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THE STRUCTURE OF A COMMERCIAL CONTRACT (4) - THE RECITALS

So far, we have covered 'the heading', 'the date and commencement', and 'the parties'. In this part of this series, we will look at the paragraphs of our contract which begin with WHEREAS.


“INTERNATIONAL DISTRIBUTION AGREEMENT [The Heading]


THIS AGREEMENT IS ENTERED INTO ON THIS 18th DAY OF FEBRUARY 2021 [The Date and Commencement]


BETWEEN [the Parties]


HAPPY SKIN Inc (hereinafter referred to as “HSI”), a Company registered in the State of California, having its office at 9876 Slick Boulevard, San Jose, California


AND


THE DISTRIBUTOR CAMDIS Limited, (hereinafter referred to as “CAMDIS”) whose registered office is at 12 Mountain Road, Cambridge, England, and whose registered number is 49820912.


WHEREAS HSI is the manufacturer of a range of high-quality skin care products, including skin creams, lotions, and moisturisers designed to promote healthier skin;


WHEREAS CAMDIS is an international distributor and is engaged in the marketing of skin care products to various international markets;


WHEREAS CAMDIS, which is engaged in the marketing of skin care products in the United Kingdom (hereinafter referred to as ‘the Territory’) has proposed to distribute various skin care products produced by HSI, including skin creams, lotions, and moisturisers that are designed to promote healthier skin (hereinafter called ‘the Products’);


WHEREBY it is agreed as follows….”


Under the section setting out the parties, we can see some paragraphs (in bold in the text above). Three of the paragraphs begin with the word ‘whereas’, in capital letters. ‘Whereas’ looks like a compound adverb – such as ‘hereby’, or ‘hereinafter’. However, it is a conjunction. If you look at the meaning in a dictionary, you will see that it is usually used to indicate some kind of comparison with something. For example:


I like strawberry ice cream whereas she likes vanilla.


In this context, ‘whereas’ means something like ‘compared with the fact that’.


When we see WHEREAS in the beginning parts of a contract, however, it is best not to try to understand it in this 'dictionary' way. The word has a different kind of function. Its function is to introduce some further information about the contract that the parties are entering into. So, in our example, we can see that the information that is being introduced by ‘WHEREAS’ includes some details about what each of the parties does (HSI manufactures skin care products, CAMDIS distributes and markets skin care products, etc).


This section of our commercial contract has a number of different names. You may hear it called:


· the recitals

· the preamble

· the ‘whereas clauses’

· the background


We should make clear that there can be some confusion in using these terms. Why? Because sometimes, lawyers will call the whole of the introductory parts of a contract (the heading, date and commencement, parties, etc) as ‘the preamble’. To avoid confusion, in this series, if we refer to the section of the contract containing the WHEREAS paragraphs, we will call it ‘the recitals’.


What kind of information might you see in the recitals? They may contain the following kinds of information:


· the background of the parties (including what they do, their business activities, etc)

· the context of the agreement, including the circumstances which led to the agreement. This is often simply an elaboration of the heading (in this case ‘INTERNATIONAL DISTRIBUTION AGREEMENT’) and giving further details about it

· whether certain requirements (for example, any statutory requirements or regulations) have been complied with

· an introduction to the agreement itself.


Many commercial contracts in English that you see will contain at least two or three recitals, but usually no more than five or six.


There are some practical things to think about when you are considering what kind of information to put in the recitals of a commercial contract. They include:


· limiting the content of the recitals to information, intentions and statements of fact only

· setting out matters which may affect the validity of enforceability of the contract

· any interdependency with other contracts or agreements.


Additionally, there are some matters that should not be included in the recitals. For example:


· definitions. We will talk about these in another part of this series.

· Any obligations, rights, duties, conditions, warranties etc that the parties are entering into.

We will discuss these in a future post in this series.


You will also note that each paragraph which begins ‘WHEREAS’ ends with a semi-colon (;).


In the next part, we will look at the section which begins ‘WHEREBY’.

© Cambridge Legal English Academy 2021

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