“Definedtermitis” is a condition caused by excessive reliance on defined terms. It causes clogging of the arteries of your contracts. Those who succumb to it are referred to as “definedtermites.”
Consider an email I received today from a reader:
OK, so I thought it was a typo, but it turns out it was intentional.
I was reviewing a clause in a software sale agreement with a major third-party distributor. I got to the assignment clause, and it was very peculiar:
“Assignment. Either Party shall neither assign any right or interest … nor delegate any obligations …”
I revised the clause:
“Assignment. Neither party can assign any right or interest … or delegate any obligations ….”
I get the following comment back:
“‘Either Party’ is a defined term, see first paragraph of cover page.”
It was, I remembered reading it, but I struck it because it read:
“‘Either Party’ means either Licensee or Company.”
In any case, sticking the definition of “Either Party” into the clause doesn’t help the clause, it only makes it worse:
“Assignment. Either Licensee or Company shall neither assign any right or interest … nor delegate any obligations.”
The other lawyer didn’t take to kindly to my mental exercise especially when I said I could make heads or tails of how it ought to apply. “It’s the assignment clause, for Pete’s sake. We’ve already wasted too much money thinking about it!”
Hmm, “Either Party” used as a defined term …. My diagnosis? Acute definedtermitis! The drafter should read chapter 5 of MSCD and call me in the morning.
9 thoughts on “The Perils of Definedtermitis”
I haven’t read the book (yet), and I realize that it’s the kind of thing that can go horribly wrong, but even given all that I still love me my defined terms. I’ve said it before (possibly even in other comments here) but they can make contracts actually quite simple and logical; it’s a way of avoiding long comma-and or comma-or sequences, and particularly of avoiding problems with modifiers.
Until the day they start letting me use parenthesis and brackets the way I did in math class, defined terms serve well enough.
(I’m aware that there is no “they,” and there is no “letting,” but there is the amorphous “legal community” and there are accepted practices, so read them in … “They” shall be defined as the legal community, to include without limitation any judge or finder of fact who will interpret this comment.)
Ben: I referred to “excessive” reliance on defined terms. Sure, defined terms are essential. But many drafters go overboard, using them to often, and often incoherently.
Each defined term comes at a cost, in that defining and using defined terms creates clutter, disrupts the normal reading flow, and distracts the reader. The drafter has to make sure that for each defined term, the utility, in terms of concision and consistency, outweighs that cost.
By the way, why use shall when defining a term? You’re not creating an obligation, you’re stating a policy.
Ben, no one disputes that defined terms properly used make a contract more readable. The key is “properly used.” Overuse of defined terms is counterproductive. There is no reason to define a term that is used only once. There is no reason to define what is is. And as the example illustrates, the drafter still has to be careful in using the defined term. If the sentence makes no sense when you substitute the definition for the defined term, either revise the definition or revise the sentence. Adding a new defined term — “Neither Party” — would have cured the sentence but would not otherwise improve the contract.
Agree with Ken’s initial comment. “Either Party” is unwieldy: it forces upon the sentence the syntactically awkward “Either party shall neither” versus the writer’s clearly preferable “neither party shall.” One solution would be to provide, in the definitions of Licensee and Company, that either may sometimes be referred to as a “Party.” I’m inclined to agree with Ken in Section 2.42 of MSCD, however, that it would be hard for any reader to interpret the uncapitalized “party” as other than a “party to the Agreement”; but I have seen this term defined in contracts (and confess to having done so myself), and it does not viscerally offend my sense of legal style. On further reflection, though, I think Ken’s suggestion in Section 2.42 to treat the meaning of a “party” in the drafting conventions section of the contract is generally preferable to creating a specific definition (unless, of course, the agreement is so short that a drafting conventions section would be awkward).
I also used to define party, until MSCD persuaded me to stop. But I still enjoy the contract scene from Night at the Opera: Driftwood (struggling to read the fine print): I can read but I can’t see it. I don’t seem to have it in focus here. If my arms were a little longer, I could read it. You haven’t got a baboon in your pocket, have ya? Here, here, here we are. Now I’ve got it. Now pay particular attention to this first clause because it’s most important. It says the, uh, “The party of the first part shall be known in this contract as the party of the first part.” How do you like that? That’s pretty neat, eh?
Fiorello: No, it’s no good.
Driftwood: What’s the matter with it?
Fiorello: I don’t know. Let’s hear it again.
Driftwood: It says the, uh, “The party of the first part shall be known in this contract as the party of the first part.”
Fiorello: (pausing) That sounds a little better this time.
Driftwood: Well, it grows on ya. Would you like to hear it once more?
Fiorello: Uh, just the first part.
Driftwood: What do you mean? The party of the first part?
Fiorello: No, the first part of the party of the first part.
Driftwood: All right. It says the, uh, “The first part of the party of the first part shall be known in this contract as the first part of the party of the first part shall be known in this contract” – look, why should we quarrel about a thing like this? We’ll take it right out, eh?
Fiorello: Yeah, it’s a too long, anyhow. (They both tear off the tops of their contracts.) Now, what do we got left?”
There’s a lot to be said for taking this stuff out.
Robert: I loooove it when commenters cite MSCD, but I note that you’re citing the first edition. I eliminated from the second edition any reference to defining Party in a provision specifying drafting conventions: the third-party-beneficiary issue that might cause you to want to do that can be addressed more economically in a manner discussed in 1.77–80 of the second edition.
From memory, it goes on:
If either party is not in his right mind, the other can terminate the contract. That’s what they call a sanity clause.
Ha, ha, ha, ha, ha. You can’t fool me. There ain’t no Sanity Clause.
Jack says “There is no reason to define a term that is used only once.” But of course if it makes things simpler (e.g. ‘The Consultant shall supply the Services to the Customer in return for the Fee.’) then by all means provide a definition of Services and Fee (that point to clauses that incorporate schedules and so on and so forth).
If “Either Party” is a defined term (meaning either A or B), the cited assignment clause could be modified by substition (and likewise it would read the way Ken would, at least regarding the issue at hand, prefer):
A shall neither assign any right or interest … nor delegate any obligations …
Obviously this way of using defined terms and substition is ridiculous and introduces ambiguity.