Stating that Recitals Are “True and Correct”

In the past year, 265 contracts filed as “material contracts” on the SEC’s EDGAR database contained a provision stating that the recitals were true and accurate. Here’s an example:

The above recitals are hereby made a part of this Agreement and the Borrower acknowledges and agrees that each of the recitals is true and correct.

That’s not an enormous number of contracts, but it’s certainly enough to warrant a blog post on the subject.

Such provisions presumably seek to turn into representations any facts stated in the recitals, so that a party would potentially have a remedy if any of those facts turn out to have been inaccurate.

But as a general matter, recitals convey background information of the sort that shouldn’t be at issue; nothing would be gained by converting such information into representations. And if any party is uncertain of the accuracy of facts stated in the recitals, that party would do well to have the one or more parties with knowledge of those facts make representations as to those facts—such representations would constitute a stronger foundation for any claim that those facts were inaccurate.

So I recommend that you not state that any recitals are true and correct, or even accurate (a less dopey alternative to true and correct).

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

9 thoughts on “Stating that Recitals Are “True and Correct””

  1. The conversion of a recital into a representation is not the only reason that parties may want to acknowledge the accuracy of a recital. By agreeing to the accuracy of a recital, a party may be estopped from denying the truth of the recital in a later dispute. For example, a lender that enters into a forbearance agreement with a defaulting borrower often will want the borrower to acknowledge the amount of the debt, the lender’s compliance with all notice requirements, etc. These are not representations that the borrower would be expected to make, but they are facts that the lender does not want to have to argue over if the borrower subsequently defaults under the forbearance agreement.

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  2. James: If I want a party to acknowledge something, I have them do it in the body of the contract, not in the recitals.

    But more generally, when parties sign a contract, they’re accepting that the recitals are accurate. It would be redundant to include a separate provision that seeks to accomplish the same thing. And a party can’t subsequently simply wash its hand of the recitals, unless the facts in question are ones that it had no knowledge of when it signed the agreement.

    Ken

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  3. Premises lease renewals typically have recitals that outline the history of the lease through an itemization of its documentation.

    As a landlord who finds sometimes that earlier documents (especially from a prior landlord) are missing, or have material typographic errors (e.g., term length not matching dates), or renew after an overholding period – since these items are clarified in the recitals, it seems to me expedient to agree that the recitals are “true”. No?

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  4. David: As I suggested in my response to James’s comment, the recitals are part of any contract, so by signing a lease a party is also accepting the recitals. But if you’re dealing with a relatively unsophisticated tenant, sure, have them acknowledge that the recitals are accurate. Ken

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  5. Ken: I couldn’t agree more. Recitals are expected to be factually correct and it is the duty of the lawyer to confirm their accuracy. I include them for purposes of giving the later reader of the contract the factual background. I have one contract with recitals that go on for four very full pages and which is by far the best source of the history of the entire large transaction it represents – when litigation arose over the transaction, I found that those four pages were the best tool available for briefing our general counsel! But if I have some liability or responsibility I want to pin on my counterparty, I will only do it in the body of the contract. It strikes me as smarmy to (try to) pin liability or responsibility on a counterparty through the recitals.

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  6. Ken: In response to two comments, you state that the recitals are part of the contract. When I first started practicing in Pennsylvania 29 years ago, that was not the case. The recitals were part of the contract only if the contract provided. I don’t know if that is still the Pennsylvania rule (I’ve long since crossed over to Delaware) or the rule in any other state. Bryan

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  7. Bryan: From a practical perspective, the recitals are indisputably part of a contract, just as the introductory clause, the lead-in, and the concluding clause are part of a contract.

    When courts say that recitals aren’t part of a contract, they mean that you shouldn’t look to recitals for the substantive provisions.

    Ken

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  8. In Pennsylvania, there may be a substantive difference when the recitals are not incorporated. This is that Pennsylvania does not require considertion for a contract if the contract states that the parties “intend to be legally bound”. This phrase usually comes after the recitals. I think that incorporating the recitals within the contract ensures that the parties “intended to be legally bound” concerning these representations, and may be necessary if there is no consideration to the contract. This may be overly formalistic but it would not surprise me if a Pennsylvania court drew this distinction.

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  9. Liz: I mention in MSCD 1.124 Pennsylvania law’s relationship with intend to be legally bound. It’s utterly bizarre, but if it happens to come in handy, then go for it. But I see no reason to add to the weirdness by incorporating the recitals by reference. The recitals shouldn’t contain anything you could be bound by. (For one thing, they shouldn’t contain representations. And anyway, one’s bound by obligations, not by one’s own representations.) If you think Pennsylvania courts have said otherwise, please let me know. Ken

    Reply

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