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Legal Vocabulary Study Guide

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Updated on Jul 15, 2011

Practice exercises for this study guide can be found at:

Legal Vocabulary Practice Exercises

Contracts are legally binding agreements. Legally speaking, a contract is formed by a meeting of the minds of at least two parties—a mutual consent resulting from an offer by one party and an acceptance of that offer by the other. Your parents are most likely very familiar with contracts as they've signed a few in their adult lives. You have a few years before you can enter a legally binding contract (most require you to be at least 18 years old), but learning the terms now will make it much easier to know whether to pick up a pen and sign something in the future.

Contracts are a part of life, regardless of what career path you eventually follow. They are part of hiring others to do work. Contracts are typically written in a language that makes them hard to read. They use terminology and legalese jargon that many people can't easily understand without some explanation. So this lesson is about those types of terms. It'll make it easier for you to either create a contract or sign one with confidence down the road.

DEFINITIONS

  • addendum   an addition or appendix, something added or a supplement
  • arbitration   a process for resolving a dispute; the settling of differences between parties by a person or persons chosen by the involved parties
  • beneficiary   a person or group that receives benefits, profits, or advantages; the legal recipient of money
  • collateral   property as security against a loan; security pledged for the payment of a loan
  • compliance   conformity; cooperation
  • default   the failure to perform an act or obligation legally required such as appearing in court or paying back a loan
  • devaluation   making or becoming less valuable; a reduction in value
  • disclaimer   a statement renouncing legal right
  • equity   a fair claim; the modification of a common law
  • extension   the act or process of increasing the range or application of something; an additional period of time
  • insolvency   the condition of being bankrupt
  • leverage   borrowing money to purchase a company; proportion of capital as debt; the use of a small investment, credit, or loan to gain a high return or reduce one's liability
  • liability   obligation under the law; debt
  • liquidate   pay a debt; shut down a business; convert assets into cash
  • notarization   the legal certification of a document by affixing a notary public's stamp and signature
  • overhead   ongoing business costs; the general expense of running a business
  • refinance   to satisfy a debt by making another loan on new terms
  • revenue   income from a person or business; the amount of money regularly coming in
  • subcontract   a secondary contract in which the person or company originally hired, in turn hires somebody else to do all or part of the work
  • variable   inconsistent; having no fixed numerical value (usually used as in variable interest or variable rates)

Practice exercises for this study guide can be found at:

Legal Vocabulary Practice Exercises

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