Recitals are an optional form of contract. Its purpose is to provide general information about the agreement. They often indicate the Parties` general understanding of the situation and its purpose or intention at the time of entering into this Agreement. This section does not contain any provisions creating obligations, rights or obligations in the contract. Nothing in the recitals is enforceable under the Treaty. In other cases, the courts have treated contractual considerations as operational provisions of the contract. One court even ruled that recitals “should, as far as possible, be brought into conformity with the operational provisions of the treaty and implemented like any other provision of the treaty”. Sometimes it is the use of a critical introductory phrase in the recital that leads courts to treat them as enforceable contractual provisions. For example, in Golden West Baseball Co. v. City of Anaheim, the California Court of Appeals found that a recital containing the prevaluable wording “understood and agreed” is an operational provision, even if language in a subsequent contractual provision was inconsistent with the recital. The reality is that contract concerts, like music concerts, are important.
They “set the stage” for the contract and help the reader understand the objectives of the contract. The 2006 appointing authority standard gas sales contract stipulates that its interpretation clause applies to this Agreement, including the recitals and annexes, unless expressly provided otherwise: in the event of a conflict, the provisions of the main part of this Agreement shall prevail over the provisions of the Annexes. The fact that recitals are not mentioned in the second half of this provision suggests that it is considered that recitals do not take precedence over operational provisions (except, as we have already seen, in case of ambiguity) and that there is therefore little need to make an explicit statement to that effect. So where do the recitals end and the operational provisions begin? In order to ensure that the main definitions are included in the legally binding contract, a better approach might be to include the phrase “as defined below” in the recitals, which immediately precedes the defined clause, thus implicitly referring the reader to the “Definitions” section of the operative part of the contract. In practice, however, it is unlikely that a court will ignore all references to terms defined in the recitals when interpreting the agreement. Whether or not recitals can produce legal effects depends on the interpretation of the contract as a whole. The most significant effect of recitals is that a court or arbitrator may examine their content when disputes arise on the interpretation of the contract due to ambiguities in the body of the contract. Given their ability to influence a court, parties should think carefully about why they include certain information in the recitals, what purpose each statement or representation is intended to serve, and whether it ultimately has beneficial legal effects for one or both parties. To the extent that they appear therein, the recitals must be regarded as legislation and not as mere introductory prose and must therefore be drafted with the same degree of caution and precision as the operational provisions of the Treaty. Recitals for related transactions: several recitals may appear in the preamble to the Treaty where several agreements are concluded simultaneously.
Contractual considerations are especially important in California. Under California law, it is conclusively presumed that the factual considerations between the parties are true. And some California courts have barred parties from presenting evidence that contradicts the plain language of a recital. In Kovtun v. DeAntoni, the parties challenged the enforceability of a warranty agreement for lack of consideration. Only the defendant argued that the guarantee agreement was not contradictory and therefore unenforceable. However, the guarantee contained a recital indicating that it had been performed as a condition of a previous construction contract between the parties. In accepting the recital, the Court considered that the recital constituted evidence of the existence of consideration and that it could rely on the previous construction contract to conclude that there was a counter-performance in support of the guarantee agreement. Recitals can play a valuable role in helping third parties to conclude or revise the contract later in order to understand the intention of the original contracting parties.
The reality is that the economic intent behind a written contract is not always clear from the substantive provisions. Contracting Parties may be surprised to find that their carefully drafted provisions, which may have seemed clear at the time of writing this report, are in fact unable to deal with unforeseen problems arising after the entry into force of the Treaty. Indeed, the contract was likely to have been the subject of lengthy negotiations (as is often the case with complex commercial contracts), with the final wording representing a compromise between conflicting commercial views. Compliance considerations – these allow the parties involved to specify specific requirements or prerequisites that must be fulfilled before the contract is signed. For example, if the required consent of an external party for the transaction must be obtained before signing the contract. Once approval has been granted, the recital clause explaining the measures taken will be incorporated into the contract. Unless otherwise stipulated in the contract, recitals do not form part of the conditions agreed by the parties. If the parties wish the recitals to form part of the contract, they may contain wording to the effect that the recitals `shall be incorporated into the contract by reference`. Where a contract contains that language, the recitals shall form an integral part of it.
Considerations relating to the parties – one or more recitals which may be included to reflect the relevant business activities for each party. Toomey reminds us that seemingly innocent recitals can take on unexpected significance in a contractual dispute. It is also worth mentioning two obit observations made by the Court of First Instance: first, that recitals may form the basis of an overriding obligation to act in good faith; and second, that a purpose clause citing prior transactions could enhance the relevance of the parties` prior course of business in the interpretation of the contract. Those observations show that recitals play a role both in the drafting and litigation of a contract.
