Where did I agree to that? The problem of incorporation by reference

There are many reasons for incorporating provisions by reference in consumer contracts. For example, terms of service may make reference to rules for the acceptable use of the services. A purchase agreement may reference a separate document explaining refunds or shipping terms.

Incorporation by reference is not a good strategy when dealing with clauses excluding liability — unless they are backed up by specifically bringing these clauses to the attention of the consumer.

A recent case illustrates the point.  It involved some lost golf clubs. The golfer signed a membership application that stated: “I, the above member(s), agree to abide by the policy, rules and regulations” of the club. He was given a handbook. The membership handbook contained a provision that said the club was not responsible for golf clubs stored at the premises. Members needed to have their own insurance.

Was the handbook the policy, rules and regulations referred to in the agreement? Probably, but the court said the club hadn’t been clear. The court said that the club didn’t bring this to the member’s attention. The club couldn’t rely on it to exclude liability.

The outcome might have been different if the club had included the provision in the agreement, said that the handbook contained these kinds of terms, or had posted signage.

Interested in the case? You can find it here.


Categories: Consumer Contracts


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