This contract tip explains some basics about contract definitions.
Many lawyers feel strongly about where to place definitions in their contracts. Not me. I consider the decision to be a stylistic one.
My review of definitions focuses on two things.
First, I make sure each capitalized term is defined and only defined once.
Second, I make sure that there are no rights and obligations in the definitions. Doing so creates a huge mess.
Let me explain why.
Definitions are shortcuts in a contract. Rather than typing a detailed concept each time, we use a single defined term.
It’s an excellent technique and makes contracts so much easier to read. But the mechanism breaks down when you include rights and obligations in the definition.
Here is the right and wrong way to write a contract definition:
CORRECT: “Site means the Buyer’s warehouse at 123 Main Street, Austin, Texas.”
INCORRECT: “Site means the Buyer’s warehouse at 123 Main Street, Austin, Texas. Buyer will store the Product in a secured area in the Site.”
If you use the incorrect version, every time the word Site appears in the contract, you will need to read it as the full definition. That means you would repeat the obligation about storage every single time.
You would never repeat the same sentence 20 times in a contract. But that is precisely what including an obligation in a definition does.
So, don’t do that.
What other advice would you add about definitions?
