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  Document review can be tedious

The Seven Deadly Sins of Defined Terms


The use of Defined Terms, while a useful and unavoidable practice, can make documents more difficult to read and can also lead to serious drafting errors.

These mistakes can, at a minimum, create the impression that the document was not carefully drafted or proofed. In some cases, these mistakes may reveal that a document was cut and pasted together from other documents. In the most serious cases, these mistakes can render a document confusing, vague and subject to interpretation--possibly even unenforceable.

Below are the seven most common Defined Term errors. Click here for some examples of these errors (from documents filed with the Securities and Exchange Commission).
 

 

Undefined Terms Terms that are used but never defined--This error often occurs when a definition is deleted but not all references to the term are removed, or when text containing a Defined Term usage is copied and pasted from another document (but the definition is not copied).
Unused Defined Terms Terms that are defined but never used--When a term is defined but never used, it can make the drafter look careless, or indicate cut and paste errors, or even broach topics that the writer never intended to address.
Terms defined more than once Terms that are defined more than once--Redundant definitions can lead to serious problems if the definitions are not identical in all places; even if the definitions are identical, the risk arises that a definition will be revised in one location but not others
Terms used before they are defined Terms that are used before they are defined--If a term appears on page two, but that term is not defined until page ten, does the instance on page two carry the meaning later assigned? Such questions can lead to unnecessary confusion and arguments.
Non-conforming uses Inconsistent capitalization--When terms are defined with initial caps but used without initial caps, issues of interpretation arise. Is the usage intended to refer to the Defined Term, or does it have some other meaning?
The double-quote convention Inconsistent conventions--When some terms are defined by setting them forth in double quotes, but others are in bold or italics or without any special designations, confusion can arise that would be easily avoided by a consistent drafting approach. Such inconsistency can also suggest that a document was hastily assembled from other sources.
Overlapping Definitions Overlapping Definitions--When one Defined Term is contained within another, confusion can arise. For example, if (1) "Company," (2) "Company Promissory Note," (3) "Guarantee," and (4) "Promissory Note Guarantee" are all defined, is a subsequent reference to the Company Promissory Note Guarantee a reference to (1) and (4), or does it refer to (2) and (3), or something else altogether?