Contractual Pitfalls of Ancillary Documents, Attachments, and Exhibits: Resolving Inconsistencies

Description

In commercial contracts, it is commonplace for parties to assume that unless the agreement explicitly provides for incorporation, schedules, exhibits, and other ancillary attached documents, they do not constitute part of that contract. Incorporation by reference provisions are often poorly drafted and result in extrinsic materials being incorporated into the agreement and given equal weight with provisions directly contained in the contract.

Further, in increasingly digital and electronic transactions, more companies are providing their standard terms and conditions of sale or purchase online for review by suppliers and customers. While incorporating online terms by reference can create consistency of terms across contracts and purchase orders--and provide counterparties with easy access to such terms--this practice raises issues of enforceability, especially where online terms are modified with little or no notice to the counterparty.

In Affinity Internet Inc. v. Consolidated Credit Counseling Services Inc. (Fla. Dist. Ct. App. 2006), the court noted that the doctrine of incorporation "requires that there must be some expression in the incorporating document ... of an intention to be bound by the collateral document ... [and a] mere reference to another document is not sufficient to incorporate that other document into a contract, particularly where the incorporation document makes no specific reference that it is 'subject to' the collateral document."

Listen as our authoritative panel of transactional practitioners guides counsel on the legal pitfalls of contract supplements--including attachments, exhibits, cross-references, and incorporations by reference--and provides examples of how to draft enforceable provisions to avoid contracting traps.