Defined terms add value—they allow you to state a concept more concisely and consistently than you might otherwise. But they come at a cost: Using an autonomous definition breaks up reading—you force the reader to read both the autonomous definition and the related provision. Integrated definitions add a bit of clutter in the form of the defined-term parenthetical. All the initial capitals that come with defined terms make a contract harder to read. And each time you read a defined term, you’re required to do a bit of extra work—in your mind, you have to connect the defined term to the definition.
So in using defined terms, it’s important to weigh the benefit against the cost. But in traditional contract drafting, drafters tend to consider only the benefit. When redrafting traditional contracts prose, usually you can eliminate a significant number of defined terms.
Weighing the benefit against the cost is a function of the economy the defined term offers and how often it’s used. Here’s an example:
First, consider the economy of the defined term compared with the definition. The defined term (Agreement Term) is two words; the definition (term of this agreement) is four words. That’s an unimpressive ratio. One way to improve that would be to shorten the defined term to Term; as a defined term, Agreement Term is unorthodox and awkward.
But you then have to consider how often the defined term would be used. Given that the definition is short, the defined term would have to be used often for the benefit to outweigh the cost.
In this case, the contract is a 12-page employment letter in which Agreement Term is used only twice. One instance could be replaced with term of this agreement. As for the second instance (continuation of your Base Salary in effect at the time of termination for a period of twelve (12) months following the Agreement Term), you could replace following the Agreement Term with after termination. The defined term isn’t worth the trouble.
That’s a small victory for efficient drafting. And those small victories add up to something meaningful.
(I wrote this from the perspective of the drafter! If you spot this sort of issue when reviewing a contract, fixing it could get annoying, in terms of the time it takes and the discussions it prompts. In reviewing a contract, generally it’s best to limit yourself to commenting on anything that doesn’t reflect your understanding of the deal or that might cause confusion, and this kind of inefficient use of defined terms doesn’t create either of those problems. Once you start making changes aimed at tidying up the drafting, where do you stop? See this recent post about that.)