A Reference Set of Definitions?

While at a social event in Saratoga recently, I had the pleasure of meeting Jerry Kaplan, senior counsel in McDermott Will & Emery’s Chicago office. Ever the imaginative conversationalist, I turned the topic to—what else?—contract drafting. At some point in our conversation Jerry wondered whether contracts wouldn’t be more efficient if drafters were able to refer to a standard set of definitions, along the lines of the definitions stated in section 7701 of the Internal Revenue Service Code.

It’s certainly the case that the same defined terms crop up repeatedly—for example, for purposes of U.S. contracts, Person, Affiliate, Government Body, Environmental Laws, and Business Day, not to mention a slew of defined terms for government agencies (IRS) and legislation (ERISA). Surely it would make life easier for drafters, and make contracts shorter, if instead of including, yet again, in a contract definitions for all or some of those defined terms you could simply refer to some established set of definitions.

Judging from this comment by reader Art, English drafters have the benefit of such a set of definitions, as they piggy-back off definitions contained in the UK Companies Act.

For U.S. purposes, the challenge would seem to be whether any suitable set of definitions currently exists. (Jerry and I agreed that the IRS definitions are too tax-focused to serve that function.) Any suggestions? And do drafters in other countries (besides England) have the benefit of such a set of definitions?

I think that once an authoritative vendor of document-assembly business-contract templates arrives on the scene, they’d be best placed to develop such a set of definitions for purposes of U.S. drafting.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

6 thoughts on “A Reference Set of Definitions?”

  1. The definitions in English law governed agreements (see link) originate from European Directives on company law. Accordingly, the very same definitions are used in all EU member state laws and therefore also found in (speaking for my own country) the Netherlands. This applies for example to the defined terms “subsidiary” and “group companies” (particularly used for statutory accounting principles and annual accounts publication requirements).

    In many non-English-speaking European legal practices it is common to have certain key English words followed by the referred to statutory concept in the local language (between brackets in italics). That would typically apply to concepts with a specific meaning, often related to property law (and security rights), insolvency law or simply the corporate type of entity.

  2. Ken:

    Maybe this would work within some limited context like acquisition agreements, or insurance contracts. But for general commercial contracts, we’d end up getting stuck with definitions that are adapted for purposes other than the ones they get used for.

    Chris Lemens

  3. The ABA Business Section has established the Taskforce on the Dictionary of M&A Terms. Its work is in progress; but, presumably it will cover international transactions. Rule 12b-2 under the Securities Exchange Act provides a compilation of standard definitions that are applicable in a wide variety of contexts. International Swap Dealers Association, Inc. has published a Code of Standard Wording, Assumptions and Provisions for Swaps, which is useful in drafting all manner of documents relating to corporate finance of a domestic or international character. Finally, there are 40+ pages of definitions in the Financial Covenants Reference Manual developed by the ACIC’s Private Placement Enhancement Project that pertain to debt issues.

  4. Gary: Most of the sources you cite are probably too specialized for general use. And I think a dictionary wouldn’t work—if it were at all rigorous, it would have to discuss alternative meanings. Ken

  5. It seems that the chief problems cited in these comments are the variety of agreement contexts and the plethora of definitive authorities (including the ABA) that already exists. Yet I think we might all agree in theory that a reference set of basic definitions would be useful, even if not mandatory and perhaps used only as a default resource. What if we did it from the ground up rather than trying to achieve some kind of official status–perhaps as a wiki that we could agree would be “frozen” as of a date that gave a reasonable time for its development, then updated periodically (e.g., every two years)? It might just catch on….


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