What Are Recitals in a Contract?

Contract recitals outline the involved parties' name, roles and background, reasons for entering into the contract. It may also include references to any related contracts to provide a complete background. The purpose of recitals in a contract is to provide background information and intention of parties involved in the contract.

 

The recitals in a contract usually begin with the word “whereas”, therefore, also referred to as the “whereas” clauses. They are often placed after the title of the contract  (contract name) and the preamble (i.e. name and address of the parties involved) and before the main body of the contract (terms and conditions).

 

Contract Recitals are not usually considered legally binding provisions, but they can help to clarify the intentions and understanding of the parties involved in the contract.

 

• Recitals in a contract are introductory statements that outline scope of the agreement and provide background information about the parties involved.
• Clarify the intention of the parties involved in the contract  i.e. the objective of entering into the agreement.
• Contract Recitals does not include any contractual obligations, conditions and warranties.

 

In this blog post, we will explore what recitals are and understand why they are an essential component of any well-drafted agreement.

Purpose of Contract Recitals

 

1. Clarifying the objective:

 

Recitals aid in stating the contract's objective and intent. 

 

They explain why the parties are entering into the agreement, the context of the transaction, and the overall objectives to be reached. 

 

The recitals ensure that both parties have reached a mutual understanding of the fundamental motivations for engaging in the contract.

 

An example of this would be: 

“The agreement is entered into for the purpose of establishing a long-term partnership that promotes sustainable and ethically sourced food options for consumers;”

2. Setting the Stage: 

 

Recitals provide a brief summary of the current situation that has led to the need for a contract. 

 

They may include information about the parties involved, their respective positions, and any relevant history or events that have occurred. 

 

This information establishes the context in which the contract is being carried out and serves as a road map for the future terms.

 

An example of this would be: 

“ABC Realty, hereinafter referred to as "Owner," is the owner and developer of a parcel of land located at Hong Kong, and intends to develop the property for a mixed-use commercial and residential development.”

 

 

3. Incorporating External Documents:

 

Recitals may, in some situations, refer to or include external documents such as earlier agreements. 

 

They ensure that the contract is matched with these external variables and that the parties are aware of any applicable obligations or needs by doing so.

 

An example of this would be: 

“The parties have since engaged in detailed discussions and negotiations resulting in the development of a joint venture agreement (the "Agreement") governing the rights, obligations, and responsibilities of the parties with respect to the development, financing, construction, and operation of said renewable energy projects.” 

 

Types of Recitals in a contract

 

1. Party-related Recitals:

 

The first type of recital typically references details about the parties involved in a transaction, such as their legal names, addresses, or company type. By clearly outlining the entities involved, these recitals lay the groundwork for further contractual obligations and responsibilities. For instance, stating "WHEREAS, Party A is a foreign-owned product company formally established and existing in accordance with the laws of the state of California," provides essential information about the nature and location of Party A, facilitating a clear understanding of its legal standing.

 

 

2. Purpose-related Recitals:

 

In understanding the reasons behind a contract and the objectives to be achieved, purpose-related recitals come into play. These recitals outline the intentions and goals of the parties entering into the agreement. For example, "WHEREAS, Party A and Party B hereto intend to collaborate on a brand relaunch project to redesign Party B’s corporate website and enhance Party B’s website performance," elucidates the specific purpose and shared goal of the collaboration.

 

 

3. Context or Background Recitals:

 

Providing a chronological account of events or circumstances that led to the transaction, context or background recitals set the stage for understanding the evolution of the contractual relationship. By delving into past events or developments, these recitals shed light on the historical context of the agreement. An example of this could be, "WHEREAS, in 2023, Party A has developed HR automation software with automation features, and Party B has expressed a strong interest in utilising this software to optimise business processes."

 

 

4. Compliance-related Recitals:

 

In today's complex regulatory environment, compliance-related recitals are essential for establishing the legal and regulatory framework within which the contract operates. Addressing adherence to specific laws, regulations, or industry standards, these recitals ensure that both parties are aligned in their commitment to compliance. For instance, "WHEREAS, both parties are committed to complying with the GDPR and ensuring data protection in their activities," clearly outlines the commitment to upholding data protection standards.

 

 

5. Recitals for Amendment or Extension:

 

In cases involving amendments or extensions of existing agreements, recitals serve to reference the original contract and explain the reasons for the proposed changes. By providing a link to the prior agreement and articulating the need for modification, these recitals maintain transparency and clarity. An example of this recital would be, "NOW, THEREFORE, Party A and Party B enter into this Sales Agreement Extension, which extends the pricing terms specified in the Original Agreement for an additional twelve (12) months, starting on January 1, 2023, and ending on December 31, 2023."

 

 

Common Examples of Contract Recitals

 

1. Memorandum of Understanding (MoU)

 

In the MoU, the parties involved are identified by their names and details, and a brief overview is provided regarding the purpose and objectives of the understanding.

 

 

2. Real Estate Contract

 

The real estate contract includes a description of the property being transferred or leased, including its address and legal details, as well as information about the consideration being paid or exchanged for the real estate.

 

 

3. Independent Contractor Agreement

 

Within the independent contractor agreement, there is a declaration of the independent contractor status and the absence of an employee-employer relationship, along with a description of the scope of work to be provided by the contractor.

 

 

4. Employment Contract

 

In the employment contract, the agreement identifies the employer and employee, along with their job titles and roles, and it outlines details about salary, benefits, working hours, and other employment conditions.

 

 

Examples Of Recital:  WHEREAS, Party 1, hereinafter referred to as the "Employer," is engaged in [describe the nature of the business or industry]; WHEREAS, Party 2, hereinafter referred to as the "Employee," possesses the skills, qualifications, and experience suitable for employment with the Employer; WHEREAS, the Employer desires to employ the services of the Employee, and the Employee desires to accept such employment, under the terms and conditions set forth in this agreement; WHEREAS, both parties acknowledge their understanding and agreement to the terms herein, intending to establish a mutually beneficial employment relationship; IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first above written.

How to write a recital?

 

1. No ambiguity 

 

To prevent confusion or misinterpretation, it should be ensured that the language used in the recital clause of a contract is precise and devoid of slang or ambiguous terms. 

 

Clear and specific language allows parties to establish a shared understanding of the contract's purpose and intent, minimising the risk of differing interpretations. 

 

Ambiguity in the recital clause can lead to disputes and legal complications, undermining the overall enforceability of the agreement. 

 

By using precise language, parties can eliminate ambiguity, foster agreement on the contract's meaning, enhance its enforceability, and convey professionalism and legitimacy.

 

 

2. Relevance

 

In order to keep the recitals of a contract concise and to the point, it is important to include only essential information that is directly relevant to the contract.

 

The recitals should provide a clear and concise overview of the background, context, and purpose of the agreement without unnecessary elaboration. 

 

Avoid including non-key definitions or excessive references that may complicate understanding or detract from the main points. 

 

By focusing on essential information, the recitals can effectively set the stage for the contract, providing the necessary context for the parties involved while maintaining clarity and brevity.

3. Exclusion of Legal Elements

 

In order to keep the recitals of a contract concise and to the point, it is important to include only essential information that is directly relevant to the contract. 

 

The recitals should provide a clear and concise overview of the background, context, and purpose of the agreement without unnecessary elaboration. 

 

Avoid including non-key definitions or excessive references that may complicate understanding or detract from the main points. 

 

By focusing on essential information, the recitals can effectively set the stage for the contract, providing the necessary context for the parties involved while maintaining clarity and brevity.

While it is important to ensure your contract has all 6 essential elements of a valid contract, it is equally important to incorporate a well-crafted recital as pretext to your contract to establish a solid foundation for your contractual relationship.