Background: Overview, definition, and example
What is the background in a contract?
The background section in a contract, often referred to as "recitals" or "preamble," provides an introductory explanation of the context, intent, and purpose of the agreement. It outlines the relationship between the parties, the reason for entering into the contract, and any relevant facts or circumstances that set the stage for the terms and obligations that follow.
For example, in a service agreement, the background section might describe the services the provider offers and the client’s need for those services.
Why is the background important?
The background section is important because it provides context for the agreement, helping all parties and third parties (such as courts or arbitrators) understand the purpose and intent behind the contract. While typically not legally binding, this section can influence how ambiguities in the contract are interpreted.
For SMBs, the background section helps align the expectations of all parties and ensures a shared understanding of why the agreement exists.
Understanding the background through an example
Imagine a franchise agreement where the background section explains the relationship between the franchisor and franchisee. It might state:
- “WHEREAS, the Franchisor owns a proprietary business model and trademarks related to the operation of a quick-service restaurant; and WHEREAS, the Franchisee desires to operate a quick-service restaurant using the Franchisor’s business model and trademarks under the terms of this Agreement.”
An example of a background section
Here’s how a background section might appear in a contract:
“WHEREAS, the Service Provider specializes in digital marketing services, including search engine optimization and content strategy; and WHEREAS, the Client seeks to engage the Service Provider to enhance its online presence through such services; and WHEREAS, the Parties desire to set forth the terms and conditions of their relationship in this Agreement.”
Conclusion
The background section of a contract provides context and outlines the intent and purpose of the agreement. While not usually legally binding, it helps ensure a shared understanding of the contract’s objectives and guides interpretation of the terms.
For SMBs, including a clear and concise background section in contracts is essential for aligning expectations and providing a roadmap for the agreement. This section sets the tone for the relationship and ensures that all parties are on the same page from the outset.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.