European contracts - part two
Definitions make contracts easier to read. They are often known as "defined terms" and are a mini dictionary at the start of a contract.
This means that, for example, rather than repeating the specific trade mark which is licensed, the "Trade Mark" is defined at the start and then the contract can simply refer to the Trade Mark in the rest of the document.
Defined terms can save a lot of reading time and improve simplicity but if you get the definition wrong, you can find yourself committed to a very different deal to what you intended.
In many instances, a clause can fundamentally change in nature and scope depending on the definition.
How to spot a defined term
You can usually spot a defined term in a contract because it is in bold, title caps, all caps or similarly identifiable. Some modern contracts will include backlinks each time a defined term appears. This means that you can skip to the relevant definition quickly. In some cases the definition will pop up so you can see what the term means without having to return to the start of the document .
The Territory is a very important term, particularly in licenses, franchises, agency and distribution agreements. It must be clear, future proof and as specific as possible.
There are still contracts being prepared which refer to the European Union when they are intended to also cover the United Kingdom (and to last more than a year). This is sowing the seeds for future confusion after Brexit. If you want to refer to the European Union, it is common to state that "European Union" means all Member States of the European Union on the date the contract is entered into.
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