Parties, recitals, definitions and interpretation clauses

This guidance note provides expert legal insight into the foundational sections of commercial contracts, focusing on the parties, recitals, definitions, and interpretation clauses. Practitioners must understand these elements to ensure enforceability and clarity in contractual agreements. The note reveals critical nuances in drafting and identifying parties, the role and limitations of recitals, precision in definitions, and sophisticated interpretation principles that influence contract construction.

Topics Covered

• Parties: Key details and legal capacities of contracting entities
• Recitals: Purpose, legal effect, and drafting considerations
• Definitions: Essential terms and drafting precision
• Interpretation clauses: Principles shaping contract meaning and application

Essential Insights

• Ensure precise identification of parties, including complex trustee and partnership capacities.
• Recognise recitals as contextual aids, not binding terms, with potential to imply contractual provisions.
• Draft definitions to avoid ambiguity and consider implications of legislative incorporation by reference.
• Interpretation clauses can exclude common law rules like contra proferentem—know when exceptions apply.
• Understand joint, several, and joint and several liabilities and their impact on enforceability.
• Evaluate how inclusion or exclusion of headings and examples affect contractual interpretation.