Ozeki Technical 005: Understanding the Structure of Legal Contracts – The Recitals

The term "recitals" originates from the Latin recitare, meaning “to read aloud” or “to recount.” In legal contracts, recitals provide background information about the agreement and the circumstances that led the parties to enter into the contract. They set the factual context for the obligations that follow. . Much like the preamble, recitals offer insight into the overarching purpose and motivations behind the contract.

Historical Background of Recitals

The use of recitals in legal contracts dates back to the early modern period, particularly in the 17th century, when commerce and law became more structured. As trade expanded and legal agreements grew more complex, recitals were introduced to provide the necessary background and context for understanding the contract. They helped courts and legal interpreters understand the intentions and motivations of the parties involved, ensuring that contracts were clearer and easier to interpret in case of disputes.

Purpose of Recitals

Recitals serve as introductory statements that establish context and intent. Traditionally, they offer a brief background on the events or circumstances leading to the contract, helping to set the stage for the obligations outlined in the operative clauses.

While recitals may include statements explaining why the contract was formed—such as historical interactions or business goals—they do not impose legally binding obligations. Instead, they clarify the context and intent behind the contract, distinguishing them from the enforceable provisions found in the main body of the contract.

The first ever posting of a recital to the internet is captured in a search of Google and shows recitals used by the High Court of Delhi:

The Debate: Context vs. Legal Reason

A point of debate among scholars is whether recitals provide just context and intent or also formal legal reasons for the contract. Some argue that recitals merely explain the background, while others believe that the factual statements in recitals help clarify broader motivations, offering an interpretive framework when disputes arise. However, even in this broader sense, recitals are generally not enforceable as obligations—they serve as interpretive tools rather than legal directives.

Common Use Cases for Recitals

Though recitals are not legally required in all contracts, they are frequently used in the following scenarios:

• Complex Commercial Agreements: Recitals help clarify the background and purpose of the agreement, particularly in deals involving multiple parties or intricate arrangements (e.g., mergers, acquisitions, joint ventures).
• International Contracts: When parties from different jurisdictions are involved, recitals provide an overview of why the agreement is being made, ensuring that any differences in legal systems or cultural expectations are acknowledged and understood.
• Contracts Involving Pre-existing Obligations: Recitals reference prior agreements or obligations, especially when the contract is part of a broader framework of agreements, such as amendments or extensions.
• Court Interpretations: Although recitals are not binding, courts may refer to them to help clarify the contract’s intent if there is ambiguity in the operative clauses.

Let’s dive into a few different examples of recitals in contracts and explain what they mean for the agreements they accompany.

1. Mergers and Acquisitions (M&A) Agreement Recital

Example: "WHEREAS, Company A desires to acquire all the issued and outstanding shares of Company B, and Company B desires to be acquired by Company A, subject to the terms and conditions set forth in this Agreement."

Meaning:
This recital sets the stage for an M&A transaction, clarifying the purpose of the agreement, which is for Company A to acquire Company B. The recital establishes that both parties are entering the contract with the mutual intent of completing the acquisition. It helps explain why the contract exists and ensures that both parties have aligned objectives, but it doesn't impose any legal obligations.

2. Joint Venture Agreement Recital

Example: "WHEREAS, Party A and Party B wish to enter into a joint venture to collaborate in the development, marketing, and distribution of renewable energy technology."

Meaning:
In this case, the recital provides the context of a joint venture. It explains the parties' shared goal of working together on a specific project—in this case, renewable energy technology. The recital highlights the intent behind the partnership, but the actual legal obligations and specific terms of the collaboration will be detailed in the operative clauses of the contract.

Parallel Between Recitals and Programming Languages

One can also make a parallel between Recitals and contemporary programming languages. Take for example JavaScript.  
In JavaScript, a while loop could represent the recital structure:

• The condition in the while loop serves as the "WHEREAS," setting up the situation.
• The body of the loop contains the actions (like the background facts or agreements in recitals).
• The loop ends when the condition changes, similar to the "NOW, THEREFORE" transitioning to the contract's operative clauses.

Alternatively, a conditional statement can capture the same essence, where the if clause checks conditions (similar to recitals stating facts), and then the operative part (the body) executes once the conditions are met.

What’s Next?

In future articles, I intend to argue that contemporary contracts written in human language can be fully represented by corresponding programming language code. This code not only describes but also embodies the meaning of the contract, conveying both the intent and rationale inherent in the human language version.

But for the next article, we will dedicate time to contract sections.

And if you missed it, feel free to check out my previous blog post on Ozeki Technical 004: Understanding the Structure of Legal Contracts – The Preamble

References

1. Law Insider. How to Use Recitals in Contracts.

2. DocPro. What Are Recitals in a Contract?.

3. Law Insider. Sample Recitals.

Disclaimer: Ozeki is not a law firm, and this blog post does not constitute legal advice. Access to this blog material does not create an attorney-client relationship with Ozeki. If this were legal advice, a bill would follow.