Contract Preambles Explained: Your Definitive Guide

What is the Preamble of a Contract?

While many people have heard the term "preamble" in passing, relatively few actually understand what it means, from a legal perspective. In the context of a contract, a preamble is a section that is contained at the beginning of the document to state and/or summarize the background of the contract, or the purposes for which the document is being drafted. It is particularly important in situations where one aspect of the contract may or may not be enforceable , as the preamble often gives the courts the context necessary to render a decision in favor of the party seeking to enforce that provision.
While the preamble to a contract will almost always form part of what is known as the "recitals" or "whereas clauses" or "background" of the contract, it may also sometimes be referred to as an "introductory clause" or "congruence clause".
The Latin phrase "expeditio ad legem", which translates to "the furtherance of the law", is often used in contractual or legal contexts when referring to a preamble.

Key Components of a Contract Preamble

In legal writing, within the context of contract law, a preamble is an introductory paragraph, often used to identify the parties involved, the date of the agreement, and the introduction of the agreement. The preamble contains clauses that summarize the main purpose and key issues of the contract and is generally followed by other articles. Contract preambles that are excessively long may be drafted to avoid the consequences of contractual mistakes.
The most common use of a preamble clause is to identify the party entering into the contract, such as "this Agreement is made and entered into as of the 1st day of January, 2017 (the "Effective Date"), by and between X Corporation, a Delaware corporation having its principal place of business at 1234 Street Name, City, State, Zip Code, and Y, with an address of 5678 Street Name, City, State, Zip Code." The second most common use of a preamble clause is to provide the date of the agreement, such as "This Agreement is effective as of the 1st day of January, 2017."
Sometimes the preamble also identifies the principal place of business of the parties to the contract, "The parties hereto agree that the principal place of business of each shall be in New York, New York, notwithstanding that either party may occasionally conduct business elsewhere."
Other examples of preamble clauses include:
• This Agreement shall be governed by the laws of the State of ___, without regard to its conflict of law rules.
• The parties intend that this Agreement terminate on December 31, 2018.
• The purpose of this Agreement is to set forth the terms under which Company XYZ will sell, distribute, and supply, and ABC, Inc. will install, its manufactured durable goods in the State of ____.
• The parties acknowledge that the rent under this Lease is based upon the recognition that the Lease is a fully net lease.

Why the Preamble is Important in Legal Contracts

Much like how the first impression a person makes on you sets the tone for the relationship, it’s the first few lines of a legal document that lays the foundation for what follows. The preamble in this regard acts as the attorney’s warm-up act. It sets the mood and provides essential context on what the rest of the document holds. The preamble is critical in helping define the scope of the document, and its importance is further cemented by the fact that it often lays the groundwork for contract interpretation, or, in the worst case, inadvertent omission of pivotal clauses/information. Some classic examples where the presence of a concise and properly structured preamble may have saved parties from unnecessary litigation and exorbitant fees include: In summary, it is of utmost importance that you include relevant information in the preamble so the position of each party is explained, thus preventing disputes at a later stage.

Common Pitfalls When Creating Preambles

Given the importance of preambles, lawyers should be mindful of their correct use. Unfortunately, there are several common mistakes made when drafting preambles.
First, some drafters will simply ignore the "preamble to a contract" altogether, by referring instead to a "statement of intent". Such a lapse in proper terminology (even if not without precedent) may itself lead to confusion in interpretation later.
Secondly, and relatedly, there is often a tendency to utilize what can only loosely be considered a preamble, by nesting it within another section of an agreement that explains something else. For example, a draftee might insert a single sentence of "contextualisation" into a section of ("Warranties") calling for the seller to provide warranties (for "enforced covenants") , rather than to preface the entire agreement with a short section (entitled "Preamble") providing – as preambles do – a precise textual map of where and how the rest of the agreement fits over top of broad factual context.
Thirdly, there is a tendency to oversell – or under-sell – the degree of importance of preambles. On the one hand, a drafter may be tempted to tout the contract preamble as more of a formal legal doctrine than is the case, having the effect of unintentionally rendering the agreement, on its face, more porus than it needs to be. And yet, on the other hand, a drafter may be tempted to downplay the degree of significance of the preamble – by either making it too brief, or couching it in unduly casual or off-the-cuff language. In either case, the relative weight of the entire agreement may be unintentionally diminished, at the time when it should be acknowledged to be at its full strength: immediately before being signed.

Preambles vs Recitals

The terms "preamble" and "recital" are typically used interchangeably to refer to the introduction of a contractual document. To be precise, however, they must be distinguished.
In its customary context, a preamble is preceded by the following language: "WHEREAS, (Name of party), a (type of organization, e.g. corporation), hereinafter referred to as "(shortened or abbreviated form of name of party)," desires to (subject matter, e.g. purchase (X) from (Y)) on the terms and conditions hereinafter set forth; . . . ."
A recitation is typically preceded by the following language: "(Lengthy notation of circumstances leading up to the purpose of the proposed document), it may be noted that: . . . ."
The difference between a preamble and a recital may be further illustrated by the following hypothetical: I. Preceding the name of a corporation seeking to procure a loan, a preamble to a loan agreement may cite the date of incorporation, type of corporation (for example, domestic) and financial condition as additional support of the proposition that the corporation seeks to purchase a loan on terms and conditions set forth in the agreement.
II. A recital in a loan agreement may describe the financial status of the corporation or the potential nature or scope of the loan sought – for example, its object – as part of a statement of "recital" of circumstances to which the memorandum relates – i.e. federal law authorizing loans to private corporations.
The predominant distinction between a preamble and a recital is the function each serves within its relevant document. Both are considered interpretive devices and assist in helping a legal practitioner ascertain the intended meaning of a written instrument.

How to Write up a Contract Preamble

An effective contract preamble is less about style and more about accurate content. Here are some tips to make sure your contract preamble serves its intended purpose.
A preamble’s express statement of the contract’s purpose can establish the context for its interpretation by helping to confirm which of the many meanings of key terms or concepts should be imported into the contract. For example, some terms such as "any," "all" and "including" can have many different meanings in a given context. The preamble’s statement of the contract’s purpose can help indicate which of those meanings should apply. A preamble’s extensive background information may be useful where the contract relies on complex concepts or expansive terms that need some explanation. This is especially helpful where the contract’s purpose was achieved over time by executing several agreements that built on one another. In such circumstances , the preamble can summarize the entire history of the contracting parties’ agreement to date and the evolution of their understanding of the key terms and concepts. A general purpose preamble is unlikely to be as useful as one that addresses the specific reasons why the parties are entering into the contract. Therefore, if a simple statement of purpose will serve to communicate the context of the contract adequately, then it should be preferred over a lengthy description. Similarly, a long preamble that covers topics that are not relevant to the incoming obligations under the contract may confuse the reader. Where the incoming obligations are few and relatively simple, it is sufficient just to state the main points. The language used in a preamble can easily drift into contractual provisions. Often, the drafter thinks of the preamble as just a sort of canvas to paint with, but its language may become part of the solid foundation of the contract.