Incorporation of terms: Overview, definition, and example
What is incorporation of terms?
Incorporation of terms refers to the process of making certain contractual terms legally binding, even if they are not explicitly written in the main contract. These terms can come from external documents, standard terms and conditions, or previous agreements between the parties.
For example, a business may include a clause stating that its general terms and conditions apply to all sales, even if they are not printed on every invoice or order form.
Why is incorporation of terms important?
Incorporation of terms is important because it ensures that all agreed-upon rules and conditions are enforceable, even if they are not directly written in the main contract. It allows businesses to reference external documents without repeating the same terms in every contract.
For businesses, this is especially useful in contracts with customers, suppliers, or service providers where standard terms apply across multiple agreements. However, to be legally binding, these terms must be clearly referenced and made available to the other party.
Understanding incorporation of terms through an example
Imagine an online retailer includes a statement at checkout saying, “By placing an order, you agree to our Terms and Conditions.” The terms are not written on the checkout page but are linked for the customer to review. If a dispute arises, the retailer can argue that the terms were incorporated into the contract because the customer had the opportunity to read them before agreeing.
In another example, a construction company signs a contract with a subcontractor that states, “This agreement is subject to the main contract between the contractor and the client.” This means the subcontractor must comply with the terms of the main contract, even if they have not seen it in full.
An example of an incorporation of terms clause
Here’s how an incorporation of terms clause might appear in a contract:
“The Parties agree that the terms and conditions set forth in [Document Name] are hereby incorporated into this Agreement and shall govern the rights and obligations of the Parties.”
Conclusion
Incorporation of terms allows businesses to include external terms and conditions in a contract without rewriting them each time. This ensures consistency and enforceability across agreements.
For businesses, properly incorporating terms helps avoid disputes by making clear which rules apply. However, it’s essential to reference these terms clearly and ensure the other party has access to them to avoid legal challenges.
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.