Contract Terms Incorporation in UK Law

There is a particular need to be clear that the parties intended to incorporate the arbitration clause when the incorporation relied on is the incorporation of the terms of a contract made between different parties, even if one of them is a party to the contract in suit.

A number of these cases concern the incorporation of terms from a direct insurance into a reinsurance. But no hard and fast rules emerge from these cases as one would expect. The question in each case is one of construction: did the parties to the contract in which the general words of incorporation appear intend that their contract should include the particular term from the other contract referred to?

In my judgment, the law of the place of incorporation applies to the duties inherent in the office of director and it is irrelevant that the alleged breach of duty was committed, or the loss incurred, in some other jurisdiction. Accordingly, these duties can only be modified by contract to the extent that the law of the place of incorporation allows.

The doctrine of incorporation can only sensibly operate where the parties have by the terms of their contract sufficiently identified specific 'black letter' provisions of a foreign law or an international code or set of rules apt to be incorporated as terms of the relevant contract such as a particular article or articles of the French Civil Code or the Hague Rules. By that method, English law is applied as the governing law to a contract into which the foreign rules have been incorporated.

The purpose of referential incorporation is not—or at least is not generally—to incorporate the intentions of the parties to the contract whose clauses are incorporated but to incorporate the clauses themselves in order to avoid the necessity of writing them out verbatim. The meaning and effect of the incorporated clause has to be determined as a matter of construction of the contract into which it is incorporated having regard to all the terms of that contract.

So there will be a valid agreement in writing where a quotation is made on one party's own standard terms and is accepted, even though the acceptor did not have a copy of those terms. In 7E Communications a German company faxed a quotation to an English company offering to sell certain satellite equipment on its general terms and conditions. No copy of those terms was sent to the claimant, which faxed the defendant a purchase order for the goods in the quotation.

Whether or not one party's standard terms are incorporated depends on whether that which each party says and does is such as to lead a reasonable person in their position to believe that those terms were to govern their legal relations.