A Guide to Acquisition Agreements - Preamble and Recitals

Most acquisition agreements begin by identifying the agreement and reciting the parties and certain other facts pertaining to the transaction.  These "recitals" are not intended to be enforceable promises or actionable representations and warranties (more about those later).  They are usually included, however, to give context to what follows.  This is a good practice, both to make the document readable (people may be working out of it for years) and because the context and general understandings recited in the preamble of the document can be used as evidence of the parties intent in any potential disputes (other evidence of the drafting history and the parties’ intentions can be excluded from evidence).

From the above discussion, you should understand the need to draft the preamble and recitals carefully.  They may not be enforceable in themselves, but they can be crucial to the enforcement of the rest of the contract.  They should say what you would want them to say if someone was trying to get the picture of the deal and should not contain extraneous information.  For example, if there are “side agreements” that are related to the business sale, such as a post-closing employment or consulting agreement with one of the founders, the recitals of each agreement should usually mention the other to make it clear that they are part of one overall deal.