Most contracts (if not virtually all) contain recitals. They will sometimes be called “recitals” or “background” or, if the attorney is old-school, use the phrase “Whereas…” a lot. When I first started studying contract law, I thought these recitals were included by convention–just something attorneys do (like use the word “whereas”). Maybe that’s what you think too.
Not so my young padawan.
Believe it or not, there is a chance that you could end up in a dispute with a person or entity even though you have a contract. In fact, in my experience it is very rare to have a business lawsuit that does not have at least one contract involved. If you are unfortunate enough to end up in court litigating about a business contract, the recitals can be very important. Nevada Revised Statute (NRS) 47.240 states “[t]he truth of the fact recited, from the recital in a written instrument between the parties thereto, or their successors in interest by a subsequent title…” can be taken as a “conclusive presumption.” This means that the fact asserted in the recital is taken as fact and cannot be rebutted.
Suppose you have a contract with the following recital: “Whereas client believes, after due diligence, that Company possesses the skill and experience necessary to perform the services as set forth in this agreement.” If a dispute arises and the client wants to argue that the Company lacked competence, the Company can submit the recital as conclusive evidence that the client was satisfied that the Company had the requisite competence.
That’s the theory at least. Truth be told, I do not know of any instance where litigation rested solely on an issue addressed in the recitals. At the same time, I wouldn’t be surprised if it has happened. The point is that recitals should not be taken lightly and it is important to understand what kind of impact they can have.
Shameless plug: If you would like a contract reviewed, are dealing with a breach of contract, or have business litigation on the horizon, contact us here at the Faux Law Group and we’d be happy to see how we can help you.