What is a Defined Term?

What is a Defined Term?

 

A Defined Term is a shorthand reference within a document that refers to another name or idea in the document. The standard convention in legal documents is to define terms in double quotes and designate subsequent references with initial capital letters.

For example:

Owner and Servicer shall not disclose any confidential or proprietary information of the other party with respect to such other party, the Mortgage Loans, or the Mortgage Files that may be in the possession of that party (the "Confidential Information") to any Person who is not a partner, officer, employee, counsel, or agent of such party except with the written consent of such other party or pursuant to a subpoena or order issued by a court or by an administrative, legislative, or law enforcement agent, department, agency, body or committee.
Source: Exhibit 99.2 to Morgan Stanley Form 8-K dated March 31, 2006 (italics added)

In this passage, "Confidential Information" becomes a Defined Term by being set forth in double quotes following the text to which it refers. Subsequent references ("Usages") to Confidential Information (with initial caps but without quotation marks) will be deemed to mean "any confidential or proprietary information of the other party with respect to such other party, the Mortgage Loans, or the Mortgage Files that may be in the possession of that party." In the paragraph above, "Owner," "Servicer,", "Mortgage Loans," "Mortgage Files," and "Person" are Usages of Defined Terms which are (presumably) defined elsewhere in the document.

Grammatically, the definition above is set forth as an appositive: a noun that follows another noun to explain or identify it. Another drafter might have written 'hereinafter referred to as the "Confidential Information" ' or something similar. As long as the phrase is set forth in double quotes, Lexicon will treat it as a Defined Term.

Although Defined Terms are unavoidable when drafting legal documents, the use of Defined Terms can lead to several types of drafting errors. More...