Recitals Clause – Purpose and How It Sets Context

When reading a contract, most people jump straight to the “business” parts payment terms, deliverables, deadlines. But before you get to those, right after the parties’ names, you’ll often find a few short paragraphs starting with the word “WHEREAS”.

These are the Recitals, and they’re not there for decoration. They quietly frame the deal, tell the story of how it came to be, and often become the interpretive compass when things go wrong.

Too often, drafters treat them as a copy-paste formality. But seasoned lawyers know that well-written recitals can be the difference between winning and losing a dispute. Let’s explore why.

What is the “Recitals Clause”?

The Recitals Clause (also called Preamble, Background, or Whereas Clause) is the opening section of a contract that:

• Summarises the background facts.
• States the reason the contract is being made.
• Explains the context leading up to the agreement.

It is typically formatted as a series of “WHEREAS” statements, followed by a “NOW, THEREFORE” statement that transitions into the operative terms.

Example:

WHEREAS, ABC Technologies Private Limited develops cloud-based accounting software;

WHEREAS, XYZ Consulting LLP wishes to purchase a license for ABC’s software for internal use by its employees;

WHEREAS, the parties wish to record their agreement regarding the licensing, maintenance, and support of such software;

NOW, THEREFORE, in consideration of the mutual covenants set forth herein, the parties agree as follows…

Key point: Recitals themselves are usually not legally binding, but they guide interpretation when the binding clauses are unclear or silent on an issue.

Why Recitals Matter More Than Most People Think

1. They Set the Stage for Interpretation

Contracts are the result of a specific situation. Recitals help capture that situation. If a dispute arises, a court or arbitrator will often read the recitals first to understand what the parties were trying to do.

Example:

If the operative clauses say “The Supplier will deliver components,” but don’t say which type, recitals stating “for the purpose of manufacturing electric bicycles” can be decisive in determining the correct components.

2. They Provide Context for Complex or Multi-Stage Deals

For straightforward contracts, a single sentence might do. But for more complex deals mergers, joint ventures, multi-year supply arrangements recitals can summarise past events, related agreements, and the strategic purpose.

Example:

In a joint venture, the recitals might note that the parties have been collaborating since 2018 under a separate supply contract, that they wish to combine R&D efforts, and that the JV will focus on a new product line. This gives anyone reading the agreement years later the ability to understand why the deal exists.

3. They Reduce Misunderstandings

When parties later argue over “what the deal was about,” recitals can provide clarity. They work like a mission statement for the contract.

Example:

If the recitals say that a marketing services agreement is “for the purpose of promoting ABC’s products in the Indian retail market,” ABC cannot later claim it covers global promotion unless the operative clauses also expand the scope.

4. They Act as an Anchor During Disputes

While recitals do not impose obligations, they can strongly influence interpretation. Courts may lean on them when:

• A clause is ambiguous.
• There’s a gap in the operative terms.
• The parties’ intentions are in dispute.

Best Practices for Drafting Recitals

Do:

• State facts and not promises or obligations.
• Keep them concise but informative.
• Use accurate, verifiable details (e.g., registered names, dates, background events).
• Align them with the operative clauses  which should never contradict.
• Use consistent formatting (e.g., “WHEREAS” statements).

Don’t:

• Insert contractual commitments which belong in the main body.
• Include irrelevant company history or marketing fluff.
• Use vague statements that could be interpreted multiple ways.
• Overload with detail better suited for schedules or annexures.

Common Red Flags

• Contradictions: Recitals say “for exclusive distribution” but the operative clause grants a non-exclusive license.
• Omissions: Leaving out a crucial fact that could explain the scope of work.
• Misstatements: Incorrect dates, wrong party descriptions, or outdated facts that cause confusion.
• Hidden obligations: Sneaking promises into recitals can create ambiguity about whether they’re binding.

Sample: Good vs. Bad Recitals

Bad:

WHEREAS, ABC Corp is in the business of selling electronics;

WHEREAS, XYZ wants to work with ABC;

NOW, THEREFORE…

(Too vague, no clarity on what’s being agreed.)

Good:

WHEREAS, ABC Corp is engaged in manufacturing and selling consumer electronics including smartphones, tablets, and laptops;

WHEREAS, XYZ Retail Pvt Ltd operates a chain of electronics retail stores in South India;

WHEREAS, XYZ desires to purchase, and ABC desires to supply, certain products under the terms set forth herein;

NOW, THEREFORE…

(Clear, specific, and sets the scope without creating obligations.)

Last Words

The Recitals Clause may feel like a mere introduction, but in the life of a contract, it can become the most-read section especially when things go wrong. It is the storyteller of your agreement, the section that explains “why we are here” before telling “what we will do.”

Done right, it prevents misunderstandings, supports proper interpretation, and keeps the contract’s spirit intact. Done wrong, it leaves room for arguments, confusion, and costly litigation.

Up next in the series: Week 3 – “Definitions Clause – The Key to Contract Clarity.