What Is the Preamble of an Agreement

If one or more signatures are made after the date specified in the preamble, add a “Consideration” clause to resolve the issue. Content. The information covered in the preamble should be limited to intentions, wishes or statements of fact. It is customary to limit these statements to those elements that may directly affect the validity or applicability of the contract. Other details that explain the overall picture of the proposed transaction, such as the interdependence of the contract with other agreements (if any) or the requirement that certain critical conditions be met or that regulatory approvals must be granted, can also be discussed here. Overall, the elements dealt with in a preamble should be of such importance that, if one of them does not apply, the treaty may be annulled on the legal basis of the “error”. No obligation. Although clauses should never contain obligations, conditions, warranties, policy rules or obligations. Title of the preamble.

In the preamble, the title Recitals, against or background, is usually written in capital letters or bold. They address some key features of the agreement, related transaction, or transactions of the parties, and help the reader understand the context before diving into the “Definitions” section.  A U.S. case, TA Operating LLC v. Comdata, Inc. and Fleetcor Technologies, Inc. (TA Operating v. Comdata), is illustrative.⁴ The plaintiff in this case, TA Operating, is one of the leading U.S. travel center operators that provides fuel and other amenities to truck drivers.

Defendant Comdata is one of the largest fuel card providers for the freight forwarding industry (fuel cards are like charging cards and allow truck drivers to purchase fuel, food, and other products and services at travel centers). The parties had a long-standing agreement under which TA Operating`s travel centers accepted Comdata fuel cards and Comdata processed transactions made at TA Operating`s centers for a transaction fee. After more than 20 years of cooperation, Comdata turned to TA Operating to introduce an alternative to purchasing fuel without a card with RFID (Radio Frequency Identification) technology in travel centers. The parties entered into an RFID contract and at the same time amended their existing agreement to reduce the transaction fees paid by TA Operating to Comdata. The recitals of the amended agreement contained a clause of `recitals` referring to the RFID contract and claimed that the parties had executed the amended agreement `taking into account the` agreements mentioned in the recitals, including the RFID contract. However, nowhere else in the amended agreement was the RFID contract mentioned. CONSIDERING that licensee has agreed to support and support these marketing efforts by:. in its territory and to refrain from any action taken with such efforts or in the above-mentioned agreement between . and businesses: The preamble to a contract usually consists of one to five paragraphs that describe the entire transaction. For most relatively standardised types of contracts, the list of recitals is limited to a few. On the other hand, settlement agreements and highly tailored (complex) agreements may contain a dozen or more recitals detailing any fact or event, the uncertainty to be resolved or the position of each party on a dispute.

Where recitals are included, they should summarise the essential trade agreement between the parties and explain why they conclude the agreement. This context can then be useful for resolving issues between parties or allowing third parties, such as auditors. B, to understand its purpose.  As a result, a dispute arose and Comdata informed TA Operating that it had breached the RFID contract. Comdata also terminated the parties` amended agreement on the grounds that the RFID contract in the formal legal sense had been taken into account for the amended agreement, meaning that the RFID contract was entered into in exchange for the amended agreement.⁵ TA Operating sued Comdata in Delaware State Court.  The preamble to an English-language contract is a brief introduction to the contractual agreement, which includes information such as the type of contract (e.g. B, non-disclosure agreement, license agreement, purchase agreement, etc.), the date of the contract and the contracting parties. The parties are first identified by their full names, which are then often capitalized by an abbreviated version of their names and sometimes by their respective roles in the transaction (for example. B, “buyer” and “seller” in a purchase agreement). In addition, the parties can also be defined individually as “party” and collectively as “parties” (although in English, the parties are not called “Party A”, “Party B”, etc.) as in Japanese contracts).

It is also customary to indicate the place of incorporation and the addresses of the parties. For example: CONSIDERING that the company has already entered into a global and non-exclusive marketing agreement with . whereby. will endeavor to sublicense and commercialize the global systems business that is of paramount importance to the Company; f.La prior relationship between the parties to the License Agreement, Licensor and Licensee. g.The details on which the parties have concluded the agreement. It is not necessary to include recitals, especially if they are self-evident. (For example, there is no point in including in a purchase and sale agreement recitals that indicate that the seller has agreed to sell the [assets or shares] and that the buyer has agreed to buy them.) The recitals are formulated as traditional paragraphs with grammatically complete sentences and not as several sentences emanating from the original preamble. Therefore, it is not necessary to limit the recitals to a single sentence. It is advisable to end each recital with a period instead of a semicolon.

This is also preferable for contract assembly software, where paragraphs are automatically inserted or omitted. For example, do not write: since the body of the amended agreement did not contain a reference to the RFID contract and because the meaning of the word “consideration” had been questioned in the recitals, the court found that the amended agreement was ambiguous. The usual principle that U.S. and other common law courts guide in the interpretation of the contract is that when a contract is clear and unambiguous, the courts interpret the contract as it is written and generally do not consider external recitals or evidence (for example. B the contractual negotiations of the parties or the subsequent conduct of the parties in the performance of the contract), understand the intentions of the parties and the meaning of the contract. However, if a court finds that a contract is ambiguous, it may use that extrinsic evidence and recitals to understand the intentions of the parties and interpret the contract to resolve the dispute.  Like the preamble, the recitals generally do not contain and are not intended to contain contractually enforceable obligations. As one English court stated in a decision, recitals are generally not “considered to contain certain operational conditions”; Their “function is simply to serve as an introduction to the detailed terms that will come later.” ¹ The US courts share this view: “The recitals are not part of the contract and are not legally binding. [C]ontract recitals are declarations of intent[.] ² In TA Operating v. Comdata therefore examined extrinsic evidence, in particular the parties` negotiations on the amended agreement, which took place at the same time as the parties concluded the RFID contract. The court noted that the weight of this extrinsic evidence strongly supported Comdata`s position that it had agreed to modify the parties` existing agreement (which, as mentioned earlier, reduced the transaction fees that Comdata received from TA Operating) in exchange for TA Operating`s willingness to sign the RFID contract.

Consequently, the Court concluded that the RFID contract in the formal legal sense was a counterparty to the amended agreement, as stated in the recitals of the amended agreement.  However, the UK and US courts recognise that if the detailed and operational provisions of a contract are ambiguous, even if there is a significant gap in the operational provisions, the recitals can be used to determine what the parties to the contract have said or intended to do.³ Sometimes the courts may also find ambiguities in the recitals themselves to support the interpretation of a contract, about which the parties are arguing.  In English-language contracts, the preamble and recitals set out the contract and the parties, as well as the context and purpose of the contractual agreement. As a general rule, the preamble and recitals do not contain operational provisions with binding contractual effect and shall not be interpreted as such. The agreement usually enters into force on the day of its signature. Caution should be exercised if a date other than the effective date is chosen. The preamble may, but is not obliged, be followed by recitals. Types of recital principles. The recitals contain general information on the parties, the context of the agreement and an introduction to the agreement itself. .