For an article I have to write in the next few days, I’ve been leafing through textbooks intended to be used in teaching contract drafting.
I had contemplated doing reviews of one or more textbooks, but I decided I’d rather focus on how I’d approach teaching contract drafting. That’s what the new article will be about.
But I noticed that the four textbooks I’m now looking at all get wrong a basic feature of defined terms. Because this mistake allows me to explore, in slightly greater detail than I have previously, this aspect of defined terms, that’s what I’ll do now.
The Textbooks’ Take
The first textbook is Tina L. Stark & Monica L. Llorente, Drafting Contracts: How and Why Lawyers Do What They Do (3d ed 2024). It says, at page 193, “Do not create a circular definition; that is, do not define a term by using the same term.” It gives as an example “‘Subsidiary’ means a subsidiary of the Company.”
The second textbook is Cynthia M. Adams & Peter K. Kramer, A Practical Guide to Drafting Contracts: From Concept to Closure (3d ed. 2025), says, in a heading on page 51, “Do not use ‘circular’ definitions.” It goes on as follows:
Circular definitions use the defined term in the definition of that term.
- “Liabilities” means Distributor’s liabilities.
Using liabilities to define the term Liabilities does nothing to enlighten the reader as to what is meant by the defined term beyond merely identifying it as the “Distributor’s liabilities.”
The third textbook is Stephen L. Sepinuck & John Francis Hilson, Transactional Skills: How to Structure and Document a Deal (3d ed. 2022). It says, in a heading on page 180, “Error Three – Using a Term in Its Definition.” It then says, “A good dictionary never uses a word in its own definition. To do so is to make the definition circular, confusing, and unhelpful.” It goes on to offer the following examples:
Poor
“Purchased Receivables” means the accounts and other receivables arising out of the invoices sold by Seller to Buyer.
Better
“Purchased Receivables” means the accounts and other rights to payment arising out of the invoices sold by Seller to Buyer.
The fourth textbook is Jonathan S. Byington & Elaine H. Gagliardi, Deal Drafting Foundations: A Transactional Lawyer’s Roel in Deals and Contract Drafting (2024). On page 76, it says this:
For clarity, the drafter should avoid circularity and overlap among definitions. A definition is circular if it defines a term by using the label of the defined term in the definition. For instance, instead of saying “‘Assets‘ means all assets transferred under this agreement,” consider defining assets as “all real and personal property used in connection with the business.” Although circular definitions should generally be avoided, occasionally it makes sense to use the term being defined as part of the definition. For example, “Smith Employment Agreement” should use the title of the underlying contract even if the title uses the same words as the label of the defined term (i.e., employment agreement).
I’m not inclined to give credit for the exception offered: the exception should be the rule.
My Take
All four textbooks offer essentially the same take. They’re mistaken.
Here’s what A Manual of Style for Contract Drafting § 6.3 has to say on the subject:
The definition of a defined term is different from a dictionary definition. Dictionaries shouldn’t use in a definition the term being defined—it would be unhelpful for a dictionary definition of, say, chair to include the word chair. By contrast, a defined term simply serves as a convenient substitute for the definition, and only for that contract. So it’s unobjectionable to repeat a contract defined term in the definition, as in “Trademark” means a registered trademark or service mark or any trademark or service mark that is the subject of any application, registration, or renewal.
I’ll now go into more detail.
A defined term allows the drafter to use throughout the contract the shorter defined term instead of the longer definition. How the drafter achieves that economy depends on the context.
One kind of definition might involve enough detail that there’s no opportunity to use in the definition a word used in the defined term. For example, my definition of the defined term Change in Control consists of three first-level tabulated enumerated clauses, one of which contains two second-level tabulated enumerated clauses. Each element of the definition describes a different kind of change of control, each of which is defined with specificity that necessarily goes beyond simply reusing change in control.
Another kind of definition might refer to different items, but the drafter decides it’s expedient to use as the defined term one of those items, instead of trying to come up with a general word or phrase for all the items. The defined term Trademark used in the definition in the MSCD extract above is an example of that.
A third kind of definition is one that refers to an item with specific characteristics. The drafter is able to achieve economy by having the defined term consist of that item, stripped of the specific characteristics. Here’s a simple example: “Board” means the board of directors of the Company. Here’s a more involved example: “Material Adverse Effect” means, with respect to any Loan Party, a material adverse effect on ….
Each of the four textbooks offers as a poor definition an example of this third kind of definition. Those examples could be challenged, but only if the key noun in the definition isn’t clear enough and should be replaced with something more detailed. In that case, the problem doesn’t involve using in the defined term a word or phrase used in the definition. If a word or phrase used in the definition is adequate, it’s unobjectionable to use it in the defined term.
For example, the “poor” definition of Purchased Receivables in the extract from Sepinuck & Hilson is unobjectionable, unless anyone wants to argue that receivables isn’t clear enough. If receivables isn’t clear enough and rights to payment is, then change accordingly both the definition and the defined term.
In Closing
Four thoughts in closing. First, if I were going to challenge the Adams & Kramer example (“Liabilities” means Distributor’s liabilities), it would be on account of the bare-minimum economy it offers—saving only one word each time the defined term is used!
Second, if you want to see definitions that actually are circular, see this 2016 blog post and this 2017 blog post.
Third, the mistake the textbooks make isn’t a trivial one. It seeks to invalidate a practice that is unobjectionable and standard.
And fourth, it isn’t just textbooks that offer this incorrect advice. In his book Garner’s Guidelines for Drafting and Editing Contracts, Bryan Garner says, “In the definition, don’t use the term being defined. Doing so is amateurish and question-begging.” I’m inclined to deduct extra points for mentioning the laughably inapplicable “begging the question.” Go here for my review of that book.
