Comments on: Superfluous Recitals in Merger Agreements

By: Jeffrey

Jeffrey — Thu, 17 Sep 2009 15:50:07 +0000

Personally, I view recitals as extraordinarily useful and helpful, if carefully drafted (particularly if written in plain English). Any written agreement serves multiple objectives. Beyond listing who will do what, and what happens if any of that isn’t done, an agreement, if thoughtfully drafted, can be a useful tool for helping parties understand aspects of the relationship both prospectively and retrospectively. The recitals can set the context, provide some history, and tee up the meat of the agreement. A little legal reminiscing and foreplay can be quite effective.

By: Jack

Jack — Wed, 16 Sep 2009 14:37:18 +0000

In states where the Secretary of State’s staff is overly afflicted with life guard syndrome, recitals are helpful in making sure your documents are accepted for filing. For the same reason, even though the satisfaction of statutory requirments may need to be addressed in the body of the contract, reciting or at least summarizing them can be helpful in getting them past civil servant gate keepers.

By: Ken Adams

Ken Adams — Tue, 15 Sep 2009 18:17:55 +0000

Joyce: See my comment responding to creditderivativesguru. Ken

By: Joyce Morrison

Joyce Morrison — Tue, 15 Sep 2009 18:01:16 +0000

I avoid recitals completely if possible.

By: D. C. Toedt

D. C. Toedt — Sat, 12 Sep 2009 21:25:50 +0000

Thanks Kazu - I added that to the choice-of-law cheat sheet for California.

By: Ken Adams

Ken Adams — Fri, 11 Sep 2009 22:09:28 +0000

Kazu: That’s useful to know, but the futility of the traditional recital of consideration is so clear that I didn’t even bother discussing it in this post. I’m more interested in the other stuff. Ken

By: Kazu

Kazu — Fri, 11 Sep 2009 21:40:12 +0000

As to recitals being superfluous, in California, our Evidence Code section 622 provides, “The facts recited in a written instrument are conclusively presumed to be true as between the parties thereto, or their successors in interest; but this rule does not apply to the recital of a consideration.”

By: Ken Adams

Ken Adams — Fri, 11 Sep 2009 16:43:57 +0000

Guru: You misunderstand the function of recitals. As explained in chapter 1 of MSCD, they serve to set the scene for the reader. In a transaction of any complexity, they can be very useful.

Only in the rarest of circumstances would you need to explain in the recitals what constitutes the consideration. But whatever the circumstances, the NOW THEREFORE language you point to is, as a matter of black-letter contract law, utter nonsense.

Ken

By: creditderivativesguru

creditderivativesguru — Fri, 11 Sep 2009 15:47:48 +0000

Isn’t that redundant — aren’t all recitals superfluous? The recitation of adequate consideration is in the NOW THEREFORE paragraph.

I started life as an associate at a firm where the corporate forms contained no recitals, and I have continued that practice. If it is important enough, make it a rep/war; if not, omit or make it a definition (which seems to be the purpose from what I read above).

By: D. C. Toedt

D. C. Toedt — Fri, 11 Sep 2009 15:22:36 +0000

In some cases, the authors may have been planting hot-button “key words and tricky phrases” in the documentary record, for possible sound-bite use in litigation or administrative proceedings.