Australia: Recitals, definitions & interpretation clauses in commercial contracts

Drafting key clauses in commercial contracts - Part 1
Last Updated: 3 July 2014
Article by Paul Kordic

1.1 Recitals

Recitals set the background and help give some context to the transaction; they can also be a convenient way of recording the parties' intentions, which could become valuable interpretation tools for a court in the event of a dispute.

Alternatively, the parties may expressly choose to state that they do not form a part of the contract.

Recitals are not an operative part of the contract. However, a court may consider them (if relevant) in deciding upon an interpretation of a particular part of the contract in dispute.

1.2 Definitions

The definitions section defines certain specific terms in the agreement. It should be contained in the operative part of the agreement usually at the beginning sometimes near the end and definitely not with the recitals.

Capitalised terms in an agreement (aside from proper names) are usually a prompt for the reader to refer to the definitions section for a full definition of the term.

1.3 Interpretation

  • A set of guiding principles that overlay a document.
  • What an informed reader would expect to find as a guide and what an uninformed reader is relieved to find in the document.
  • Otherwise general rules will apply:
    • The document is to be read as a whole;
    • Contra proferentem
    • Expressio unius est exclusion alterus;
    • Ejusdem generis

1.4 Extract from a standard form of deed Recitals

A. [insert details].

B. [insert details].
The parties agree in consideration of, among other things, the mutual promises contained in this deed: Definitions and interpretation


In this deed:

Business Day means a day on which banks are open for business in the city where the notice or other communication is received excluding a Saturday, Sunday or public holiday.

Encumbrance means an interest or power:

  1. reserved in or over an interest in any asset including any retention of title; or
  2. created or otherwise arising in or over any interest in any asset under a bill of sale, mortgage,
  3. charge, lien, pledge, trust or power,

by way of, or having similar commercial effect to, security for the payment of a debt, any other monetary obligation or the performance of any other obligation, and includes any agreement to grant or create any of the above.

Government Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity.

Material Adverse Effect means a material adverse effect upon:

  1. Party 2's ability to perform any of its obligations under this deed;
  2. the value of [relevant property/assets/subject of the Transaction];
  3. the business or operations of Party 2; or
  4. the enforceability of this deed.

Power means any right, power, authority, discretion or remedy conferred on Party 1 by this deed/or any applicable law.


In this deed:

  1. words importing the singular include the plural and the converse;
  2. words importing a gender include all genders;
  3. where a word or phrase is defined, its other grammatical forms have a corresponding meaning;
  4. an expression importing a natural person includes an individual, a firm, a body corporate, an unincorporated association and any Government Agency;
  5. a reference to any thing (including any right) includes a part of that thing but nothing in this clause 1.2 implies that performance of part of an obligation constitutes performance of the obligation;
  6. a reference to a clause, party, annexure, exhibit or schedule is a reference to a clause of, and a party, annexure, exhibit and schedule to, this deed and a reference to this deed includes any annexure, exhibit and schedule;
  7. a reference to legislation or to a provision of legislation includes any modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it;
  8. a reference to a document includes all amendments or supplements to, or replacements or novations of, that document;
  9. a reference to a party to a document includes that party's successors and permitted substitutes (including persons taking by novation) and assigns;
  10. a reference to a deed other than this deed includes an undertaking, deed, agreement or legally enforceable arrangement or understanding whether or not in writing;
  11. a reference to an asset includes all property of any nature, including a business, and all rights, revenues and benefits;
  12. a reference to a document includes any agreement in writing, or any certificate, notice, deed, instrument or other document of any kind;
  13. a deed, representation or warranty in favour of two or more persons is for the benefit of them jointly and each of them individually;
  14. nothing in this deed is to be interpreted against a party on the ground that the party put it forward;
  15. a reference to liquidation includes official management, appointment of an administrator, compromise, arrangement, merger, amalgamation, reconstruction, winding-up, dissolution, deregistration, assignment for the benefit of creditors, scheme, composition or arrangement with creditors, insolvency, bankruptcy, or any similar procedure or, where applicable, changes in the constitution of any partnership or person, or death;
  16. an accounting term is a reference to that term as it is used in accounting standards under the Corporations Act, or, if not inconsistent with these standards, in accounting principles and practices generally accepted in Australia;
  17. the meaning of terms is not limited by specific examples introduced by expressions "including" or "for example", or similar expressions;
  18. a reference to Australian Dollars, A$ and $ is a reference to the lawful currency of Australia; and
  19. the Corporations Act is a reference to the Corporations Act 2001 (Cth).

1.5 Extract of Definitions clause from AMPLA Joint Venture Agreement

Unless the context otherwise requires, the following expressions have the respective meanings in this agreement (including the Recitals):

Approved Programme and Budget means a programme and budget relating to Joint Venture Activities during a particular period which has been approved or deemed to have been approved by the Management Committee under this agreement.

Auditor means a registered company auditor under the Corporations Act appointed by the Management Committee at the cost of the Joint Venture to conduct an audit each Year of the accounts of the Joint Venture.

Authorisation is any consent, authorisation, registration, filing, lodgement, notification, agreement, certificate, commission, lease, licence, permit, approval or exemption from, by or with an Authority (including the Tenements) required to undertake Joint Venture Activities.

Authorised Officer means the person nominated by a party in its Particulars, or any person replaced as its authorised officer by notice given in accordance with this agreement.

Authority is any government department, local government council, government or statutory authority or any other party under a Law which has a right to impose a requirement or whose consent is required with respect to Joint Venture Activities.

Bankable Feasibility Study means a Feasibility Study that is of a standard suitable to be submitted to a financial institution as the basis for lending of funds for the development and operation of the mine contemplated in the study and is capable of supporting a Decision to Mine.

Called Sum means the Percentage Share of funds required to be contributed by a Joint Venturer, in accordance with this agreement to finance Joint Venture Activities under an Approved Programme and Budget.

Commencement Date means the date on which the last of the Conditions Precedent have been satisfied or waived in accordance with this agreement or, if there are no Conditions Precedent, then the date of this agreement.

Conditions Precedent means the conditions set out in Schedule 1 which are required to be satisfied or waived for this agreement to be effective.

Corporations Act means the Corporations Act 2001 (Cth).

Defaulting Joint Venturer means a Joint Venturer which has committed a breach of this agreement, whether as an Unpaid Monies Default Event or a Breach Default Event or to which (or to a Related Body Corporate of which) a Breach Default Event relates.

Decision to Mine means a decision made by the Management Committee to proceeds to Development and Mining of a Deposit within the Tenements. Deposit means an ore body located within the Tenements.

Development means the development of a commercial Mining operation for Minerals.

Due Date means the date on which a payment is due under this agreement.

Emergency means a situation involving actual or reasonably apprehended substantial damage to or loss of Joint Venture Property or injury to persons or loss of life.

Encumbrance means any mortgage, pledge, lien, charge or other form of security or interest in the nature of a security interest.

Expenditure has the meaning given to that term in Schedule 3.

Expert means a person suitably qualified and capable of making an expert determination under this agreement in accordance with, and subject to, the Institute of Arbitrators & Mediators Australia Expert Determination Rules.

Exploration means searching for, discovery and delineation of commercial deposits of Minerals in the JV Area and the evaluation of such deposits, including prospecting, surface mapping, sampling, aerial mapping an reconnaissance, drilling, trenching and related field work, geophysical and geochemical testing, core sampling; assaying; exploration declines; test mining; analysis and evaluation of activities undertaken and results obtained, conducting preliminary feasibility studies, preparing Feasibility Studies reports, planning, supervising and administering all activities undertaken.

Feasibility Study means a study of technical, commercial and economic feasibility of Development and Mining in the JV Area and producing Minerals in significant commercial quantities, which includes all available exploration, geological, engineering and other relevant date and capital and operating cost estimates and (if appropriate) marketing studies in sufficient detail to enable options for optimum Development, Mining and Treatment to be identified in reasonable detail, including:

  1. Exploration Results and estimates of Mineral Resources, and Proven and Probable Ore Reserves as defined in the JORC Code;
  2. the proposed methods of Development, Mining and Treatment, including the extraction, beneficiation and transportation of the Ore and the Treatment and production of Minerals, including waste disposal;
  3. an estimate of operating levels, environmental costs, shutdown and rehabilitation costs, including an estimate of required capital expenditure and operating costs;
  4. an economic evaluation of the proposed Development, Mining and Treatment and the marketing and sale of the Minerals including a comparative analysis of the effect of various assumptions, financing methods, operating costs and taxation; and
  5. a schedule of relevant Authorisations required to be obtained before Mining may commence,'

and includes any preliminary, scoping or pre-feasibility study.

GST Act means A New Tax System (Goods and Services Tax) Act 1999 (Cth).

Gross Negligence means such wanton and reckless conduct as constitutes an utter disregard for the harmful, foreseeable and avoidable consequences which result from that conduct.

Insolvency Event means the happening of any of the following events in relation to a body corporate:

  1. it is unable to pay all its debts as and when they become due and payable or it has failed to comply with a statutory demand as provided in section 459F(1)of the Corporations Act;
  2. a meeting is convened to place it into voluntary liquidation or to appoint an administrator;
  3. it, or any other person, makes an application to a court for its winding up, being an application that is not stayed, withdrawn or dismissed within 7 days;
  4. an order is made for it to be wound up;
  5. the appointment of a controller as defined in section 9 of the Corporations Act of any of its assets;
  6. it proposes to enter into or enters into any form of arrangement (formal or informal) with its creditors or any of them, including a deed of company arrangement; or
  7. it becomes an insolvent under administration as defined in section 9 of the Corporations Act.

Joint Venture Activities means all Exploration activities involved in the acquisition, use, development, operation and maintenance of Joint Venture Property and all other activities, undertakings, and operations engaged in by the Joint Venturers under this agreement, but do not, unless otherwise agreed in writing, include Development, Mining, Treatment or the marketing or sale of Minerals.

Joint Venture Expenditure means all costs reasonably and properly incurred by the Manager on behalf of the Joint Venture in connection with Joint Venture Activities pursuant to an Approved Programme and Budget or incurred in an Emergency or as a permitted overrun.

Joint Venture Intellectual Property means all copyright, patents, patent applications, discoveries, inventions, and similar rights developed by the Manager pursuant to an Approved Budget in the course of Joint Venture Activities.

Joint Venture Interest means the following rights, liabilities and obligations of a Joint Venturer determined under this agreement and expressed as a percentage:

  1. the obligation, subject to the terms of this agreement, to contribute its Percentage Share of all Expenditure and other Joint Venture costs;
  2. the ownership of and the right to receive in kind and to dispose of for its own account its Percentage Share of Minerals produced by the Joint Venture;
  3. the beneficial ownership as a tenant in common of an undivided share in its Percentage Share of Joint Venture Property; and
  4. all other rights, liabilities and obligations accruing to or incurred by the Joint Venturers in or arising out of this agreement in its Percentage Share.

Joint Venture Property means all rights, titles, interest, claims, benefits and all other property of whatever kind, real or personal, from time to time owned by any Joint Venturer for the purposes of the Joint Venture, and includes the Tenements and the Joint Venture Intellectual Property.

Joint Venturer means a party which holds a Joint Venture Interest, but does not include a party in its capacity as Manager.

JORC Code means the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves as adopted by the Australasian Joint Ore Reserves Committee (JORC), which is sponsored by the Australian mining industry and its professional organisations, for the purposes of compliance with the Listing Rules.

JV Area means the area of the Tenements set out in Schedule 2 and any other Tenements applied for or acquired for the purposes of this agreement, or such other area as is agreed in writing by all Joint Venturers.

Law is Commonwealth and State legislation including regulations, by-laws, and other subordinate legislation, Authority requirements and guidelines of the Commonwealth, the Nominated State and local governments and Authorities with which the Contractor is legally required to comply, and common law and equity, in respect of undertaking Joint Venture Activities under this agreement.

Listing Rules means the Listing Rules of the Australian Stock Exchange Limited or, to the extent that a party or its Related Body Corporate is bound thereby, the listing rules of another recognised stock exchange.

Majority Vote means a resolution voted in favour by representatives entitled to vote and be present at the meeting holding in total not less than the Passmark. Excluding for this purpose the votes held by a Defaulting Joint Venturer.

Management Fee means the remuneration payable to the Manager under this agreement which is intended to reimburse it for the indirect or overhead corporate, administration and other service costs of managing the Joint Venture not otherwise reimbursed to the Manager as direct Expenditure for Joint Venture Activities.

Manager means the person or entity named as Manager in Schedule 1 or such other person or entity as may be engaged or appointed by the Management Committee as Manager from time to time under this agreement.

Mineral or Minerals means the mineral or minerals set our in Schedule 1.

Mining means all operations associated with the extraction and Treatment of Ore on a commercial basis, including pre stripping, and removal and disposal of overburden and waste.

Mining Act means the mining legislation listed in Schedule 1.

Native Title Claims means either:

  1. any claim, application or proceeding in respect of Native Title Rights which is accepted by the Native Title Tribunal or the Registrar thereof pursuant to the Native Title Act 1993 (Cth); or
  2. any claim, application or proceeding in respect of those rights, interests and statutory protections of and relating to aboriginal persona as set out in the legislation of the Nominated State or the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth).

Native Title Rights has the same meaning as the expressions "native title" or "native title rights and interests" as defined in section 223(1) of the Native Title Act 1993 (Cth) and includes those rights, interests and statutory protections of an relating to aboriginal persons as set out in the relevant legislation of the Nominated State or the Aboriginal and Torres Strait Islander Heritage Protections Act 1984 (Cth).

Nominated State is the State or Territory of Australia set out in Schedule 1. Ore means mineralised material located within the JV Area from which Minerals can be economically recovered.

Particulars means the particulars of a party given on page 1 of this agreement, or any particular amended by the party by notice given in accordance with this agreement.

Passmark means the requirements needed to be satisfied as set out in Schedule 1 to pass a resolution of the Management Committee by a Majority Vote.

Percentage Share means, in relation to a Joint Venturer, the percentage that corresponds to the percentage of its Joint Venture Interest.

Proposed Programme and Budget means a work programme and budget for a given Year, or other agreed period, in relation to the conduct of Joint Venture Activities proposed by the Manager.

Rehabilitation Obligations means the obligations of the Joint Venturers under the Act, all Tenements and Authorisations, and all applicable statutory and contractual obligations relating to the rehabilitation, revegetation and cleaning up of the JV Area during the following completion of Joint Venture Activities.

Related Body Corporate means a related body corporate as defined in the Corporations Act.

Shutdown Costs means all costs associated with shutting down all Joint Venture Activities within the JV Area including the costs associated with satisfaction of the Rehabilitation Obligations and any redundancy or termination benefits or payments to any consultant or contractor or employee who is engaged by the Manager in the conduct of Joint Venture Activities, but only to the extent of the period for which an employee was engaged in Joint Venture Activities.

Tenement means the mining tenement or tenements listed in Schedule 2 and includes any lease, licence, claim, permit or other authority issued or to be issued under the Mining Act to the Joint Venturers for the purposes of the Joint Venture which confers or may facilitate the enjoyment of such right, and includes any application for, and any extension, renewal, conversion or substitution of, any of those tenements.

Third Party means a person not a party, or the Related Body Corporate of a party, to this agreement.

Treatment means the processing, smelting, and refining of Ore up to and including a product stage, and includes crushing, weighing, sampling, assaying, refining, treatment, transportation, handling, storage, loading and delivery of the Mineral and its associated Ore, overburden and waste.

Ultimate Holding Company means an ultimate holding company as defined in the Corporations Act.

Unanimous Vote means a resolution voted in favour by all representatives entitled to vote and be present at the meeting in respect of the matters set out in Schedule 1, excluding for this purpose the votes held by a Defaulting Joint Venturer.

Wilful Misconduct means an act or omission that is a reckless and intentional disregard of:

  1. any provision of this agreement;
  2. any Approved Programme or Budget, except in the case of an Emergency;
  3. any Law required to be observed in connection with Joint Venture Activities; or
  4. the terms or conditions of a Tenement,

but does not include any error or judgement or mistake made by the Manager or any of its directors, employees, agents or contractors in the exercise, in good faith, of any function, authority or discretion conferred upon the Manager.

Year means a year commencing on and including the first day of July and ending on and including the following thirtieth day of June.

2. Notices

Notices not conforming to the guidelines outlined in the services of notices provision could be deemed to have been given much later than was actually the case, or in a worst case scenario, not to have ever been given

Notices are either a trigger, or to record significant events in a contract. For this reason it is important that the service of notices provision be scrutinised carefully to ensure that it is practically workable and effective.

A typical clause will usually provide for:

  • the name of the representative of the party and the address at which any notice must be served;
  • the method of services; and
  • circumstances in which a notice is deemed to have been served

Advances in communications technologies have seen interesting changes in these in recent years.

2.1 Extract of notice clause from a lease

  1. A notice or other communication in connection with this Lease must be in writing and may be given by the relevant party or its solicitors or agents and may be left at the address of the addressee or sent by prepaid ordinary post to the address of the addressee set out in the Schedule;
  2. Unless a later time is specified in it a notice or other communication takes effect from the time it is received;
  3. A letter is taken to be received if left at the Premises at the time it is left and in the case of a posted letter on the third day after posting.

2.2 Extract of notices clause from AMPLA Joint Venture Agreement


21.1 Form of Notice

Unless expressly stated otherwise in this agreement, any notice, certificate, consent, approval, waiver or other communication in connection with this agreement (Notice) must be in writing or given by electronic transmission, signed by the sender (if an individual) or an Authorised Officer of the sender and marked for the attention of the person identified in the Particulars or, if the recipient has notified otherwise, then marked for attention in the last way notified.

21.2 When Notices are taken to have been given and received

  1. A Notice is regarded as given and received:
    1. if delivered by hand, when left at the address given in the Particulars;
    2. if sent by pre-paid post, on the 3rd day following the date of postage;
    3. if given by fax, on production of a transmission report by the machine from which the fax was sent which indicates that the fax was sent in its entirety to the recipient's fax number, unless the recipient informs the sender that the Notice is illegible for incomplete within 4 hours of it being transmitted; and
    4. if sent by email, at the time shown in the delivery confirmation report generated by the sender's email system.
  2. A notice is delivered or received other than on a day on which trading banks are open for business in the capital city of the Nominated State (Business Day) or after 5.00pm (recipient's time) is regarded as received at 9.00am on the following Business Day. A Notice is delivered or received before 9.00am (recipient's time) is regarded as received at 9.00am.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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This article is part of a series: Click Assignment & novation clauses in commercial contracts for the next article.
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