Defining terms
Defining terms

The following Commercial practice note provides comprehensive and up to date legal information covering:

  • Defining terms
  • The definitions and interpretation clause
  • Common defined terms
  • Drafting and reviewing definitions

Defining terms

This Practice Note discusses the role and importance of defined terms in an agreement. It identifies the defined terms that most commonly appear in agreements relating to transactions and examines the approach that should be taken when reviewing or drafting an agreement containing defined terms.

For more information on boilerplate clauses generally, see Practice Note: The role of boilerplate.

For more information on the interpretation of contracts generally, see Practice Note: Contract interpretation—rules of contract interpretation.

The definitions and interpretation clause

One example of a boilerplate clause is the definitions and interpretation clause. The definitions and interpretation clause should include all of the individual defined terms that are included in an agreement and all of the provisions that are to apply to the general interpretation of an agreement and, if necessary, of certain phrases used with it. The defined terms and the interpretation provisions will normally be set out in two separate sub-clauses. The definitions and interpretation clause will usually be found at the beginning of an agreement and the terms will be set out in alphabetical order for ease of reference.

The purpose of defining terms is to avoid:

  1. repetition within the main body of an agreement, particularly of long or complex phrases, so that it becomes easier to read and more concise, and

  2. ambiguity in the interpretation of an agreement, by giving specific meanings to words

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