Chapter 10. Definitions

"10.1. INTRODUCTIONDefinitions are a necessary part of every agreement. Their purposes are to assist the reader in reading and understanding an agreement and to attempt to avert potential confusion and, therefore, disputes. In some circumstances, they may be critical in deciding a dispute. As they are often substantive, they should not be treated lightly.It is far easier and less confusing for a reader to read “the Company” or “the Recipient” than to be faced with “the party of the First Part”, or to see the “Jones Property” than “that part of the property hereinbefore described in paragraph 1.01 hereof”. It is also advisable not to use “-ee” and “- or”, as in payee and payor.One thing must always be remembered: once a word has been defined in an agreement, it will always have the defined meaning unless the contrary is clearly indicated or is required to make sense of a provision.2 It can be confusing for a reader if commonly used words are defined in other than ordinary terms. Unique words that will stand out in the text are more likely to be recognized as having special meaning. It is also good practice to identify defined terms by capitalizing them in the text of the agreement. Boldfacing of definitions is also sometimes used for this purpose but, as boldfacing is not easily identified in handwritten revisions, it can be missed in the press of negotiations, especially when several typists are involved. Lack of consistency in identifying defined terms is not a fatal mistake, but it can create confusion, especially if the reader is new to the agreement or is reading it in a highly technical manner, such as when there is a dispute.If definitions used in the main text also apply to a schedule, they need not be included in both. Omitting them from the schedule makes the agreement look shorter, which to some people is a benefit. If definitions are not repeated, make certain that the schedule clearly indicates that words defined in the main text have the same defined meanings in the schedule3 and are clearly identified as defined words. In considering whether or not to repeat in a royalty schedule definitions appearing in the agreement proper, think of definitions as an aid and a reminder to the reader. Repeating them will help a reader, if only by saving the nuisance of remembering where to find them in the main text and constantly turning to it. All the definitions needed to read the schedule will be right there, so that the schedule is a self-contained document. Just make certain that, if you do repeat a definition, you repeat it in identical terms. If you have to change any defined term to make it fit the royalty provisions, use a different word or phrase as the defined term to warn the reader that he is dealing with a different concept.4"