Indemnity, warranty, force majeure, boilerplate — legal documents are full of terms most people have never been taught. Here's what they actually mean.
Legal documents are written by lawyers, for lawyers. Most people signing them are neither. The result is that millions of people sign contracts, tenancy agreements, and employment contracts every year without understanding what they've agreed to.
Here are the most common legal terms you'll encounter — explained in plain English.
An indemnity is a promise by one party to compensate the other for specific losses or costs if they occur.
Plain English: "If X happens and it costs you money, I'll pay for it."
Indemnities are common in commercial contracts, service agreements, and employment contracts. They can be broad (covering any loss arising from a breach) or narrow (covering only specific costs). Pay close attention to who is indemnifying whom, and whether the indemnity is mutual.
An indemnity is generally stronger than a damages claim — it triggers a right to payment without needing to prove the loss was foreseeable.
A warranty is a contractual promise that a particular fact is true or that a certain standard will be met.
Plain English: "I promise that [X] is the case."
In a contract for services, a warranty might state that the work will be performed with reasonable skill and care. In a property or business sale, warranties cover things like "the accounts are accurate" or "there are no pending claims against the business."
If a warranty turns out to be false, the other party has a claim for breach of warranty — typically damages to put them in the position they would have been in if the warranty had been true.
Liability simply means legal responsibility for something.
A limitation of liability clause caps the amount one party can be required to pay the other, regardless of the actual loss suffered.
Plain English: "Even if something goes badly wrong, the most I'll owe you is £X."
These clauses are common in commercial contracts and professional services agreements. They're usually valid between businesses. In consumer contracts, they're more restricted — the Unfair Contract Terms Act 1977 and Consumer Rights Act 2015 prevent unfair exclusions of liability, including for death or personal injury caused by negligence, which can never be excluded.
Force majeure (French for "superior force") is a clause that excuses a party from their obligations when extraordinary events beyond their control prevent performance.
Plain English: "If something completely outside our control makes it impossible to perform, we won't be in breach."
Classic force majeure events include natural disasters, war, and pandemic. The COVID-19 pandemic led to widespread force majeure disputes. Whether a force majeure clause applies depends heavily on its exact wording — some require the event to make performance literally impossible; others require only that it makes performance significantly more difficult.
Force majeure clauses must be drafted clearly. Vague references to "circumstances beyond our control" may not be enough.
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Boilerplate refers to the standard clauses that appear at the end of most contracts and are often copied without much thought.
Plain English: The "small print" at the back.
Common boilerplate clauses include:
Boilerplate looks dull but matters. The "entire agreement" clause, for example, means verbal promises made during negotiation may be completely worthless once the contract is signed.
In English contract law, a contract requires three things: offer, acceptance, and consideration.
Consideration is the "something of value" exchanged by each party. In most commercial contracts, that's money (from the buyer) in exchange for goods or services (from the seller).
Plain English: "What am I giving you in exchange for what you're giving me?"
Consideration doesn't have to be financially equal — you can agree to sell something for £1. But there must be something on both sides. A promise to give someone a gift, with nothing in return, is generally not an enforceable contract under English law (though there are exceptions).
This phrase appears in contracts — particularly property and sale of goods contracts — to signal that deadlines are strict and that missing them is a fundamental breach.
Plain English: "These dates are not approximate — if you miss them, the other party can treat the contract as over."
Without this clause, courts generally treat time limits as non-binding in the sense that a short delay will not automatically entitle the other party to walk away. With it, even a one-day delay can entitle the other party to terminate.
If a letter or email is marked "without prejudice," it means the contents cannot be used as evidence in court proceedings.
Plain English: "I'm writing this to try to settle — don't use what I say against me if we end up in court."
This protection allows parties to have frank settlement discussions without fear that their offers or admissions will be used against them. Once litigation starts, without prejudice communications stay out of the judge's hands until the case is resolved.
An assignment is the transfer of a contractual right or obligation from one party to another.
Plain English: "I'm passing my rights under this contract to someone else."
Many contracts include clauses restricting assignment — "this contract may not be assigned without the written consent of the other party." This prevents one party from unexpectedly handing over their side of the deal to someone you didn't agree to work with.
Novation is similar to assignment but goes further — it replaces one party to a contract with a new party entirely, with the agreement of all three parties.
Plain English: "We're all agreeing that [New Party] steps into [Old Party]'s shoes completely."
In a novation, the original party is released from their obligations. In a simple assignment, the original party may remain liable even after transferring their rights.
Understanding these terms before you sign means you can identify clauses that are unusually broad, unusually narrow, or missing altogether. A wide indemnity, an uncapped liability, a broadly drafted "entire agreement" clause removing verbal promises — these are all things worth noticing and, where possible, negotiating.
Disclaimer: This article is for general information only and does not constitute legal advice. For advice on a specific contract or legal document, consult a solicitor regulated by the Solicitors Regulation Authority. You can find one at solicitors.lawsociety.org.uk.
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