I’d like now to address a concept in a way I haven’t had occasion to address it before: the circular definition.
Consider the following contract definitions:
“Bonus Date” means a date on which Acme determines that a Bonus Period concludes.
“Bonus Period” means a period that commences on a date determined by Acme and concludes on a Bonus Date.
Their combined effect is to make the first definition read as follows:
“Bonus Date” means a date on which Acme determines that a period that commences on a date determined by Acme and that concludes on a Bonus Date concludes.
And to make the second definition read as follows:
“Bonus Period” means a period that commences on a date determined by Acme and concludes on a date on which Acme determines that a Bonus Period concludes.
So a Bonus Date is a date of unknown significance, and a Bonus Period is a period of unknown significance. Because in each case the defined term is in effect also in the definition, you’re left chasing from one definition to the other, looking for meaning.
This is the first time I’ve noticed this, but it’s a thing. See this Wikipedia entry. To use a Wikipedia example, it’s like defining an oak as a tree that grows from an acorn and defining acorn as a nut produced by an oak. So I assume it occurs in contracts, at least more than the one instance I spotted.
Note that is is different from using in a single definition the term being defined. For example, chair means a chair you sit in. But as a practical matter, that doesn’t happen, which is why the Wikipedia entry doesn’t refer to it. I hear that concept raised as an objection with respect to contract definitions, but it doesn’t apply. Here’s what MSCD 6.4 says:
The notion that you shouldn’t use in a definition the term being defined doesn’t apply to contracts. It does apply to dictionaries, because it would be unhelpful for a dictionary definition of chair to include the word chair. But in a contract a defined term simply serves as a convenient substitute for the definition, and only for purposes of that contract. Consequently, repeating a contract defined term in the definition is unobjectionable. An example: “Trademark” means a registered trademark or service mark or any trademark or service mark that is the subject of any application, registration, or renewal.
It is ugly, but I expect it can be made to work, something like as follows:
“Bonus Period” means a period that commences on a date determined by Acme and concludes on [later] date determined by Acme.
“Bonus Date” means a date on which [Acme determines that] a Bonus Period concludes.
You can probably leave out the bits in [square brackets].
What other interpretation could it have?
My fix would be revising the definition of Bonus Period to say what function it serves.
And would you move the provisions on setting the dates when a Bonus Period starts and ends in the operative clauses, rather than in the definitions? Many ways to skin a cat, but some are messier than others.
A few comments:
1/ Andrew’s revisions are lovely. I would tighten them slightly:
‘Bonus Period’ means a period that starts and ends on dates Acme sets. ‘Bonus Date’ means a Bonus Period’s end date.
2/ I don’t see circularity here. And ‘how it functions’ needn’t be part of a definition. A definition may simply lay the groundwork for substantive provisions.
3/ But I do see an ill-formed period description that omits start and end points. If the following is what the drafter means, she should say something like:
‘Bonus Period’ means a period from the start of a date Acme determines to the end of a date Acme determines. ‘Bonus Date’ means the 24-hour period before the end of the Bonus Period.
Whatever.
It’s definitely a thing. In patent licence agreements, it is not uncommon to see these types of definition:
Licensed Products means products that are within one or more claims of the Licensed Patents.
Licensed Patents means any patents owned by the Licensor that claim any aspect of the Licensed Products.
Prepare to see that example used in MSCD4 …
I recently came across a similar issue where two definitions excluded each other. For example:
“Licensee Technology” means licensee’s background IP, including data. Licensee Technology excludes Licensor Technology.
“Licensor Technology” means licensor’s background IP, including data generated therefrom. Licensor Technology excludes Licensee Technology.
This oversimplifies the issue somewhat, but if there’s ever a question about which category some item fell within, how would you determine which exclusion applied? For example, if Licensee used Licensor Technology before the term of the agreement to generate data, the data would appear to fall within both definitions. I understand the desire to separate the two, but a circular exclusion doesn’t seem to fit the bill.
This might raise issues, but I suggest that this doesn’t constitute circular definition.