Contract Recitals: Everything You Need to Know
Contract recitals precede the main text of a contract and are referred to as the "whereas" clauses. A recital provides the reader with a general idea about the purpose of the contract, the parties involved, and why they are signing it.3 min read
Contract recitals precede the main text of a contract and are referred to as the "whereas" clauses. A recital provides the reader with a general idea about the purpose of the contract, the parties involved, and why they are signing it.
- Recitals can be considered as the preamble to the contract.
- They can be placed as the first paragraph of the contract to reference information and state that it is true and correct. Recitals help avoid confusion and prevent potential arguments regarding the legality of the contract.
- No rights or obligations are associated with recitals. They are in place simply to explain the reason/purpose of the contractual relationship.
Types of Recital Clauses
Several kinds of recital clauses are available. These include:
Party-related recitals - one or more recitals/whereas clauses can be included to reflect the business activities relevant to each party.
Context or background recitals - this kind of clause describes what circumstance or event led up to the transaction. This could include things such as sales or trademark or patent licenses.
Compliance-related recitals - in these, the parties involved may want to state certain requirements or prerequisites that need to be met prior to the signing of the contract. An example would be if the needed approval of an external party for the transaction must be complied with prior to signing the contract. Once the approval has been granted, the recital clause explaining the action had been taken would be included in the contract.
Transaction-structure related recitals - these involve non-standard and complex transactions where steps were taken in accordance with the contract. An example would be a sequence of events.
Related-transaction recitals - in the preamble of the contract, more than one recital may be included if there are multiple agreements being entered into at the same time.
Step-up recital - when the contract is being drafted, the step-up recital can be considered redundant, as its lead-in to the contract is similar to the contract itself.
Creating a Recital Clause
A recital helps define the contract in non-legal terms. When drafting it, things to consider include:
- Do not use slang or loose language to describe a subject as this may cause confusion.
- Do not fill recitals with non-key definitions or point to multiple references following every defined term.
- Whereas clauses should not contain any warranties, covenants, representations, policy rules, conditions, or obligations.
- Recitals are formatted in traditional paragraphs in complete sentences. They are not created with bullet points.
- Although recitals are not enforceable, they are important and can be referred to when determining the intent of parties. However, they do not control the provisions of the contract.
- All key terms relevant to the agreement should be placed in the main portion of the contract and not in the recital section.
- The traditional format is to create them as a continuous sentence with several clauses each beginning with the word "whereas" and ending with a semicolon. The modern way format consists of a list of declarative sentences that may be numbered.
A traditional draft would include a recitation of consideration. Most commentators are in agreement that this is now unnecessary and instead include verbiage such as, "Therefore, the parties agree as follows."
An example of the traditional format was used in recitals in an agreement between Microsoft Corporation and Expedia, Inc. This is what the format looked like:
WHEREAS, the Parties have entered into (type of agreement and date);
WHEREAS, the Parties have entered (process) and plan of (purpose and date); and
WHEREAS, as part of the consideration (steps being taken, and names of companies involved).
NOW, THEREFORE, (for and in consideration of (legalese), and for other good and valuable consideration (legalese) the parties hereby agree as follows:
Here are the same recitals written in modern form.
1. The parties have entered into an (agreement type and date).
2. The parties have also entered into an agreement (purpose and date).
3. As part of the consideration for the (steps and names involved).
Therefore, the parties agree as follows:
With the modern format, the list of declarative statements is generally numbered, but not always.
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