Corporate & Securities Law

The Perils of Definedtermitis

By Ken Adams

“Definedtermitis” is a condition caused by excessive reliance on defined terms. It causes clogging of the arteries of your contracts. Those who succumb to it are referred to as “definedtermites.”

Consider an email I received today from a reader:

OK, so I thought it was a typo, but it turns out it was intentional.

I was reviewing a clause in a software sale agreement with a major third-party distributor. I got to the assignment clause, and it was very peculiar:

“Assignment. Either Party shall neither assign any right or interest … nor delegate any obligations …”

I revised the clause:

“Assignment. Neither party can assign any right or interest … or delegate any obligations ….”

I get the following comment back:

“‘Either Party’ is a defined term, see first paragraph of cover page.”

It was, I remembered reading it, but I struck it because it read:

“‘Either Party’ means either Licensee or Company.”

In any case, sticking the definition of “Either Party” into the clause doesn’t help the clause, it only makes it worse:

“Assignment. Either Licensee or Company shall neither assign any right or interest … nor delegate any obligations.”

The other lawyer didn’t take to kindly to my mental exercise especially when I said I could make heads or tails of how it ought to apply. “It’s the assignment clause, for Pete’s sake. We’ve already wasted too much money thinking about it!”

Hmm, “Either Party” used as a defined term …. My diagnosis? Acute definedtermitis! The drafter should read chapter 5 of MSCD and call me in the morning.

Full post as published by AdamsDrafting on January 14, 2010 (boomark / email).