PES Contract Clauses > Interpretation and Definitions
Contract language must be used precisely, as small misunderstandings, mistakes, or inconsistencies can alter the rights and obligations of the parties. Two important parts of an agreement are therefore those explaining how certain language is to be interpreted and outlining terms that are used in the agreement.
The interpretation section contains information applicable to large portions of the agreement about how terms or headings should be treated. Because timing is important for things like delivery and payment, it also generally includes information about how time and days (or calendar days, business days, or banking days, whichever is used in the agreement) should be measured.
Words and phrases that have specific meaning in the context of the agreement are defined and highlighted in context throughout the agreement. Defined terms are capitalized when used in order to avoid confusion about when the common meaning, as opposed to the defined meaning, is intended. A dedicated definitions section is usually included to provide more information about defined terms, or to define technical terms that are used – but not defined – in the agreement.
Note that in government-run PES programs, information about interpretation and definitions is likely to appear in the program guidelines, rather than in the participation agreement.
Interpretations and Definitions Examples
Example 1, Interpretation (private carbon emissions reduction purchase agreement)
Example 2, Definitions (private carbon emissions reduction purchase agreement)
These Clauses are:
Moderately customizable
Moderately controversial
Disclaimer: Materials on this site are meant to highlight issues that should be considered in PES transactions, not to provide a substitute for experienced legal counsel. It will be essential to engage legal counsel in conjunction with any PES transaction to ensure that any agreements reflect the latest developments in the field and comply with current local and national legislation.
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PES Contract Toolkit
