But that wasn’t in the contract! The risks of incorporation by reference

Often an agreement will refer to additional documents that are not physically attached to the agreement itself.  These additional documents are referred to as being ‘incorporated by reference’.  This might be for several reasons — it might seem unnecessary to attach the document, or the parties might think that attaching that document will make the agreement too long.  A common example might be a workplace policy that is incorporated by reference into an employment contract, but not physically attached to it.

However, a number of potential issues may arise as a result of the reference to an unattached document, which can lead to disputes between business associates and the costs and delays that go hand-in-hand with disputes.

Confusion

Where a document is referred to in an agreement but is not physically attached to the agreement, confusion may arise between the parties to the agreement as to which document or which version of the document is intended to be incorporated into the agreement.

The incorporated document may even contain provisions that are inconsistent with the terms of the agreement, leading to further confusion about whether the terms in the contract or the terms of the other document should prevail.

Failure to properly incorporate the document

Another issue that may arise when documents are referenced in an agreement but are not physically attached to the agreement, is that the terms contained in the unattached document may not have been brought to the attention of the other party.  This issue will be particularly relevant if any terms of the unattached document are particularly onerous or unusual.

In those circumstances, the party intending to rely on the incorporated document must demonstrate that it was brought fairly and reasonably to the attention of the other party.  If this cannot be demonstrated, then any terms in the additional document may be found to be not binding on the other party.

Further, the reference to the additional document in the agreement may not be sufficient to incorporate the unattached document into the agreement.

In the case of Australian Rail, Tram and Bus Industry Union v KDR Victoria Pty Ltd t/as Yarra Trams [2013] FCA 330, the Federal Court held that even though a particular enterprise agreement referred to the terms of an internal company disciplinary policy document, the terms of that document had not been incorporated into the agreement, in part, because the policy was not physically attached to the enterprise agreement.

This will not always be the case, however, and a carefully worded agreement may incorporate documents that are not attached to the agreement. Indeed, care should be taken not to unintentionally incorporate unattached documents into an agreement where it is not intended that those documents form part of the binding agreement.

Conclusion

Difficulties may arise in asserting that a document that was not physically attached to an agreement formed part of that agreement.

Similarly, care should be taken to ensure that documents are not inadvertently incorporated by reference (whether or not they are attached to the agreement), where the parties do not intend to be bound by the terms of that document.

Seeking legal advice prior to entering into an agreement may well save considerable time and money down the track.

If you, or someone you know, wants more information or needs help or advice, please contact us.

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