Clauses incorporated by reference: Overview, definition, and example
What are clauses incorporated by reference?
Clauses incorporated by reference are provisions or terms in a contract or legal document that are not written out explicitly but are instead referred to from another source or document. Essentially, these clauses are "imported" into the agreement by citing their location or content in a separate document, making them part of the current agreement as if they were fully included within it. This practice helps reduce redundancy and ensures consistency across multiple related documents.
For example, a contract may state, "The terms of the company’s privacy policy, as outlined in Exhibit A, are incorporated by reference and form part of this agreement," meaning that the privacy policy in Exhibit A is an integral part of the contract even though it is not fully restated within the contract itself.
Why are clauses incorporated by reference important?
Clauses incorporated by reference are important because they streamline contracts and legal documents, making them more concise while still ensuring that all necessary terms are included. This approach can prevent the need to repeat lengthy or frequently referenced provisions, such as industry standards, regulations, or external agreements. It also helps maintain clarity and focus in the main document while ensuring that important terms are not overlooked.
Using clauses incorporated by reference can also help ensure that related documents are consistently updated. If the referenced terms change, the main agreement can automatically reflect those updates without needing to be rewritten or renegotiated. This is particularly useful in agreements that need to reference dynamic or evolving documents, such as terms of service, privacy policies, or legal standards.
Understanding clauses incorporated by reference through an example
Imagine a software licensing agreement between a company and a customer. The agreement includes a clause that states, "The terms of the user agreement, as provided in Appendix B, are incorporated by reference and form part of this agreement." This means that all the terms and conditions in the user agreement in Appendix B are binding on both parties, even though the user agreement itself is not fully repeated within the contract. By referring to the user agreement in this way, both parties are bound by its terms without having to list every provision.
In another example, a construction contract may include a clause incorporating local building codes by reference. Instead of listing every building code in the contract, the agreement states, "The construction shall comply with the local building codes as outlined in [local law document] and are incorporated by reference." This ensures that the parties are aware of and adhere to the applicable building regulations, without the need to reproduce them in full within the contract.
An example of a clauses incorporated by reference clause
Here’s how a clause about clauses incorporated by reference might appear in a contract:
“The Parties agree that the provisions set forth in the Terms of Service, as referenced in Exhibit A, are incorporated by reference and form an integral part of this Agreement. All obligations and rights stated therein shall be binding on both Parties as though fully stated herein.”
Conclusion
Clauses incorporated by reference provide an efficient and effective way to include necessary provisions without repeating them in their entirety. This approach keeps contracts and agreements concise, clear, and organized, while ensuring that all essential terms are legally binding. By referencing external documents or clauses, parties can create agreements that are easier to manage, update, and enforce, making them a common and useful tool in legal and business practices.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.