Decoding Legal Jargon: 10 Terms You Will See In The News and Hear At Interview

For law students aiming to build their commercial awareness and impress during vacation scheme interviews, understanding the following 10 terms will ensure you lay the groundworks for potential success.

1. Due diligence

When an individual or a company buys another company, it means they must “buy at their own risk”, and there are no laws protecting them when they buy a company. This involves investigating the company’s legal, financial, and other operational aspects to have a good understanding of the company’s state through the process called due diligence. Each department (legal, HR, tax, compliance, etc.) contributes to the final due diligence report, which flags issues such as regulatory breaches, ongoing litigation, or unfavourable contracts. Due diligence helps identify potential risks or pending issues the company may have.

2. Regulatory risk

This refers to the risk that a change to the laws or regulations will impact a business, sector, or market. A government or regulator may introduce stricter regulations that can lead to increased operating costs, reduced profits, or lower investor confidence.

3. ROI

Return on investment measures the profit generated from an investment relative to its cost. A higher ROI suggests a better financial return. In legal practice, ROI shows the client whether they should or should not pursue a commercial opportunity.

4. Market Volatility

Volatility refers to sharp movements in markets or unpredictable changes in market prices. There are two types of volatility: historical vs implied.

• Historical volatility looks at past prices to see how much an asset’s price has changed over time.
• Implied Volatility is based on current option prices and shows how much traders think the asset’s price will change in the future.

Higher volatility means significant price changes, which can lead to higher profit or loss. When reading news, volatility often explains investor behaviour, caution or dramatic price swings.

5. NDA (Non-Disclosure Agreement)

An NDA is a legal document that requires parties to keep information confidential.

These are common when law firms manage sensitive client information or during corporate negotiations. The NDAs make it clear that unless the information is being used for work purposes, it cannot be used or shared outside the organisation. As an NDA is a legal contract, if breached, it can result in the other party taking legal action.

Example: Client signed an NDA before viewing the company’s financials during due diligence.

6. Insolvency

A business becomes insolvent when it cannot pay its debts when they are due. For example, if a company cannot pay its suppliers or loans on time, then it becomes insolvent.

7. Indemnity

An indemnity is a contractual promise to compensate the other party for a specific loss or damage. Indemnity is routinely included within a contract.

8. Pro bono

Pro bono refers to voluntary work. In the legal world, free legal advice is provided voluntarily and without charge by a lawyer or law firm to individuals, charities or community groups who cannot afford legal services.

Law firms often highlight their pro bono initiatives in recruitment materials and interviews.

9. ADR (Alternative dispute resolution)

ADR is used to describe ways of settling a dispute without having to go to court. The common methods include mediation, arbitration, conciliation, conciliation, adjudication, expert determination, and ombudsman.

These methods are often cheaper, faster, and more flexible than court procedures.

Tip: You can be asked to compare ADR and litigation in interviews.

10. Litigation

This is the process of resolving disputes through the courts. The term is used to describe all the disputes or claims that may arise in any commercial transaction or deal. These issues can range from banking transactions and fraud, mergers and acquisitions, or corporate management. Understanding the litigation risks involved in a deal or commercial scenario is a key skill.

Tips to sound like a future solicitor or barrister:

• Build a glossary of these terms and try explaining them to your friends and family.
• Practice using these terms when reading news stories or when attempting mock interview questions.
• To stay updated, follow digestible legal commentary: Use BBC News, The Student Lawyer website, Legal Cheek, AllAboutLaw, and the Commercial Law Academy.

Sources used:

https://www.lexisnexis.co.uk/legal/guidance/what-is-pro-bono https://www.tollers.co.uk/what-does-it-mean-to-file-for-insolvency/ https://economictimes.indiatimes.com/definition/volatility?from=mdr https://legal.thomsonreuters.com/en/insights/articles/4-things-to-know-about-non-disclosure-agreements#:~:text=An%20NDA%20is%20a%20legal,protecting%20valuable%2C%20sensitive%20business%20information. https://www.investopedia.com/terms/r/regulatory_risk.asp https://uk.practicallaw.thomsonreuters.com/5-107-6256?transitionType=Default&contextData=(sc.Default)&firstPage=true https://www.citizensadvice.org.uk/scotland/law-and-courts/legal-system-s/settling-out-of-court/using-alternative-dispute-resolution-to-solve-a-problem-s/

Article written by Amanpreet Singh, Birmingham City University LLB graduate and current LLM student at University of Birmingham