I’m back teaching at Penn Law, working through the chaos that inevitably seems to accompany the first couple of weeks. A sign that we’re getting more focused is that two students each reported an MSCD typo. (Cue author gnashing teeth.)
And more to the point, one student asked the first blogworthy question of the semester. We had been discussing integrated versus autonomous definitions, and one of the examples I used featured a definition of the defined term SEC. The student mentioned to me that during his summer at a law firm, a partner had told him that he needn’t define SEC in the contract the student was drafting, as anyone who had any business reading the contract would know that SEC was a reference to the U.S. Securities and Exchange Commission.
I thought a bit of empirical research was in order, so I of course turned to the SEC’s EDGAR system. I looked at twenty merger agreements that used the initialism SEC. Of those twenty, seventeen defined SEC, two didn’t define it, and one was inconclusive, as the definition section was in an unfiled attachment. That suggests that overwhelmingly, the practice is to define SEC.
But which approach prevails is only of anecdotal interest to me, because I think it’s simplest and clearest to define all terms, no matter how obvious their meaning. For one thing, contract drafting is most efficient when you apply rules across the board—it complicates matters if the drafter starts making judgment calls regarding whether the meaning of a given defined term is obvious. And if drafters start dropping definitions, at some point you can expect reader confusion, either because contracts can have a broader readership than you might expect, or because a given drafter had an agressive notion of what terms have an obvious meaning.
So I’ll continue to recommend that you provide a definition for every initialism or other bit of contract shorthand.
"Are Some Terms Too Obvious to Define?" Not according to Bill Clinton. ;-)
God forbid someone misinterprets SEC as Southeastern Conference. OTOH, some acronyms are not likely to be miscontrued. WYSIWYG seems pretty safe (at least if you're working on a software agreement).
If in a particular contract, a word or phrase is capable of more than one interpretation, then it makes sense to define it. Although it is generally true that words should be given their common (dictionary) meaning, the business or cultural context of the contract may cause the words to be interpreted differently than normal usage. Even in English, words or idioms can have differing uses and meanings by geographic region or by industry. If the counterparty is not from your same industry or cultural background, more definitions lead to less confusion.
Ken:
For short documents (no more than a couple pages), I often omit what I think are obviously defined terms. Because of the work I am in, my favorites are the Federal Trade Commission and the Fair Credit Reporting Act. The first time I use those terms, I spell them out; every time after that, I abbreviate it, but I don't define it expressly and I don't do this: the Fair Credit Reporting Act (the "FCRA"). It would just be silly and distracting, expecially when the audience is consumers.
Chris
From a litigator's perspective I agree with your approach, Ken…define all terms.
Some terms are too obvious to define. If a contract refers to "written notice", few would think it necessary to define "written" as "represented, physically or electronically, by alphabetical symbols". One can see circumstances where to do so might avoid a dispute, but contracts have to be functional as well.
As for the SEC, I would always reference an institution's full name as a matter of course (though I don't draft consumer contracts).
Westmorlandia: Sure. I was referring to terms that are conventionally treated as defined terms, rather than all contract language. Ken
As a trial lawyer, I lean the other way, hoping, in a lender case, that opposing counsel will whine: “what “Bank” your honor”?
So I follow a practice mentioned earlier, give the full name on first occurance, then use a single, capitalized, word or acronym thereafter.
I was asked to draft a listing agreement that referred to a PIP from a given hotel chain. There are over 100 definitions on line for PIP. I took several minutes of research to find out the parties meant a Property Improvement Report. You can bet that I defined the term.
Defining acronynms and initialisms is just common sense. Perhaps even more obvious than SEC or FTC would be using FAA or FARs in an aircraft purchase agreement. Perhaps it is true that anyone with any business reading the agreement knows what we mean. But I don't want to be the one to tell a judge or a juror, or an auditor, that she has no business reading the contract.
Some terms are too obvious to define, of course. I've started following Ken's suggestion not to define the parties (Night at the Opera notwithstanding) and not to define the document itself (this agreement vs. this Agreement).
Jack: To avoid anyone thinking that I'm in favor of not providing a defined term for any given party name—perish the thought!—I assume that what you're referring to is my not using the defined term "Parties." Ken
"ERISA" seems like a no-brainer, but I usually see it defined.