Using the wrong word can introduce ambiguity and cause contract disputes ©123RF
Using the wrong word can introduce ambiguity and cause contract disputes ©123RF

Why definitions are the backbone of all good contracts

23 February 2018

Misuse definitions in contracts and the legal results can be disastrous, says commercial lawyer Susan Singleton

“Using an undefined term may lead to expensive litigation,” she says. “Definitions are the backbone of every good contract.”

Definitions

These are used to ensure that readers are aware a term has a particular meaning. Include all abbreviated terms used in the ‘definition’ section, even in short contracts.

Avoid capital letter mistakes

Don’t use capital letters if the word is not in the definition section. Random capital letters are the bane of many a lawyer’s life.

Be consistent

Occasionally a contract will refer both to the “Goods” and the “Products”, when there is no different kind of product intended. Use one or the other. Be careful not to refer to definitions in a different contract unless this is made clear. Consistency is key.

Avoid operative provisions

Never include an operative provision in the definition. If “Goods” is defined, do not include in its definition terms like: “The Goods must not be actively marketed outside the UK.” Operative provisions need to be in the main clauses of the agreement.

Check definitions and words match up

Solicitors often come across contracts where two contracts have been cobbled together, resulting in definitions for words that don’t appear. Do a word search for each defined term.

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