In commercial disputes, the contract is everything. When a dispute lands in court, the first question is: what did the parties actually agree to? If key terms were not properly incorporated, even the strongest position can quickly unravel.
So what does incorporating contract terms actually mean?
It is about making sure all relevant terms (whether discussed in emails, meetings, or previous dealings) are clearly brought to the other party’s attention and formally included in the final agreement. That includes standard terms and conditions, referenced documents, and any negotiated changes. If they are not properly incorporated, they may not be enforceable.
How does this affect businesses in practice?
Take this example: a supplier relied on their standard terms to limit liability in a dispute over defective goods. But the court found those terms had not been properly incorporated – it transpired there was no clear reference to the terms at the time of entering into the contract, and the buyer had not seen or agreed to them. The result? The supplier was held fully liable, facing a six-figure damages award they thought they had protected against.
Common mistakes to avoid:
- Assuming terms on a website are automatically binding
If they are not referenced in the contract or agreed to by both parties, they may not apply. - Failing to attach or reference standard terms clearly
A vague mention like “our standard terms apply” is not always enough – be specific and ensure acceptance at the outset. - Relying on terms introduced at the point of invoice
Invoices are typically issued after the contract is formed. If that is the first mention of any terms, they are unlikely to be incorporated unless a consistent course of dealing can be shown. - Not updating contracts after negotiations
If changes are agreed but not reflected in the final document, they may be disregarded due to lack certainty or supporting evidence.
Incorporating contract terms is not just about good drafting – it is a critical part of managing legal risk. If you have taken the time to have terms professionally prepared, it is just as important to ensure they can be relied upon. That means making sure they have been properly incorporated into the contract. Whether you are defending a claim or pursuing one, a well-drafted and properly incorporated agreement can be the difference between a favourable outcome and a costly judgment.
If you need any support with contract terms or a commercial dispute, please don't hesitate to get in touch.