Joshua Stein on Defined Terms

I’d made many new professional friends through A Manual of Style for Contract Drafting, but never new family members. So recently I was delighted to receive an email from a reader who announced that not only did he “hugely appreciate” the book, he was also related to me—he was my second cousin once removed. More specifically, my reader’s great-grandfather was Samuel Gordon, brother to my mother’s mother, Mary Schneider, née Gordon.

This came as news to me. Why did it take so long for us to figure out the connection? Probably because my parents moved overseas shortly after the Second World War and returned only for occasional visits.

My new relative is none other than Joshua Stein, a lawyer who’s a notable figure in the world of commercial real estate. After twenty years as a partner at Latham & Watkins, in 2010 he formed his own firm, which he keeps lean and nimble. Go here for his firm’s website; go here for an article about Joshua.

What makes this connection particularly fun is that Joshua has written extensively about real estate, including contracts. So it would seem that the Gordon family genetic makeup contained a gene for particularly pointy-headed scholarship! (But as regards my own efforts, I wouldn’t want to underestimate the contribution from the Adams side of the family. After all, while dean of the School of Oriental Studies of the American University in Cairo, my father’s father wrote Islam and Modernism in Egypt, a forbidding tome that still features in bibliographies on the subject.)

One of Joshua’s books is A Practical Guide to Real Estate Practice (2001). It contains plenty of stuff of interest, but I noted in particular the chapter on defined terms. In it, Joshua makes some general points that apply to using defined terms in any kind of business contract. Since it’s useful to see different takes on an issue, I’ve copied below some extracts.

Page 93

When you write a legal document, it must do many things, all at once. First and above all, your document needs to communicate intentions and meanings accurately and effectively through words. At the same time, though, your document should not be too much longer or more complex than necessary.

It should be internally consistent. When the same concept arises more than once, you should say it in the same way every time. Otherwise, someone will argue that a variation in words implies some variation in meaning. …

Any legal document must speak unambiguously, both today and five years from now, to the attorney, opposing counsel, both attorneys’ clients, whoever might later acquire either client’s position, some other future reader of the document, and a judge who might need to interpret the document when the parties are no longer friends.

If you want to prepare documents that achieve these and other important goals, [you] will find yourself at least halfway there if you consistently use one simple tool: define terms.

Page 94

In theory, if you were to set up the right defined terms, your document could consist of 75 pages of definitions, followed by one operative paragraph (and some signature blocks) ….

You shouldn’t really do this—it is a parody!—but it gives you an idea of how far you could take the use of defined terms.

Page 95

Later, when you revise the document, and find that you need to make one particular change in eight places (a “conforming change”), you will usually save time, both immediately and in the long run, if you establish just the right defined term—once—and then use it repeatedly.

Page 103

[T]he drafter of a legal document needs to make sure that as he or she develops and modifies a defined term, that term continues to mean what everyone will intuitively expect it to mean.

For example it is dangerous to define the “Loan Documents” to mean all the loan documents except the unsecured loan documents such as guaranties.

Page 107

Defined terms also allow you to avoid perpetrating internal section cross-references within a document. By using defined terms, you can refer to concepts by name rather than by section number. If you define the “Normal Cash Flow Waterfall” and the “Post-Default Cash Flow Waterfall,” a reader is much more likely to remember what you are talking about than if you refer repeatedly to section 8.12 or section 8.13 of your document.

Page 108

If multiple defined terms refer to related concepts, the defined terms should interact in a way that tracks the interactions of the underlying concepts. For example, if a transaction involves two promissory notes, you invite confusion if you call one “the Note” and the other “Note B” or the “Supplementary Note.” …

The drafter can, instead, prevent confusion by setting up parallel definitions of “Note A” and “Note B” (or the “First Priority Note” and the “Second Priority Note”), and a defined term—”the Notes”—to refer to both of them.

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.