Circular Definitions in Contracts

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.

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.