Keoghs Insight

Author

Jody Proudman

Incorporation of contractual terms

AWARE30/04/2014
Property Insurance Aware 3

As commercial litigators, we are often presented with tradespeople or business policyholders who unfortunately find themselves on the receiving end of a claim.

Allegations made against tradespeople vary greatly and may include dissatisfaction with the quality of works or perhaps an allegation that works were not completed within an agreed timeframe and, as such, this has led to losses for a customer.

Jody Proudman provides practical advice regarding written contractual terms.

Our insured clients often tell us that they have written contractual terms and conditions which provide clauses seeking to limit or exclude liability in certain circumstances and therefore are relevant to the claim.

However, contractual incorporation is not straightforward leading to the question of whether or not any express written contractual terms and conditions can be relied upon.

When are written contractual terms relevant?

Express, written contractual terms are always of key importance whenever an allegation is made that a contract or agreement has been breached.

Written contractual terms can provide certainty to those parties entering into an agreement by setting out agreed timescales for work, nature of works, warranty periods, payment terms and other such clauses appropriate to the insured’s particular nature of work.

Even more importantly, written contractual terms can seek to set out a limitation or exclusion of liability in certain circumstances.

Is it enough to give a copy of printed terms and conditions to a customer?

Sadly, in most cases the answer is no. The party seeking to rely upon written terms must demonstrate that the terms were agreed to by the contracting parties at the time the contract was made, technically referred to as ‘incorporation’.

An insured may be able to demonstrate that printed terms were provided to a customer before or at the time the agreement was made, for example, by obtaining a customer signature at the foot of the printed contractual terms.

This evidence is likely to address any argument faced by the insured that the customer was never presented with, or agreed to be bound by, any printed terms.We often see situations where contractual terms are provided to a customer along with an invoice after works have been carried out, or simply referred to as being available on request.

In these scenarios, the insured is likely to struggle to demonstrate that the terms they are seeking to rely upon were brought to the attention of the customer and agreed to at the time the contract was entered into.

If this is the case, any argument seeking to rely upon written terms to exclude or limit liability is likely to fail.

There are certain occasions when contractual terms will be deemed to have been incorporated on the basis of a regular and consistent course of dealing between the parties, even in the absence of being brought to a parties’ attention at the time the contract was agreed.

When drafting contractual terms, a party must also be aware of the statutory provisions in relation to unreasonable terms, even where it can be shown that they were incorporated.

Conclusion

Written contractual terms serve an important function in providing certainty for those parties entering into an agreement and are not to be taken lightly.

Contractual terms will usually be subject to the requirements of reasonableness contained within the Unfair Contract Terms Act 1977 and also, any vague or ambiguous written terms are likely to be construed against the party seeking to rely upon them.

The significance of drafting written terms with care and ensuring that the terms are properly incorporated cannot be underestimated as this may afford some much needed protection to an insured when carrying out professional services.