The benefit of using a Defined Term (usually with initial capital letters) in a contract or legal document is that it makes it easier to read, and consistent.
However… when used to excess they can easily backfire:
- elements of the commercial deal do not belong in a definitions section,
- acronyms and initialisms can ‘turn contracts into alphabet soup‘ (Ken Adams, Manual of Style of Contract Drafting, 4th ed, 6.12),
- we rely on predictabililty so avoid the temptation to try something novel and so confuse users,
- a long definitions section at the start of a document is inconsistent with putting important provisions first (MSCD, 6.95) and requires a reader to flip back and forth in the contract to understand it properly (MSCD, 6.89),
- terms may remain in the section which are never actually used, especially after numerous negotiation cycles, and
- terms may be left in the definitions section which are only used once – these are best defined in the clause in which they appear.
I favour a simpler approach to defined terms:
- create a table of key commercial terms as a summary of the deal – place this at the front of the document,
- minimise the use of defined terms especially where statutes or case law (or even common sense) would provide exactly the same definition, and
- if required, define the term in the clause where is it used.
What should you do?
If you are writing a contract with users as your focus, adopt a structure which places more emphasis on the commercial aspects of the deal, and introduces the important content first.
