Incorporation by Reference of Terms and Conditions: Notice, Objection, Emphasis, Enforceability, Clear Reference Test

Description

A common tenet of contract law is that the terms of the agreement are contained within the four corners of the page. Increasingly, whether an agreement is online or physically presented, it includes a simple phrase: "You agree that your use of these services is governed by this agreement and the terms of service located on our website." This incorporation by reference leads to future claims and disputes, as those online terms often contain hidden and draconian clauses, such as auto-renewals, additional costs, and more.

When reviewing an agreement with a set of incorporation by reference terms and conditions, counsel must clarify if the parties had knowledge of and assented to the incorporated terms.

Case law has clarified that an incorporation by reference clause will be strictly construed. If the clause places limits, such as "all prices are subject to [Company's] terms and conditions," then a form-selection clause would not be enforceable. When contracting with the government, it is not considered best practice, but it is possible to incorporate by reference.

Listen as our authoritative panel discusses best practices when reviewing a contract that attempts to incorporate by reference any terms of services and best practices when an existing agreement presents issues due to such a clause.