As a business owner, you probably have agreements governed by legal contracts with businesses, employees or others. Do you ever skim over the introductory paragraphs of your contracts, dismissing them as mere formalities?
Those segments, usually starting with “Whereas,” are not just fluff – they are called recitals and can impact the strength of your agreement. Instead of assuming they do not matter, learn how they can help – or harm – your business relationships.
What purpose do they serve?
Contract recitals set the stage for the agreement by providing background information, outlining the parties’ intentions and clarifying the context of the association. They function as an interpretive guide, aiding in understanding the contract’s purpose and preventing future misunderstandings.
Here are some benefits well-drafted recitals can offer.
- Clarity and interpretation: They can guide courts, arbitrators, and readers to understand the agreement’s purpose and intent.
- Risk mitigation: They help prevent misunderstandings and potential disagreements by stating context and goals.
- Negotiation tool: They establish common ground for negotiations, ensuring everyone’s on the same page.
- Historical context: They provide valuable background information, especially for complex or long-term agreements
For ideal results, recitals should be clear, concise and easy to comprehend, despite any required “legalese.”
Is there a possible downside?
Remember, contract recitals are introductory narratives meant to establish clarity and intent about the association. If they are overwritten or stray into the realm of operative provisions, it may introduce confusion, which could amplify in the face of a dispute.
Contract recitals are typically advantageous, but if drafted improperly, they may increase legal risk for one or all involved parties. Having experienced legal guidance can help ensure that all parts of your contracts minimize your risk.