When entering into a contract, whether you’re a small business owner or an individual, you want to ensure that all terms are clear, fair, and legally enforceable. While most people focus on the core terms of a contract—such as price, services, and obligations—there’s one key section that often gets overlooked: the recitals. Although they may seem like a simple introduction, recitals are more important than they might first appear.
In this article, we’ll explore what recitals are, why they matter, and how understanding them can help protect your interests and make your contracts stronger.
What Are Recitals in a Contract?
Recitals are introductory statements at the beginning of a contract that provide background information or context for the agreement. Often referred to as “whereas clauses” (due to the common phrasing “whereas [party] agrees to…”), these sections explain the purpose or intent behind the contract, the parties involved, and the background facts that led to the agreement.
In many contracts, recitals appear right after the title and before the operative clauses. They are often framed with phrases like:
- “Whereas, Party A desires to…”
- “Whereas, Party B has agreed to…”
Despite being introductory, recitals can serve multiple important functions and may be crucial if a dispute arises.
Why Are Recitals Important?
Though recitals don’t generally create binding obligations, they play a critical role in defining the intent behind the agreement.
Here’s why they matter:
1. Clarifying the Purpose of the Agreement
One of the most important functions of recitals is to clearly identify the purpose of the agreement. For instance, in a partnership agreement, the recitals can state that the purpose of the contract is to outline the terms under which two parties will work together to develop a new product. This can help prevent confusion about the intention behind the contract and ensure everyone is on the same page regarding the overarching goal of the agreement.
2. Explaining the Factual Background of the Agreement
Recitals serve to explain the factual context of the agreement. For example, if the parties involved are entering into a contract because of previous business dealings or an unresolved dispute, the recitals can explain the situation leading to the contract. By providing this factual background, recitals prevent the need for lengthy explanations in the body of the agreement and help provide clarity on the circumstances behind the contract.
3. Describing the Relationship of the Parties
Recitals can describe the relationship between the parties to the agreement. In the case of a joint venture, for example, the recitals might explain that the parties are collaborating for mutual benefit. Understanding the nature of the relationship—whether it’s a partnership, a licensing agreement, or a supplier contract—can be essential in interpreting the contract later, especially if any disputes arise.
4. Protecting the Operative Provisions from Misinterpretation
The recitals help frame the operative provisions of the contract and can protect them from being misinterpreted by courts or parties later on. By setting the context clearly, the recitals provide a foundation that helps clarify the meaning of specific terms. If there’s any ambiguity in the core provisions, courts may refer to the recitals to help interpret the agreement.
5. Aiding in Contract Interpretation in a Dispute
If a dispute arises, courts may look to the recitals to interpret the contract. In fact, California Evidence Code § 622 states that facts recited in a written agreement, other than recitals of consideration, are conclusively presumed to be true. This means that the factual statements included in the recitals are considered accurate unless proven otherwise. Additionally, Civil Code § 1068 allows recitals to assist in interpreting unclear or doubtful operative provisions. This is particularly important if there is any ambiguity in the specific terms of the contract, as recitals can provide context that aids in construction.
(Friendly reminder: remember to do your own research, like reading the statutes mentioned in social media or blog posts like this one! Also remember that every statute might be interpreted by dozens of court opinions.)
Best Practices for Small Businesses When Drafting Recitals
While recitals are important, it’s also crucial to draft them in a way that serves their purpose without overcomplicating the contract.
Here are some practical tips for small business owners when it comes to recitals:
1. Keep It Simple and Modern
When drafting recitals, it’s important to use clear, modern language. Avoid archaic terms like “whereas” or “heretofore,” which can make the contract more difficult to understand. Instead, use plain, straightforward language that anyone can read and comprehend. For example:
- Instead of: “Whereas, Party A has heretofore engaged in the business of…”
- Say: “Party A has been in the business of…”
This keeps the recitals readable and accessible while avoiding unnecessary complexity.
2. Avoid Including Substantive Terms
Recitals should set the context for the agreement, not repeat the terms found in the main body of the contract. It’s crucial to avoid outlining the specific rights, duties, and obligations of the parties in the recitals. Doing so may lead to redundancy and increase the likelihood of inconsistencies or mistakes between the recitals and the operative provisions.
For example, don’t write: “Party A agrees to provide Party B with a 10% discount on all products…” in the recitals. Instead, stick to general background information such as: “Party A has agreed to sell certain products to Party B…”
3. Incorporate the Recitals into the Main Body if Necessary
Sometimes, it may be beneficial to include a clause in the main body of the agreement that expressly incorporates the recitals into the operative sections of the contract. This can make the recitals legally binding and ensure that the background information is treated as an integral part of the agreement. For example, you can add a clause like:
- “The parties agree that the recitals set forth above are true and form an integral part of this Agreement.”
This ensures that the intent behind the recitals is recognized and can be used to support the interpretation of the contract as a whole.
4. Provide Important Context Without Overlap
Remember, good recitals should provide important context for understanding the contract’s terms but should not overlap with or repeat the operative provisions. The purpose is to clarify the general context and intent behind the contract without duplicating detailed obligations or terms.
Conclusion
Recitals play a pivotal role in establishing the background, purpose, and context of a contract. For small business owners, understanding the importance of recitals and drafting them correctly can help prevent misunderstandings and ensure your contracts are legally sound. By keeping recitals simple, clear, and free of substantive terms, you can protect the integrity of the agreement and ensure that the core provisions are interpreted correctly by the courts if needed.
If you’re considering entering into a contract or need help reviewing one, it’s always a good idea to consult with a knowledgeable attorney who can ensure that your agreements are clear, well-drafted, and enforceable. With proper recitals, you’ll be able to safeguard your business and avoid unnecessary legal complications.