The word “whereas” appears frequently at the beginning of contracts, especially in formal or traditional agreements. While it may seem outdated or purely stylistic, it serves a specific purpose in contract drafting and interpretation.
Understanding what “whereas” means helps you read contracts more confidently and recognize which parts of an agreement are explanatory versus legally operative.
In this article, we will break down the meaning of the term whereas to eliminate all confusion.
What Does the Term “Whereas” Mean in a Contract
In contracts, whereas is used to introduce background statements that explain the context, purpose, or circumstances leading up to the agreement. These statements are commonly known as recitals. In plain terms, whereas can be read as meaning “given that,” “considering that,” or “in light of the fact that.”
The context in which contracts are signed is very important to ensure that the parties (and, eventually, a court) can adequately understand the parties’ intentions or the reason for the contract’s existence. Here is what you could find in the “whereas” provisions of a software licensing contract:
Whereas the First Party has developed a proprietary software allowing for the management of [xxx];
Whereas the Second Party is a global distributor of software products and services in the [xxx] industries;
Whereas the parties have entered into a letter of intent on [xxx] for the Second Party to distribute the First Party’s software in the United States;
Whereas the parties wish to mutually agree to such distribution terms and conditions in writing (…).
As you can see, the whereas provisions provide an explanation of the context that led the parties enter into this specific agreement. The whereas terms are not necessarily contractual obligations or mutual promises.
Where “Whereas” Provisions Appear in a Contract
Whereas provisions are most often found at the beginning of a contract, before the main operative provisions. A contract is typically made of different sections: (i) the appearance where the parties are named, (ii) the recitals where initial context is provided to the agreement, (iii) the body where the terms and conditions are set out, (iv) the signature page where the parties sign, and (v) appendices, exhibits, addendums, or other documents attached to the contract.
The whereas clauses will generally be found after the appearance but before the body, in a section called recitals. Within the recitals, each paragraph will generally start with the term “whereas.”
What Is the Purpose of Whereas Clauses
The purpose of the whereas clauses is to provide context for the agreement. They explain why the parties are entering into the contract and what they are trying to accomplish.
In many cases, the whereas clauses are used to (i) present the parties, what they do, and their expertise, (ii) describe the relationship between the parties or important events leading to this contract, (iii) a description of what each party is aiming to achieve by entering into the agreement, (iv) present important events, factual circumstances, or milestones that are crucial for the understanding of the contract, and (v) the clarification of important assumptions underlying the contract.
For example, if parties have a long-standing business relationship enter into a contract, they may draft the whereas clauses to present themselves, to state what prior contracts have been signed that are related to this new contract, they may refer to confidentiality agreements or undertakings that the parties had previously signed and would like to observe for the purpose of this contract, and potentially state whether this new contract will replace, override, or complement any existing contracts.
By drafting the whereas provisions this way, the parties frame the agreement, refer to other agreements that are important to consider, and ensure they maintain some clarity (or organization) in the new agreements that they are signing with one another.
Are Whereas Clauses Legally Binding
It’s important to note that whereas clauses can have a legal impact on your contract in the event of a dispute. In other words, a court will consider the entire content of your contract to interpret its meaning, to enforce certain obligations, or to clarify the parties’ rights.
Strictly speaking, the court cannot enforce the whereas clauses as the parties are not setting out an obligation to do something or to refrain from doing something. As such, the whereas clauses do not create an “enforceable” obligation.
However, whereas clauses can still have legal significance in interpreting the contract in general, courts may look to recitals to better understand why the parties entered into the contract, what factual background the parties considered important to mention, clarify ambiguous contract language, understand the intention of the parties, and better understand the context for interpreting operative provisions.
In this context, the court can interpret a party’s obligation in a manner that will fit more closely with the overall intention of the parties. For example, if the whereas provisions present a party as an expert in marketing services, with the skills, experience, and knowledge to enter into the contract, the court may interpret that party’s obligations as those of an expert marketer, not an inexperienced amateur.
If a recital directly conflicts with the operative terms of a contract, the operative terms generally control.
Practical Example of Whereas Provisions in a Contract
To help you better understand the whereas provisions, it’s useful to look at an example. Let’s consider the following:
Whereas Company A develops software solutions;
Whereas Company B wishes to license such software (“Software”);
Whereas Company A and Company B have entered into a Master Software License Agreement on [xxx] (“MSLA”) governing the general terms and conditions of all licenses provided by Company A to Company B;
Whereas the parties wish to enter into this statement of work (“SOW”) for the licensing of the Software subject to the MSLA;
Whereas the parties wish to evidence their agreement in writing.
In this case, the “whereas” clause provides background on the relationship. More specifically, it explains that the parties have already entered into a Master Software License Agreement, and they would like to subject the Software to its terms.
If the court eventually has to interpret this contract, it will have a much better understanding of the context and other contracts that may be relevant.
Common Misunderstandings About Whereas
A common misunderstanding is assuming that everything written after the whereas provisions is legally enforceable. In general, the whereas clauses usually explain context rather than impose duties. For example, the whereas clauses will very often present the parties. This presentation, although useful, is not legally enforceable in any way. Rather, the whereas provisions set the tone for the contract’s legally binding and operative terms.
Other misunderstandings include:
- Believing that clauses are required for a valid contract
- Assuming removing the whereas clauses invalidates an agreement
- Treating recitals as promises all the time rather than background statements
While helpful, whereas clauses are not mandatory for contract formation. As such, you can enter into a legally binding contract without including any recitals or whereas clauses, and such a contract will be perfectly valid.
Ultimately, it’s important that you consult a qualified lawyer in your jurisdiction to ensure that you understand the local application of the whereas provisions.
Is Whereas Still Necessary in Contracts
Today, many contracts will continue to include whereas provisions to set the background and the tone of the contract, while others may not.
Ultimately, including whereas provisions will depend on the drafting party’s writing style, industry best practices, and the desire to make the contract appear more “formal” or “sophisticated.”
Removing the whereas provisions will not affect the validity of your contract, will not negatively affect the enforceability of the obligations set out in the contract, and will not cause any interpretation issues to the extent that the terms and conditions of your contract are clear.
When Whereas Clauses Matter More
Whereas clauses tend to matter more when:
- Contract language is ambiguous
- There is a dispute over intent
- The agreement references prior dealings
- The contract is heavily negotiated
A common example is in the context of mergers and acquisition contracts (such as a stock purchase agreement or asset purchase agreement). In these situations, given that the parties will likely be signing many contracts simultaneously and/or consecutively, the recitals will be important for setting the background, establishing the order of application of the contracts, and influencing how a court understands the agreements as a whole.
Takeaway
In contracts, you’ll typically see the “whereas” clauses used to introduce background statements that explain the context and purpose of the agreement. These clauses usually do not create binding obligations on their own, but they can play an important role in helping a court ultimately understand and interpret the parties’ rights and obligations.
Knowing the difference between explanatory language and operative terms helps you focus on what truly governs the parties’ rights and responsibilities while still understanding the bigger picture behind the contract.
We regularly write about interesting contractual terms and phrases to help you better understand them. You may wish to consider reading our article explaining the meaning of “now therefore” in a contract or “be it resolved” in a resolution.
