Ireland: Incorporation By Reference: Focus On Arbitration Clauses

Last Updated: 15 April 2014
Article by Niav O'Higgins and Tristan Conway-Behan

Judgments in two recent High Court cases dealing with the issue of incorporation by reference of arbitration clauses highlight that clarity is key in terms of contract formation. When seeking to incorporate terms into an agreement, whilst the accepted position is that general words of reference will be sufficient, the same general words should be evident as to the terms to which they relate. Clear as mud....then read on!

INCORPORATION BY REFERENCE – THE BASICS

The completion and execution of a formal written document encompassing all of the agreed terms governing the relationship between parties is something which is more often honoured in the breach than in the observance. The more usual scenario will involve an exchange of correspondence between the parties during which one or both parties may seek to incorporate their standard terms, or those contained within the standard forms of contracts provided by governing bodies such as Engineers Ireland/Royal Institute of Architects of Ireland, into a contract. This is an acceptable and efficient way in which to record the terms of an agreement between parties provided that the essential terms are agreed and the terms incorporated are clear in their effect.

Similarly, conditions usual in a particular trade may be incorporated where both parties are in the trade and aware that conditions are habitually imposed and of the substance of those conditions, even though they may not have been referred to at the time the contract was formed1 . A sequence of emails may be read together even if they do not, strictly, form part of a chain and further, where the later email does not expressly refer to the earlier emails2.

However, parties should note that, in the cases of particularly onerous or unusual terms, the party putting forward the document will be obliged to demonstrate that the relevant term has been brought to the specific attention of the other contracting party. To quote Lord Denning:

"Some clauses which I have seen...would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient."

GENERAL POSITION

The accepted position is that general words of incorporation will be effective to incorporate a term(s) from another contract. In the construction context, the concept of incorporation by reference is often used to incorporate the terms of a main contract into a sub-contract.

In Ireland, the case of James Elliott Construction v. Irish Asphalt3 is instructive. In looking at the incorporation of an exclusion clause which was found within one of the party's standard terms and conditions, Charleton J. applied a test of reasonable notice, noting:

"I approach the matter in that traditionbound way because contracts are based upon what people agree. Any absence in agreement is not to be supplied by litigation and a court is not entitled to alter the plain wording of any agreement, save as required by statute or, in the rare case circumstances where that might be possible, by necessary implication. Each party to a contract, moreover, is to be judged as if that party is acting out of rational motives and expects the other side to act reasonably both in the performance of obligations and in the incorporation and construction of terms."

There are no special rules as to the incorporation of arbitration clauses by reference in construction cases4. The paramount issue for consideration in each case is whether, on a proper construction of the contractual documentation, the parties intended to incorporate the arbitration clause. However, the caveat must be added that, clear evidence of the parties' intention to incorporate will be required where the arbitration clause is not specific to the contract in question.

THE RECENT CASES

In the first case, In the Matter of the Arbitration Act 2010 And In the Matter of an Intended Arbitration Between John G. Burns Limited (Applicant) And Grange Construction and Roofing Company Limited (Respondent)5, the respondent sought to incorporate the arbitration clause found within the standard Construction Industry Federation ("CIF") form of sub-contract into the contract between the parties. Laffoy J. held that the respondent was unable to demonstrate, in any of the documentation determined by the Court as forming the basis of the sub-contract between the parties, that its contractual relationship with the applicant was governed by the CIF form of sub-contract. Accordingly, the Court held that there was simply no arbitration agreement in writing that could be binding on the applicant (main contractor).

The Court distinguished such cases as Lynch Roofing Systems v. Bennett & Son Limited6, McCrory Scaffolding Limited v. McInerney Construction Limited7 and Barnmore Demolition & Civil Engineering Limited v Alandale Logistics Limited & Ors8, on the basis that, in those cases specific references were made in documents found to underpin the contractual relationship between the parties to standard terms and conditions which included arbitration clauses.

In the current case, the Court found that the key contractual documentation neither contained an express reference to the CIF standard form of sub-contract, nor anything from which it could be implied that the intention was that the CIF standard form sub-contract would apply. Laffoy J. noted that the last of the four documents forming the subcontract, a letter dated 19 January, 2010 (referred to by counsel for the applicant as the sub-contract and by counsel for the respondent as a contract document), contained the contract price, clarified the VAT position and stated:

"All other terms and conditions are based on all tender documents and post tender negotiations as per the letter of nomination dated 13 December, 2009, and as noted below."

There followed what were described as "additional conditions relating to this order", which numbered seventeen in total. It was accepted by the Court that, the respondent's commencement of the sub-contract works was evidence of its acceptance of the terms set out therein. The Court noted that on a plain reading of the letter, in conjunction with the documents referred to within it, the terms of which were effectively incorporated in it, it seemed clear that the intention of the parties was that all the terms and conditions applicable to the parties' relationship were to be found in the documents referred to in the letter and in the letter itself. None of these referred to the arbitration clause in the CIF standard form of sub-contract.

MOUNT JULIET PROPERTIES LIMITED V. MELCARNE DEVELOPMENTS LIMITED & ORS, [2013] IEHC 286

In this case, Laffoy J. found that the standard terms of SE 9101 and ME 9101 (both standard forms of appointment issued by Engineers Ireland) formed the basis of the respective relationships between the applicant consultants and respondent developer. In so finding, the Court held that the standard form of arbitration agreement contained within each of SE 9101 and ME 9101 applied to the separate contractual relationships between the parties and had been incorporated by general words of reference in correspondence between the parties.

In both cases, correspondence issued by each of the third and fourth defendants made specific reference to these standard terms of engagement and additionally, in the case of the fourth defendant, to the fact that its opinion on compliance would be in the standard industry form:

"Engineering services are provided in accordance with the standard conditions in Agreement SE 9101 as published by the Institution of Engineers of Ireland. Engineering Services include all necessary designs, specifications, drawings and schedules for the proper tendering and construction of the project. Monitoring of the construction will be carried out by visits of inspection in the normal manner. Form BRSE 9101 'Opinion on compliance with building regulations' will be provided on completion of the engineering aspects of the works."

In the case of the fourth defendant, the correspondence also set out the relevant fees, referred to an upcoming meeting and included a statement that the fourth defendant trusted that the details set out in the correspondence met the plaintiff's approval. It was specifically noted that there was no 'demurrer' by the plaintiff to the fourth defendant's correspondence. The fourth defendant proceeded to provide the relevant services.

The Opinion on Compliance, BRSE 9101, as issued by the fourth defendant also noted that it was for use where a consulting engineer is appointed under "Conditions of Engagement Agreement SE 9101".

Clause 4.2 of SE 9101 provided for a right of either party to refer a dispute to arbitration.

The plaintiff's position was that it was not aware of the terms of SE 9101 at any stage during the negotiations and, further, that the arbitration clause contained in Agreement SE 9101 was never sufficiently identified to make it a part of the agreement between the parties.

Similarly, initial correspondence from the third defendant made specific reference to the fact that its services would be based on the "Agreement ME 9101 in relation to Mechanical & Electrical Services" and intimated that the plaintiff should request any further information which it might require in this regard. Similarly, the plaintiff argued that it was unaware of the terms of ME 9101.

In the case of both the third and fourth defendants, the Court held that specific reference had been made to the basis upon which both parties would provide their services and, hence, the basis of the contractual relationship between them and the plaintiff. Having been put on notice of this, the plaintiff could not plead ignorance in seeking to avoid the arbitration clause in the standard conditions.

In making her decision, the Court referred to a decision of the High Court in Kastrup Trae-Aluvinduet A/S v. Aluwood Concepts Limited9, in which McMenamin J. considered that the respondent in that case had been put on notice of the applicant's general conditions, by virtue of a reference to the same in the first letter from the applicant to the 9 [2009] IEHC 577 respondent, and that it was open to the respondent to seek copies of those conditions but it had not done so.

The Court also referred to the decision of Leo Laboratories v. Crompton BV 10(a choice of jurisdiction case) and noted, in particular the following passage from the judgment of Fennelly J.:

"It is not in dispute that the plaintiff was on notice of the [defendant's] standard terms and conditions...The defendant's order confirmation referring to them was exhibited in the plaintiff's own affidavit. Indeed the plaintiff purported to rely on standard conditions of its own. I am quite satisfied that O'Higgins J. was correct to conclude that the plaintiff was fixed with the general terms and conditions of sale. It was put expressly on notice of their existence and thus put on inquiry as to their terms." [emphasis added]

CONCLUSION

Both recent High Court cases further affirm that general words of incorporation will be effective in incorporating an arbitration clause between parties to an agreement. However, parties should avoid having to rely on general references within their contractual documentation and should strive, at all stages, to be clear in recording the specifics of the agreement between them. It is always worth bearing in mind that some additional time spent around the formation of the contracts and accurately recording the relevant agreed terms, will be time better spent than in potential dispute at the far end, where it may fall to an arbitrator or court to interpret the intentions of the parties.

Footnotes

1 British Crane Hire Corp. Limited v. Ipswich Plant Hire Limited [1975] QB 303, as endorsed in this jurisdiction by Morris P. in Lynch Roofing Systems Limited v. Bennett & Son Limited [1999] 2 IR 450.

2 Golden Ocean Group Limited v. Salgaocar Mining Industries PVT [2011] EWHC 56 (Comm)

3 [2011] IEHC 69

4 Keating on Construction Contracts, 9th Ed. 13-055, as supported by Sea Trade v Hellenic Mutual War Risks [2007] 1 Lloyd's Rep. 280 at [65].

5 [2013] IEHC 284

6 [1999] 2 I.R. 450

7 [2004] 3 I.R. 592

8 Unreported High Court, Feeney J., 11 November, 2010

9 [2009] IEHC 577

10 [2005] 2 I.R. 255

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.