarantor accessory promise to perform a debtor obligation if the debtor fails to do so.
Suspension of payments
A temporary court-granted moratorium giving a struggling debtor breathing space to restructure.
Tendering
A structured competitive procedure in which suppliers bid for a contract under predefined rules and award criteria.
Term (duration)
The period during which a contract is in force, from start date to expiry.
Termination
Bringing a contract to an end before or at its natural expiry, by right or agreement.
Three-way matching
A control that pays an invoice only if it matches the purchase order and the goods-receipt record.
Tort (wrongful act)
A wrongful act causing harm that gives rise to liability outside of any contract.
Total Cost of Ownership
The full lifetime cost of a purchase, including acquisition, operation, maintenance and disposal.
VCA (Safety, Health & Environment Checklist Contractors)
A Dutch certification scheme for managing safety, health and environment in contracting work.
Vendor lock-in
Dependence on a supplier that makes switching prohibitively costly, complex or risky.
Version control
Tracking successive drafts of a contract so the authoritative current version is always identifiable.
Volume discount
A price reduction granted to a buyer who purchases larger quantities within an agreed period.
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