Contract Drafting Series: Two (Introduction & Recitals)

Contract Drafting Series: The Introduction.

Hey! It’s Shaunt of the Oozoonian Law Corporation – OLC. Welcome to the second article in the “Contract Drafting Series.” It’s a series I would like to build out about how I personally read and interpret a contract, how you might go about drafting a contract and what the structure, phrasing or words in a typical contract mean or represent.

Today we look at the Introduction section of the contract.

The introduction is always at the top of every agreement and should set out the name of the contract, should identify the parties to the contract, and the date that it is drafted or executed. Finally, the introduction should also set out the “Recitals”.

In a PSA an introduction section should be similar to the following:

“This Purchase and Sale Agreement (this “Agreement”) is made and entered into on October 13, 2023, by and between Tom Brady, a California corporation (the “Seller”), on the one hand, and Aaron Rodgers, a California limited liability company, and Joe Burrow, a general partnership, (collectively referred to as the “Buyers”), on the other hand.”

You will notice that the first words of the introduction state the title of the agreement and then provide a short-form definition of the name of the agreement. This definition is used because it can get tedious to type “Purchase and Sale Agreement” one thousand times throughout the contract. It takes up too much space to type the whole thing every time when you could just set a definition (i.e. “Agreement”) and use that short-form version throughout the contract.

You will also notice that this same strategy is utilized to define the seller and the buyers of the agreement. In addition, the parties usually have a parenthetical qualifier after its name so that the identification of the company can later be identified and/or verified in the future.

For example, there might be 3 different companies called Tom Brady but only two of them are corporations and only one of those two is a California corporation. Thus, we know which Tom Brady we are referring to by adding the identifying parenthetical.

Now that we’ve set out the name of the agreement, identified the date of the agreement, and identified the parties to the agreement we can move to a sub-section of the introduction called the recitals.

The recitals can be long or short depending on the history of the transaction. For the sake of example, here’s a short version:

“RECITALS:

1. Buyers wish to buy from Seller 3 footballs; Seller wishes to sell to Buyers 3 footballs.

2. Buyers only agree to purchase from Seller if Buyers are able to financing.

3. Seller has represented that only 2 footballs are currently available and that if a third football cannot be obtained by Seller before a particular date, Buyers refuse to purchase any footballs from Seller.”

The Recitals are placed right underneath the opening paragraph and therefore, I consider the recitals a sub-section of the introduction. The recitals are not considered to be terms or provisions of the agreement but can certainly create a background of the transaction and the reason the contract was entered into in the first place. It can also set out special circumstances, but careful attention should be given to ensure that the enforceable terms of the contract follow the general idea of the recitals, otherwise an ambiguity will be created.

The sole reason contracts exist are to resolve and prevent any confusion relating to the transaction and the parties to that transaction. A contract drafter should work very hard to create a clear and concise contract.

Thanks for reading!

Shaunt Oozoonian

Oozoonian Law Corporation