Clause-by-Clause Guide #1 – Definitions

by Carl Spencer-Spear, January 2024

From our January 2024 newsletter:

We’ll start our guide with the first clause you’ll typically find in any contract: the definitions clause. Put simply, its purpose is to list the capitalised terms used throughout the contract and give a definition for each of them.

This clause is easy to overlook, as at a glance the terms and their definitions may seem obvious or unimportant. However, these capitalised terms have been defined for a reason: to provide certainty on their meaning, which will assist with interpretation of the legal terms and reduce the risk of disagreement over the intention of the parties when entering into the contract.

Therefore, it is important to ensure that the definitions are appropriate and don’t inadvertently impose obligations, risks or liabilities on your business that you were not expecting. A definition that is too broad, vague or strict, could have a significant impact on the interpretation of a party’s rights or obligations.

Top tip – if you’re not sure about why a particular term is defined, or its significance, go into ‘find’ (in the menu bar or press CTRL+F) and search for the term to see how it is used in context.

If in doubt, we are always here to help. Contact Ian, Carl or Helen (details here). 

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