Defined terms in legal documents: how they work
The rules on defined terms, particularly whether a term should be defined and whether further uses of that word should start with a capital letter can seem arcane and complicated. In fact, they are quite simple and we explain them here.
What are defined terms?
The defined terms can usually be found at the beginning of a legal document, or at the beginning of a stand-alone section such as a schedule.
The first letter of each word in a defined term is capitalised so that the reader can identify that the meaning of the term is “different” and that he should interpret what he is reading in accordance with the definition given.
Why use defined terms?
Giving a different or specific meaning
Defining a term gives that word or phrase a particular, special meaning within the context of the legal document, and not the meaning that would be used in everyday language.
This happens mostly to general words when we want to narrow the range of its meaning. A simple example is:
"Patents" means every patent owned by Net Lawman Limited.
So it becomes clear that when I refer to "Patents", I refer to every single one owned by Net Lawman Limited - not to some of those, or all owned by another person.
Shortening a long description
Defining a word or phrase can also simplify the context in which it appears in the document. We can give a single word an exact meaning once, so that we don't have to repeat that exact meaning throughout the document.
It is easiest to explain using an example. Say I want to write:
“Every fierce brown dog in Wiltshire must carry a label attached to its left leg by a red ribbon”.
The document would be tedious and ridiculous to read if I used that expression many times in near succession. The document might also be harder to understand.
So I might define the following two terms:
"Dog" means every fierce brown dog in Wiltshire.
"Label" means a label attached to its left leg by a red ribbon.
Now I can express myself very simply by writing: "Every Dog must carry a Label."
You might not think that is very helpful. However, if I had to refer to dogs and labels many times, the fact is that you would find it far easier to understand my document if I kept the language simple in this way. Documents that are easy to understand are more likely not to be disputed.
Ensuring everyone is clear as to what is meant
Often the correct meaning would be clear without defining it. But sometimes it is not. Defining a term ensures that everyone attaches the same meaning.
Now I will apply this to a real document example.
At Net Lawman, the longest definition of a term we use regularly is “Confidential Information” (mostly in our confidentiality and non-disclosure documents). No court has ever defined confidential information, so in everyday language it can mean whatever you want it to mean.
What I think should be confidential will not be exactly the same as what you think is confidential. Let us suppose that you have promised me not to tell anyone else my confidential information. What then would you be happy to tell others about me? The difficulty for you is that you have to guess every time that you want to mention something about me to someone else, whether that information is confidential in the context of our agreement. Over time, we are likely to disagree on whether something you disclosed was in fact confidential.
The solution is for me to write down very carefully a list and description of every category of information that I want to keep confidential. Then, there can be no dispute. If you tell any secret I have listed, you are in breach of our deal and I will take you to court for compensation.
My list and descriptions may take hundreds of words, but for ever after, when I have referred to Confidential Information, you and I know exactly what we mean. Those two words now have a special meaning.
Incidentally, now that my special meaning is identified only by its initial capital letters, I have to make sure I remember to use them in the right places. If I fail to do so and just refer to "confidential information", my term just has its ordinary meaning. That could be a disaster for me.
Defined terms in defined terms
There is an interesting extra twist to this point. Occasionally, we have to use a defined term just once, in order to clarify another defined term.
To do this unnecessarily is very bad drafting. Whenever we possibly can, we avoid it.
The Net Lawman example is “Know-How”. We include this word sometimes in the definitions of our intellectual property agreements. We state that intellectual property includes (among a long list) know-how. But what do we mean by know-how? Again you and I may interpret it differently. So we also define know-how, even though we refer to it only in the definition of intellectual property. That keeps the definition of intellectual property short and easy to read, yet also precise.
Of course, within the definition of intellectual property “Know-How” is capitalised!
When a defined term is not capitalised
Document users sometimes think that every instance of words that are given a defined term should be capitalised.
That is not the case. Capitals should only be used if the term is used in context of the definition. Sometimes we want to use the same words with the everyday meaning, and not the defined meaning.
Here is a simple example reverting to the dog and its label:
“If you find a Dog with a Label, you will contact the Wiltshire Police who are responsible for all dogs in the area.”
The point being that in this example, Wiltshire Police are responsible for all dogs, whether they are fierce and brown or not.
Examples of poor drafting
Poor use of grammar
Many misunderstandings arise because poor legal draftsmen often randomly capitalise words without having defined them. As a result, many people have come to assume that lawyers use capitals for no apparent reason.
A good example is the word “Agreement”. Often, you will see references to “this Agreement” or “the Contract”. Conveyancers are particularly guilty of this too. Words like “Property” and “Lease” are often capitalised unnecessarily.
Perhaps this is done through ignorance of our language, or perhaps the draftsman wanted the document to look more formal without understanding what he was doing.
You rarely find these errors in government documents, and never in acts drawn by parliamentary draftsmen.
Unnecessarily defining terms
The use of defined terms is often essential. However, a draftsman should always avoid using them if possible. They may make the meanings precise in law but can also tend to make a document more complicated to read and understand because a reader needs to refer back to the definition.
At Net Lawman our draftsmen always complete their drafting work by trying to remove any surplus defined terms - if necessary by re-drawing a complicated point.
In a well drawn document you will never find ordinary words defined for no particular reason. Here are examples for you to look out for in other firms’ documents:
"Agreement" means this agreement.
"Parties" means the parties to this agreement
Really! What else could they mean?
A last piece of advice
When you have finished editing any document, remember to go back to your defined terms and make quite sure the exact definitions still apply.
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- Does not provide a complete or authoritative statement of the law;
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