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Incorporation By Reference

Sunday, June 04, 2006 10:59 am

Incorporation By Reference

A common contractual device is the incorporation of external documents or contract provisions into an agreement by reference. The incorporated provi-sions are generally as binding as the terms found in the body of the agreement. The device can therefore create pitfalls for contracting parties.

The classic use of incorporation by reference is to impose technical speci-fications or other definitions of the work. For instance, reference to a national plumbing code imposed those standards on the contractor even if the standards were more stringent than industry custom. Appeal of D.E.W., Inc., ASBCA No. 35759 (October 24, 1991); CCM January 1992, p. 4.

Prime contractors commonly pass through work requirements to their sub-contractors by reference to the technical specifications of the prime contract. Lord & Son Construction, Inc. v. Roberts Electrical Contractors, Inc., 624 So.2d 376 (Fla.App. 1993); CCM January 1994, p. 8.

Broad or imprecise references can produce unexpected consequences. A broad incorporation by reference clause in a subcontract imposed not only the technical requirements of the prime contract, but also legal provisions pertaining to risk of loss of the work prior to final acceptance of the project. Lincoln Weld-ing Works v. Ramirez, 647 P.2d 381 (Nev. 1982); CCM September 1982, p. 3.

In one case, a contract referenced the AIA General Conditions, Document A201, which was attached to the contract itself. The contractor's representative glanced at the cover of the referenced document, assumed he knew what he was getting, and signed the contract. When disputes subsequently developed, the contractor discovered that the project owner had made extensive revisions to the "standard" form. Those revisions were binding on the contractor even though they had not been noted in the contract itself. L. R. Foy Construction Co., Inc. v. Dean L. Dauley and Waldorf Associates, 547 F.Supp. 166 (D.Kan. 1982); CCM December 1982, p. 2.

In another case, a contractor included a supplier's sales literature in a pro-posal to the project owner. When a contract was awarded, the proposal was in-corporated by reference into the contract. It was later ruled that the representa-tions in the supplier's sales literature created an express warranty running from the contractor to the project owner. Hillcrest Country Club v. N. D. Judds Co., 461 N.W.2d 55 (Neb. 1990); CCM January 1991, p. 3.

The contractual reference to safety standards or safety manuals can be problematic. One construction contract stated: "The contractor further shall comply with the provisions of the Manual of Accident Prevention in Construc-tion by the Associated General Contractors of America." It was held that the AGC manual was binding on the contractor and established the scope of job site safety responsibilities. Farris v. General Growth Development Corp., 354 N.W.2d 251 (Iowa 1984); CCM December 1984, p. 3.

In another case, however, an Army Corps of Engineers contract stated that the contractor had to comply with the Corps publication General Safety Re- [...]

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