Incorporation of reference

Dennis Brand from Traprain Consultants looks at what is meant by ‘incorporation of reference' in contract terms.
Incorporation of reference
By Dennis Brand
Wed 15 Sep 2010 04:00 AM

What is ‘incorporation by reference'? Put simply, it is a means by which the parties to a contract make reference to a standard form of contract conditions, technical specifications or similar publication without the need of having to retype the whole of that document in order for it to form part of the documentation which together forms the contract between the parties.

Incorporation by reference is to be distinguished from an implied term because reference is made to a specific document or publication. Contrary to popular belief, only nationals of the UAE have an inherent right to work in the UAE. Where a position becomes vacant or is created that can be performed by a national of the UAE, then in the event that a national is available a work permit will not be granted to a foreigner in respect of that position.

Many standard forms of contract published by the various industry bodies and organisations concerned with the construction and engineering industries often include a form of agreement together with a set of general conditions and an appendix which has inserted in it project-specific data, e.g. start and finish dates, limits of liability, levels of liquidated damages, required insurance values, bonding requirements, etc. Changes to be made to the general conditions are often done in the form of special conditions or conditions of particular application.

In point of fact, once signed, the main interest of the parties, when looking at the contract, scope and specification aside, will be the general conditions, special or particular conditions and the appendix; little attention is paid to the form of agreement, although that is the document which makes the liabilities and obligations of the parties as contained in the other documents legally binding, i.e. the contract.

The form of agreement is a basic contractual document. It is often quite short, sometimes little more than a page. In the US, such forms of agreement are often referred to as ‘signature agreements' because they provide no information concerning the obligations of the parties apart from a statement from each party confirming the intention to form a legally-binding agreement with the other.

The form of agreement will generally contain little more than the names, addresses and descriptions of the parties, what is intended concerning the work or services required and to be provided, a list of the documents which together form the contract, a confirmation of the effective date of the contract for commencement of the work as well as the date for completion and, finally, the provision for signature by the authorised representatives of the parties.

Where the form of agreement lists the documents which together form the contract, the list is often preceded by words similar to: "The following documents shall be deemed to form and be read and construed as part of the xontract ..." Sometimes that wording is expanded to confirm the order of priority, e.g. "The following documents shall be deemed to form and be read and construed as part of the contract and in the order of precedence in which they appear hereunder ..."

By far the most important element of the form of agreement relates to the documents which are listed as forming part of the contract, and where it is intended that the general conditions of a particular body or organisation, often in a printed form, has been incorporated in into a contract - e.g. FIDIC, IChemE or NEC, etc; those general conditions are what is termed ‘incorporated by reference'.

When it is intended to incorporate by reference, then the wording to be used must be absolutely clear that the parties intend to incorporate the specific document - e.g. form of conditions of contract or technical specifications - using such wording as: "The following documents shall be deemed to form and be read and construed as part of the contract ..."For the purposes of avoiding any misunderstanding, it is important that the specific document to be incorporated be described accurately, as well as stating the correct version - e.g. "FIDIC Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer (ISBN2-88432-022-9) First Edition 1999".

Finally, when one is incorporating a specific document by reference, it is important to determine, with the other documents which form the contract, the order of precedence. For example, where the parties are intending to incorporate by reference a form of general conditions of contract, then in terms of priority they would be high on the list, probably just below the form of agreement. A particular technical specification, however, although important, would be included further down the list at the upper end of the list of technical documents.

It is quite unusual for one to find a printed form contract in which the provisions of one standard form is incorporated by reference into another. A rare example of this is the FIDIC Subcontract 1994. Clause 12.1 provides: "The provisions of Clause 54 of the Conditions of Main Contract in relation to Contractor's Equipment, Temporary Works or materials brought onto the site by the Subcontractor are hereby incorporated by reference into the Subcontract as completely as if they were set out in full therein." Of course, the reference to the "Conditions of Main Contract in Clause 12.1 as a FIDIC publication" refers to FIDIC 4th Edition - Conditions of Contract for Works of Civil Engineering Construction.

The series of conditions of contract published by FIDIC in 1999, often referred to as the ‘Rainbow Suite', did not include an updated form of its Subcontract 1994. However, a ‘test edition' of the FIDIC Subcontract to complement the Rainbow Suite was published in 2009.

In conclusion, here in the UAE where the Civil Code provides (Article 259) that "There shall be no scope for implication in the face of clear words", a clear statement of the parties' intention to incorporate by reference a document with an accurate description in order that it can be identified and not confused with any other is essential.
Dennis.Brand@traprain.com

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