Legal and cost glossary: 40 terms in one sentence each
The forty terms that appear in proposals, contracts and invoices for digital work, each explained in one plain sentence.
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Proposals and pricing
| Term | In one sentence |
|---|---|
| Proposal | A written offer describing what will be delivered, how, when, for what price and under what conditions. |
| Scope | The defined set of deliverables and work included in a price. |
| Not included | The explicit list of what the price does not cover, the most useful section in any proposal. |
| Assumption | A condition the price depends on, such as content arriving on time, which becomes a change request if it fails. |
| Fixed price | A set price for a defined scope, with changes priced separately. |
| Time and materials | Billing by hours worked and costs incurred, best with a cap and a cadence. |
| Estimate | A non-binding indication of cost, distinct from a fixed price. |
| Change request | A formal request to alter the scope, priced and scheduled before work. |
| Change budget | A monthly allowance of hours or money for small changes without individual quotes. |
| Discovery | The paid phase that defines scope, risks and prototype before a build price is fixed. |
| Total cost of ownership | Everything an option costs over the period you will use it, including running, maintenance, change and your own time. |
| Cost of delay | What each month of not doing something costs, the number missing from most decisions. |
Contracts and ownership
| Term | In one sentence |
|---|---|
| Governing law | The legal system under which a contract is interpreted, stated explicitly in cross-border agreements. |
| Assignment of rights | The clause transferring ownership of the work’s intellectual property to you, usually on payment. |
| Licence | Permission to use something you do not own, such as a theme, a font or a library, under stated terms. |
| Open-source licence | Terms under which freely available code may be used, some with obligations that matter for your project. |
| Escrow | Depositing source code with a third party for release to you if the supplier fails. |
| Repository | The version-controlled store of your code and its history, which should be in your account. |
| Hand-over | The defined set of code, documentation, credentials and data a departing supplier delivers. |
| Exit clause | The contract terms defining notice, hand-over, cooperation and data at the end of a relationship. |
| Auto-renewal | A term that renews automatically unless cancelled within a window, often a trap when combined with long notice. |
| Notice period | The time between giving notice and the contract ending, ideally one to three months either way. |
| Non-solicitation | A clause restricting hiring each other’s staff for a period. |
| Confidentiality | Mutual obligation to keep each other’s non-public information private. |
Payment and liability
| Term | In one sentence |
|---|---|
| Deposit | An initial payment at signing that commits both sides and funds early work. |
| Milestone | A demonstrable delivery to which a payment is tied, such as an approved prototype or a working stage. |
| Acceptance | Agreement that a delivery meets its criteria, within a defined review window, triggering payment. |
| Retention | A share of the price held until a warranty period ends. |
| Warranty | The supplier’s promise to fix defects against the specification for a period after delivery at no charge. |
| Defect | A difference between what was specified and accepted and what was delivered. |
| Liability cap | The maximum a party can be held liable for under the contract, with carve-outs your advisor should check. |
| Indemnity | A promise to cover the other party’s losses arising from specified events, such as intellectual property claims. |
| Service level | A measurable commitment such as response time by severity, reported and checked. |
Compliance and running costs
| Term | In one sentence |
|---|---|
| Processor agreement | The contract required when a supplier processes personal data on your behalf, setting out what they may do with it. |
| Data residency | The requirement that certain data be stored and processed within a specific jurisdiction. |
| Accessibility statement | A public statement of a site’s accessibility status, backed by testing, required for some organisations. |
| Consent mechanism | The banner or control that obtains permission for non-essential cookies and trackers before they run. |
| Managed hosting | Hosting bundled with maintenance and support, often opaque; prefer hosting in your name with maintenance separate. |
| Usage-based billing | Charges by consumption, such as bandwidth, requests or function calls, rather than a fixed server fee. |
| Effective rate | Total running cost divided by revenue or usage, tracked over time to see whether costs are drifting. |
Frequently asked questions
How should we use this glossary?
As a reference when a proposal, contract or invoice uses a term you are not sure of, and as a checklist of concepts to understand before signing. Each sentence is enough to follow the document; the linked articles are there when a decision depends on the detail.
Is this legal advice?
No. These are practical explanations of how terms are used in digital work. The meaning and enforceability of contract terms depend on your jurisdiction and the specific wording; have an advisor review anything you sign.