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<P>A recent case in the office brought up an interesting question about the effect of information appearing in the recitals at the beginning of a contract but nowhere else in the contract. Opposing counsel based its case on the argument that because one of the whereas clauses of a loan agreement said that the borrower contemplated using the proceeds of the loan for a particular purpose, the alleged failure to use the proceeds for thatpurpose constituted a breach of the agreement - even though the paragraphs of the agreement defining events of default made no mention of how the loan proceeds were to be used.</P><P><BR> Research on this point revealed that a term appearing in a recital but nowhere else is not part of the contract. <U>Burr v. American Spiral Spring Butt Co.</U>, 36 Sickels 175, 81 N.Y. 175(1880)(affirming order granting judgment for plaintiff publisher in anaction to recover from defendants for price of advertisement inplaintiffs book: plaintiffs failure to prove that it conducted sales in the manner described in a recital clause, but not appearing anywhere else in the contract, did not preclude recovery by plaintiff); <U>see also</U> <U>Jones Apparel Group, Inc. v. Polo Ralph Lauren Corp.</U>, 16 A.D.3d 279, 791 N.Y.S.2d 409 (1st Dept 2005)(recitals in contract are not part of operative agreement); <U>Trump Village Section 3, Inc. v. New York State Housing Finance Agency</U>, 292 A.D.2d 156, 739 N.Y.S.2d 37 (1st Dept 2002)(recital clause of contract did not impose contractual obligations beyond those specifically set forth in the contract); <U>Ross v. Ross</U>, 233 A.D. 626, 635, 253 N.Y.S. 871, 882 (1st Dept 1931)(recitals in a contract form no part thereof, and at most indicate but the purposes and motives of the parties).<BR> <BR></P>
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