Don’t Use Definition-First Autonomous Definitions

MSCD offers two ways to create defined terms: autonomous definitions and integrated definitions.

Here’s an autonomous definition:

“SEC” means the U.S. Securities and Exchange Commission.

Here’s an integrated definition, with its associated defined-term parenthetical:

… Acme Incorporated, a Delaware Corporation (“Acme”).

But one also sees a different way of presenting definitions: as autonomous definitions, but with the defined term placed at the end. Here are three examples, with the definition in italics:

On the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware, as amended (the “DGCL”), at the Effective Time, Merger Sub will be merged with and into the Company (the “Merger”), the separate corporate existence of Merger Sub will cease and the Company will continue as the surviving corporation in the Merger. The Company as the surviving corporation in the Merger is referred to herein as the “Surviving Corporation.”

WHEREAS, the Borrowers, the Facility Guarantors, the Lenders, the Agents and certain other parties are party to that certain Amended and Restated Credit Agreement, dated as of March 30, 2012, as amended by that certain First Amendment to Amended and Restated Credit Agreement, dated September 24, 2015 (the “Existing Credit Agreement”). The Existing Credit Agreement, as amended by this Amendment, and as may be further amended, amended and restated, restated, supplemented, extended or otherwise modified and in effect from time to time is referred to herein as the “Credit Agreement”.

The party making a claim under this Article VII is referred to as the “Indemnified Party”, and the party against whom such claims are asserted under this Article VII is referred to as the “Indemnifying Party.”

Here’s what MSCD says about this:

In autonomous definitions, the defined term can be placed after the definition, as in Any such transfer is referred to in this agreement as a “Permitted Transfer.” But it’s more economical to place the defined term before the definition, as in “Exchange Act” means the Securities Exchange Act of 1934.

But using an integrated definition might be even more economical. Consider the first example above, reworked to use an integrated definition (8 words instead of 17):

On the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware, as amended (the “DGCL”), at the Effective Time, Merger Sub will be merged with and into the Company (the “Merger”), the separate corporate existence of Merger Sub will cease and the Company will continue as the surviving corporation in the Merger (the Company in that capacity, the “Surviving Corporation”).

So instead of a definition-first autonomous definition, use either an integrated definition or a defined-term-first autonomous definition, whichever is clearer and more economical.

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.