What is a Preamble?
An agreement preamble is a short section of an agreement. It comes before the actual agreement. The agreement preamble is a short introduction that is often written in more practical English rather than legalese. It is well worth taking the opportunity to draft a short agreement preamble that states the purpose of the agreement, who the parties are and gives a brief description of what the agreement is about.
Many parties do not know what an agreement preamble is. For some, the first time they come across this aspect of an agreement is when an agreement is close to being finalised . This can be convenient for the party drafting the agreement, because they can write a draft and give it to the other party or parties at the same time they pass the agreement for signature. However, this can lead to sticky situations for other parties who are not familiar with a draft agreement preamble.
An agreement preamble is a manner of easing parties into the terms of an agreement. It can help the reader to focus on the substantive terms of an agreement and ensure they are covered later on. An agreement preamble is not an obligatory part of an agreement but it is useful to include.
Preamble Components
The components of an agreement’s preamble will vary depending on the particular document being used. However, certain main components are almost always present. These components are:
The Heading. The preamble is typically a distinct heading at the top of the first page of the agreement immediately preceding the opening paragraph of the agreement. While some headings might be generic and might be used in multiple documents, the type of agreement for which the form is intended is often included in the heading. For instance, the heading "Sales Agreement" would suggest that the preprinted agreement would be transposed into the document form when it is to be used as a Sales Agreement.
The Title Block. In addition to a heading or title, many documents may also have a title block listing the subject matter of the agreement. Take the title block found on the forms provided by the State Bar of Texas as an example. There it is common practice to have a title block which states the subject nature of the transaction (e.g. "Design/Build Agreement" or "Construction Subcontract"). The title block will also provide a citation as to where the form was first published. That is stated as a "State Bar of Texas Form" followed by an identification number. The number in the publication will change from time to time with weak-selling forms being discontinued.
The Primary Parties to the Agreement. The name of the principal parties to the document is typically contained immediately after the preamble or heading. For example, in a simple Seller-Buyer Car Title document, the primary parties are often stated as follows: "This Agreement is between John Smith (herein called Buyer) and Richard Roe (herein called Seller)." A preamble with such language will tell a court or arbitrator or other adjudicator who the principal parties to the document being reviewed are.
The Date the Agreement Was Documented. Included in the preamble is almost always the date of the agreement (or in some cases the date of agreement, which may differ from the date the agreement is signed or the date of execution of the document). In some instances, such as with commercial real estate leases, there may be several different dates contained in the preamble, such as the "effective date of this Agreement," the "date of this Agreement," the "commencement date of this Agreement," and so forth. Unlike the header on the document, the date in the preamble is more likely to change from revision-to-revision. If the date appears in the preamble, it can be reasonably certain that the date will also change.
Purpose of an Agreement Preamble
The importance of preambles in legal instruments should not be overlooked. Their primary function is to provide context. A preamble sets the table so that a table of contents can be understood. It provides context to individual provisions, which allows the reader to appreciate how the provision at issue fits into the overall scheme. Without a preamble, one can only wonder why an agreement begins at section 1 and continues on with several sections without any immediately preceding context. A reader is left guessing as to whether or not there is missing content before the first section. In the intervening years, to say that I have seen many separate sections that predate the first section of a document would be an understatement.
Perhaps most important is the role that a preamble plays in providing insight into intent. A preamble provides context for the agreement as a whole. It attempts to convey to the reader exactly why the parties are entering into an agreement: what are they looking to do, and what are they hoping to avoid? Forgetting that preambles exist will lead to unnecessary questioning of the intent behind the provisions of the agreement.
Here is the simple truth: a properly drafted preamble will help a reader understand the purpose behind the provision of an agreement as a whole. A well-drafted preamble will not only help a reader understand the agreement’s intent, but it will also save the reader time and character when encountering a provision that may otherwise draw a raised eyebrow.
How to Write an Effective Preamble
To draft an effective preamble, you will want:
- Specificity…or not. Be as specific as possible when identifying the parties and the subject matter of the agreement. The ideal preamble is specific about the other parties, the subject matter, and the scope of the agreement. That said, sometimes you want an agreement to cover a broader set of transactions or a class of parties, so you may find yourself wanting to use several words or phrases to generally describe the potential parties and subject matter. For example, consider who are the potential joint ventures under the agreement: present and future joint ventures? All present and future related companies? Joint ventures formed as part of the subject matter, such as joint ventures named in joint venture reports? More difficult to imagine are parties that fall between these two extremes: can you use the word "Affiliate" to cover all the parties that might participate in the agreement without tying the agreement to any particular partnership and its name? Including words like "any" or "all" may also undermine your goals in drafting the agreement if the preamble is not tailored to fit.
- Accuracy. The preamble cannot contain any inaccuracies, otherwise you risk having the agreement trumped by another document or position. As the saying goes, "you have to be careful what you ask for…" we have all been asked: "should I get other parties’ approval or permission if the other party includes something inaccurate"? The worse question might be: "well, it’s too late now, what do I do?" Try extremely hard to make sure the preamble does not include anything you do not want. If you must include a statement that you do not know to be 100% accurate, consider whether the provision is material to the agreement or the parties’ relationship with each other. If it is not, you might not want to include it in the preamble at all, or make it clear each party acknowledges it has not reviewed and therefore may not confirm the accuracy of the statement.
- Conciseness. Too much detail will conflict with the other provisions, and without more, could result in a court interpreting the agreement with regard to the preamble statements. Brevity is your friend here. While smaller parties might benefit from more general wording, larger parties may want to include a bit more detail on the preamble for clarity. Review with fresh eyes and consider: will all that effort in the body of the agreement please the readers? Will the preamble inform the reader about the key concept of the agreement? Or will the preamble confuse the reader? You might also want to consider the length of the preamble. A long introductory clause may help convey important terms relevant to the agreement, or important details about your relationship with other parties to the agreement, but it can be difficult for other parties to process in a way to understand how it relates to the body of the agreement.
- Functionality. You may be able to avoid redundancy by ensuring that the preamble does double (or even triple) duty. Consider the following:
•Approval – a better place for identifying the approved parties or scope of transactions may be a schedule, but in some cases this can work in the preamble.
•Purpose – use the preamble to refer to the fact that your distinctive language in the agreement was used to help identify the purpose.
•Scope – your scope may be no more than the subject matter, and therefore be in the preamble. However, a more robust scope becomes more than you need in the preamble.
•Definitions – good luck avoiding this – sometimes preambles are short, but find yourself defining "party/ies", "herein", "agreement", "recitals", or "preamble."
5. Tone – Decide what tone to use and stick with that, unless some later part of the draft requires otherwise. You want the preamble to set up the agreement for the reader, so the tone should be neutral.
6. Order – Ordering your preamble content can be difficult. But there are preferences. For instance, you may want to separate the stuff only relevant to the parties into one sentence and separate from what applies to them all.
Agreement Preamble Samples
Examples of agreement preambles abound as they are an almost unavoidable part of any agreement. The most common agreement preambles are those in commercial agreements, which are commonly referred to as recitals. Other names include the "Whereas" section or background section (although the latter should not be confused with an explanation of the background of the subject matter of the agreement, which should be included in fine detail in the main body of the agreement itself). The examples below provide guidance on the wording of an agreement preamble. Whether you wish to use the words verbatim or mix and match, it is helpful to keep in mind the subjects that an agreement preamble can address:
Agreement Preamble Example – Agreement Relating to New Technology
This agreement is made on [insert date] by and between [insert name of aggrieved party] of [insert registered office address including country].
Whereas the parties,
A. [Insert name of aggrieved party], is a party to an application [specify application number or other reference number] for a [insert description] patent,
B. [Insert name of party infringing patent] has unlawfully advertised, manufactured, used, imported and supplied [insert description] for sale in [insert description] at [insert description].
NOW IT IS HEREBY AGREED AS FOLLOWS: [insert agreement terms]
Agreement Preamble Example – Agreement Relating to Intellectual Property Rights
This agreement is made on [insert date] by and between [insert name of person subject to obligations] of [insert registered office address including country].
WHEREAS, the parties
A . [Insert name of person subject to obligations], becomes aware of and has access to certain proprietary "know-how" and/or "intellectual property rights" owned by [insert name of other party to agreement] including but not limited to know-how and/or intellectual property rights subsisting in [insert description of items to which this agreement relates].
B. This agreement is made with reference to such know-how and/or intellectual property rights.
C. Such proprietary "know-how" and/or "intellectual property rights" are valuable to [insert name of other party to agreement] and [insert name of person subject to obligations] therefore agrees not to disclose any such information to any person who is not an employee of [insert name of person subject to obligations], unless [insert name of person subject to obligations] has the written consent of [insert name of other party to agreement].
Agreement Preamble Example – General Outline of Parties Involved in Agreement
This agreement is made on [insert date] by and between [insert name of party 1] a company with the registered office at [insert registered office address including country] ("Party 1") and [insert name of party 2] a company with the registered office at [insert registered office address including country] ("Party 2").
Whereas the parties wish to record their agreement in writing and to define their respective interests and intentions in relation with each other concerning the subject matter of this agreement;
And Whereas the parties wish to make provision for the determination of the rights and obligations, presently contemplated, between them arising from an arrangement for the future commercial co-operation for [insert description].
As the examples show, the content of an agreement preamble can cover any number of topics or issues, all dependent upon the parties’ requirements.
Preamble Drafting Errors
Misinterpreting the Purpose
The purpose of the preamble is not to set out the commercial rationale behind the contract. Quite unfortunately, drafters do exactly that. The preamble is not where you should place statements like "it is imperative that the parties avoid the following risks", or "the following reasons necessitate the execution of this document". The preamble is strictly a recitation of the context, legal authority and intent of the contract.
Extraneous information
There is no need to include matters that relate to or stem from the recitals in the preamble because they are best suited at the beginning of the agreement. If a provision relates to the contract, it should be in the contract itself, not in the preamble.
Repetition of information in the balance of the agreement
Not surprisingly, there is also no point in repeating what the contract says in the preamble. It is not a summary, synopsis or digest of what follows. Conversely, if something is included in the preamble that is not in the body of the agreement, confusion may arise, especially in a multi-document transaction where specific documents are meant to be read together. Do not create ambiguities by introducing conflicts with the language of the main agreement.
Inadequate or unnecessary definitions
If the preamble contains or appears to contain defined words, those words must be dealt with in the definitions section of the agreement. And though the preamble usually lists the parties, any defined terms which way might identify them, should be used consistently throughout.
Legal Effect of an Agreement Preamble
The preamble, which is intended to describe the purpose of an agreement, may have interpretive effect. Developers generally include a preamble that states the purpose for which the agreement was drafted and the reasons for its execution (i.e. that a developer intends to form a common interest community in order to promote the development of a particular residential community). The preamble may also summarize the general scope of the rights and responsibilities of the parties.
Because a preamble can reflect the intent of the parties to the agreement, courts have found it to be a potential source of ambiguity in an agreement that warrants interpretation to give effect to the intent of the parties through parol evidence. Parol evidence is evidence that is used to interpret ambiguous provisions, in order to determine the intent of the parties to the contract. A preamble stating the purpose for which the contract is formed , or summarizing the rights and responsibilities of the parties, is not likely to constitute parol evidence, but may be treated as such and interpreted in a more definitive manner than other provisions of the contract.
An agreement may also contain an introductory preamble. An introductory preamble includes the names of the parties and a recitation of the type of instrument the agreement is. This type of preamble has little interpretive significance because the introductory preamble is not operative in the same way as an agreement preamble.
Parties to a contract should be cautious about using a preamble to a condominium declaration or community association document to support the legality of its provisions because courts have denied enforcement where the intent of the parties regarding the preamble was not carried into the operative sections of the contract.