Incorporation by reference: Fifth Circuit reviews Texas case law about what will suffice (2014)

In a 2014 case, the Fifth Circuit held that a supplier’s price quotation sufficiently incorporated by reference a standard-terms-and-conditions document published by the European Engineering Industries Association (the “ORGALIME“). The supplier’s price quotation didn’t expressly incorporate the ORGALIME by reference; instead it stated, “Terms and conditions are based on the general conditions stated in the enclosed ORGALIME S2000.” (Emphasis added.) The appellate court reviewed Texas law on the point:

With respect to incorporation, the Supreme Court of Texas has held that the language used is not important provided the document signed plainly refers to another writing.

Texas courts of appeals, however, have frequently held that a mere reference to another document is insufficient to incorporate that writing when the facts and circumstances surrounding the agreement do not indicate that incorporation was intended.

• One decision held that the mere mention of General Terms and Conditions of Sale in a contract’s table of contents and as a heading was insufficient to incorporate a separate, unattached document containing the same title.
• Likewise, the statement that a district court’s judgment was entered pursuant to a stipulation was insufficient to incorporate the terms of that stipulation when it was equally plausible that the phrase was meant as mere decretal language confirming that the judgment was decided based upon the pleadings and evidence in the case.

However, when the reference to the other document is clear and the circumstances indicate that the intent of the parties was incorporation, courts have held that a document may be incorporated, even in the absence of specific language of incorporation.

• A Texas court of appeals recently held that an instrument that referenced a separate contract six times and invited the parties to consult it incorporated that document, even though there was no language of incorporation.

* * *

Because the parties’ agreement reflects the ORGALIME was part of the terms and conditions of their agreement, we conclude that the district court erred in holding there was no agreement to arbitrate.

Al Rushaid v. National Oilwell Varco, Inc., 757 F.3d 416, 420-21 (5th Cir. 2014) (reversing denial of motion to compel arbitration) (footnotes, internal quotation marks, and alteration marks omitted; extra paragraphing and bullets added).

I’m adding the above to the Common Draft annotation on this subject.

Drafting tip: Obviously the safest course is to expressly incorporate the desired material by reference. (Thanks to Tina Stark for reminding me to add this.)