Say I had a fact such as:
bigger(cat,mouse).
If I wanted to describe this to someone, would I be correct in saying "cat is the first term within this fact and mouse is the second term" or would I refer to the cat and mouse as atoms and say "the cat is the first atom within the fact and the mouse is the second".
Your first description is fair, being 'term' a recursive data structure: i.e. a term is either an atom, a number, or a struct, where a struct is 'name(arg1,arg2,...)', and each argument is a term.
So your second description it's more accurate (restricted).
As other answers noted, 'argument' it's the usual naming of positionally identified attributes in structured terms.