In commercial transactions, it is quite common for a contract to incorporate terms from another contract or document instead of stating them in full in the contract itself. This saves time and reduces the length of contracts. This column looks at how this is done and some of the challenges that arise under common law and Chinese law, particularly when a contract incorporates standard terms prepared by one party.
A term may be incorporated into a contract either on an implied basis or an express basis. An example of implied incorporation is where the parties to a contract for the sale of goods or services have established an ongoing business relationship through a course of dealings, and the relationship is regulated by a set of agreed terms (either written or unwritten).
A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at www.vantageasia.com.