Using “X” and “Y” to Refer to the Parties

Note use of the defined terms “X” and “Y” in the following, from the 2002 ISDA master agreement (discussed in this post):

If a party is so required to deduct or withhold, then that party (“X”) will:—

(1) promptly notify the other party (“Y”) of such requirement;

(2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y;

(3) promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such authorities; and

(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required.

Using “X” and “Y” is one way to handle the awkwardness that can arise when you refer to the parties in describing a procedure in which either party could play a given role. You could use “that party” and “the other party,” but that doesn’t work if you need to refer to “that party” after having referred to “the other party”—the reader could think “that party” refers to “the other party.”

But “X” and “Y” are devoid of any context, so you force the reader to remember what hats X and Y wear. The same applies to using instead “the first party” and “the second party.”

So I’d be inclined to use instead, in the ISDA master agreement, “the deducting or withholding party” and “the other party.” Sure, instead of “X” you’re using five words, but you’d use them only three times in the quoted extract, so I think it’s a price worth paying.

And outside of this example, more likely than not you wouldn’t have alternative designations for a given party, so you could more economically say, for example, “the purchasing party.”

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.

4 thoughts on “Using “X” and “Y” to Refer to the Parties”

  1. Good point about context, Ken. Two other issues I’ve encountered: First, the single letters X and Y look a bit too much alike; second, the reader has to remember that X and Y refer to parties and not to something else. On the rare occasions I’ve used single letters, I’ve used “_Party_ A” and “_Party_ B.”

  2. I wouldn’t use X or Y; I’d figure out some brief way to label (and help the user remember) whoever it is that has obligations to deduct or withhold. For example, I might call them “Tax Obligor” and “Tax Obligee.” These are shorter than “the deducting or withholding party,” which is sort of too much work.

    • Joshua: Sure: the most common example of that approach is using the defined terms “Indemnifying Party” and “Indemnified Party.” They share the same problem as the defined terms you propose, in that they’re distinguished by only the final syllable.

      Whether it makes sense to use defined terms or my approach depends on the context.



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