Chelsea have identified Modric has a top transfer target as manager Andre Villas-Boas aims to bolster his creative midfield options, but Tottenham are unwilling to part company with the 25-year-old.
The Blues have so far seen two offers rejected by Spurs, the latest in the region of £27 million, while the Croatia international has declared his interest in leaving White Hart Lane for their London rivals.
Terry said on Sky Sports News: "He's a world-class player who is very difficult to play against. He's very agile, very quick and a great finisher like we've seen over many years.
"I know there are problems. It's probably a little bit disrespectful towards Spurs... [to talk about the situation].
"He has his own problems at the moment. We've got a good squad of players. If he comes he could certainly add to that."
Terry also reflected on the quality of striker Fernando Torres, who joined Chelsea from Liverpool in January for £50 million but desperately struggled for form since the move, scoring just once.
"He backs himself. He realises from the World Cup he had a slight injury and carried that towards the end of last season," Terry said.
"He feels fresh, he's happy. He's fully settled. I'm certainly looking for him to get double figures goals wise.
"He was still good at times last year. He's a world-class player and the price tag is a big weight to carry on your shoulders.
"He's got all the ability in the world. He's very quick and a great finisher. We're delighted to have him and if he can bring goals along with what we already have then fantastic."