Precision In Drafting–Recitals Are Not Substantive Terms, And “Value” Must Mean What You Intend

A recent Delaware Court of Chancery opinion, Feeney Brothers Excavation Trust v. Artera Services Holdco, LLC, C.A. No. 2025-0558-PAW (Del. Ch. July 31, 2026), offers a sharp reminder to transactional practitioners about the limits of recitals and the critical importance of defining consideration with precision–particularly where elements of that consideration may not have a static valuation.

Recitals Cannot Impose Substantive Obligations

In Feeney Brothers, plaintiffs sold their business interests in exchange for cash and rollover equity. When the equity proved to be worth far less than expected, plaintiffs claimed breach of contract, arguing that the Rollover Agreement’s recital definitions—which referenced units with “an aggregate value of $30,000,000” and “each Feeder Common Unit having a value of $160.00″—constituted a guaranty of actual value.

The Court dismissed this theory. Citing established Delaware law, the Court reiterated that “recitals are not a necessary part of a contract and can only be used to explain some apparent doubt with respect to the intended meaning of the operative or granting part of the instrument.” Recitals may define terms and provide background, but they may “not establish a substantive obligation.” Critically, where recitals are inconsistent with operative provisions, the latter controls.

Here, the recitals served a permissible function—identifying which units were being transferred. But the Court refused to transform recital language into a representation, warranty, or guaranty of intrinsic value, particularly where the operative provisions and the contract’s representations-and-warranties section told a different story.

Define Consideration with Precision

The Court’s analysis also exposed the consequences of imprecise valuation language. The Rollover Agreement never used the terms “actual value” or “intrinsic value.” Rather, its operative provisions stated that Feeney Trust “will be deemed to have made a capital contribution to Artera in an amount equal to the Rollover Amount”—language suggesting a notional or accounting value for purposes of calculating ownership, not a guaranty of market worth.

The Court concluded that plaintiffs “did not bargain to receive a certain dollar amount but to receive a specific number of units, which defendants provided.” Had the sellers desired a guaranteed cash value, the Court observed, “they could have accepted an offer for just that.” The parties’ failure to distinguish clearly between a “deemed” value and an “actual” or guaranteed value left the sellers without a contractual remedy when the equity declined by over 99%.

Practical Takeaways

For practitioners drafting transactional documents for Delaware entities:

• Do not rely on recitals to do the work of operative provisions.  If a term, obligation, or guaranty is material to your client, place it squarely within the body of the agreement—in the covenants, representations and warranties, or indemnification provisions.
• Define “value” explicitly.  When consideration includes equity or non-cash assets, the value of which may fluctuate, specify whether value references are notional (for accounting or ownership calculation purposes) or represent a guaranty of intrinsic worth. Ambiguity here may be construed against the party seeking enforcement.
• Distinguish “deemed” from “actual.” If your client requires that rollover equity have a minimum intrinsic value, negotiate for express representations, price-adjustment mechanisms, or put rights—do not assume that a stated per-unit figure in the recitals will serve as a floor.
• Pair recital definitions with operative protections.  Where recitals define key economic terms, ensure the operative sections cross-reference and enforce them with binding obligations, not merely descriptive shorthand.

Feeney Brothers is a cautionary tale. Sophisticated parties who leave material economic protections in the recitals—or who fail to define the consideration with precision—may find themselves without a remedy when floating-value consideration turns out to be worth less than expected at the time of contracting.