Corporate & Securities Law

Stating that Recitals Are ?True and Correct?

By Ken Adams

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).

Full post as published by AdamsDrafting on February 16, 2008 (boomark / email).