November 25 2014
… It is often the case that where commercial contracts include a recitals section preceding the operative provisions, the recitals will be among those sections of the contract that have been afforded the least consideration by the contracting parties during the drafting stages. There is a widely-held perception that the recitals are legally inconsequential, since their role is fundamentally ‘scene-setting’ in nature and they do not automatically form part of the operative, legally binding agreement between the contracting parties. However, when a dispute arises over contractual interpretation and a court or arbitrator is tasked with deciphering an ambiguous provision, the recitals may be brought into play as an aid to interpretation. They are, after all, clearly a part of the written contract in some way or other.
This article seeks to restate the importance of the humble recital, and to serve as a reminder that the recitals could be legally binding upon the contracting parties in certain circumstances, and that they could also play an important role in enabling a third party (crucially, a court of law or an arbitrator) to refer to relevant background information in order to discover the true intention of the contracting parties…