Are Some Terms Too Obvious to Define?

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.

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.