Find out what common words and terms mean in contracts and sales agreements.

Common terms and conditions

Below are definitions for common conditions and clauses you might find in a contract or agreement.

Terms that are clearly stated and agreed when the contract is made. Express terms may be agreed verbally, written into the contract, or stated on a receipt or a notice at the counter.

Contracts commonly have express terms about:

  • who the contract is between
  • what is to be sold or supplied
  • the price and payment terms, eg 'payment within 14 days of delivery'.
  • when a job is to be started or completed
  • delivery dates.

Terms not specifically stated but which are still part of the contract.

Implied guarantees are usually implied by law, eg under the Consumer Guarantees Act, contracts for consumer products have an implied term that guarantees the products will be of acceptable quality.

Conditional contracts require certain conditions (or actions) to be met by one or both of the parties. Otherwise the contract does not go ahead — it becomes void. Both parties must agree to the conditions at the time the contract is made.

Real estate contracts often have conditions, eg you agree to buy a property as long as you can arrange finance in a certain number of days. If you can’t get finance, the sale will be cancelled and any deposit already paid will be refunded in full.

Car buyers often agree to buy a car on condition that the car passes a mechanical check. If the car fails to pass, the buyer can choose to cancel the contract and get any deposit already paid back in full

These remove some of the seller’s responsibilities if the contract is broken. A common example is a statement like ‘The manufacturer is not responsible for a fault if the goods are used in a way that is not intended.’

Exclusion clauses are not always clear, so always ask the seller what happens if something goes wrong with the goods when they haven’t been misused.

Exclusion clauses can't contract out of the seller's responsibilities under the Fair Trading Act or Consumer Guarantees Act unless it is a business-to-business transaction.

Common words and phrases

Below are definitions for common words and phrases you might find in a contract.

Sets out who the contract or agreement is between. This usually means clearly identifying the seller, eg business, trader, retailer or service provider, and the consumer, eg buyer, customer or client.

How long the contract or agreement will last. Term can also refer to the specific things that are being agreed to in the contract, eg terms and conditions.

Makes it clear there are no other terms apart from what is written in the contract or agreement. If a problem occurs, the written contract or agreement alone will set out the rights and obligations of both you and the seller.

These clauses do not prevent consumers from taking action against any false or misleading statements made by a business outside of the contract.

A seller’s promise that the product or service is what they claim it to be.

The promises a seller makes to you when you buy a product or service. Warranties usually include your rights as a consumer if something goes wrong. Some warranties, eg extended warranties, may provide promises over and above the law, eg the ability to return an item you accidentally damaged.

The promises a seller makes that are not fully written out in the terms of your contract or agreement. If the terms state you have 'implied warranties', this includes all of your rights under the law, eg the Consumer Guarantees Act.

Spells out the protections that both you and the seller have when you enter a contract or agreement. An indemnity clause is usually included to limit a seller’s responsibility for any loss or damage.

No matter what the indemnity clause says, you still have rights under consumer laws if something goes wrong.

States the situations when the seller no longer has to meet their obligations in a contract or agreement for reasons outside of their control, eg earthquakes and other natural disasters.

Spells out when you or the seller can end the contract or agreement early. Typically, you or the seller can end it if the other party doesn’t follow the terms of the agreement. Contracts or agreements may end early for other reasons, eg force majeure.

Look out for any cancellation fees for ending a contract or agreement early.

Usually outlines which country’s laws apply to the contract or agreement. It may also include information on which country, or court within that country, will deal with any legal action if there’s a dispute between you and the seller.

Make sure you read the seller’s privacy policies, particularly if you buy online from an overseas retailer. Different countries have different laws about how a seller can use your personal information.

Outlines when a seller or business can transfer your contract or agreement — or your rights under them — to another seller. For example, if your internet provider is bought out by another business, your contract can be transferred to the new business.