Clients inquire whether it is sufficient for a short, customer friendly contract to incorporate by reference Terms & Conditions ("T&Cs") and merely provide a link to the T&Cs online, to allow the short contract to be legally binding against the customer under New York Law?
The short answer is yes, but with certain caveats.
The short answer remains yes, even where the T&Cs are extensive and meant to cover a variety of agreements including both sales of goods as well as types of services.
Best Practices
In terms of "best practices," the clause referencing the T&Cs should:
- Appear on the signature page somewhere above the signature line indicating assent to the contract.
- Be reasonably conspicuous to alert the reader to 'inquiry notice.
- Clearly state that the T&Cs are expressly made part of the contract, using language, such as, the T&Cs "are incorporated into" or "made a part of" or this agreement "shall be construed in accordance with and is subject to the T&Cs."
- Ensure that the link to the T&Cs on the client's website is not "buried," but rather as straightforward as possible, such as, being readily found from the home page.
- Incorporation by Reference is Generally Valid
For the avoidance of any doubt, as a general rule of contract construction, "all writings which are part of the same transaction are interpreted together ...One application of this principle is the situation in which parties have expressed their intention to have one document's provision read into a separate document." Richard A. Lord, Williston on Contracts ' 30:25 (4th ed. 2020).
Williston goes on to write:
"As long as the contract makes clear reference to the document and describes it in such terms that its identity may be ascertained beyond doubt, the parties to a contract may incorporate contractual terms by reference to a separate, noncontemporaneous document, including a separate agreement to which they are not parties, and including a separate document which is unsigned." Id. (emphasis added).
See also Restatement (Second) of Contracts ' 132:4; Corbin on Contracts ' 23.3 (2020); Revis v. Schwartz, 192 A.D.3d 127, 140 N.Y.S.3d 38 (2d Dep't 2020) (reference to arbitration by AAA rules in NFL player regulations was specific enough to leave no doubt as to what was being referenced and incorporated).
"It is a fundamental principal of contract law that documents may be incorporated by reference into an executed agreement (see Kachurin v. Barr, 272 App. Div. 391, 398, 71 N.Y.S.2d 629 (1st Dep't 1947), aff'd, 297 N.Y.889, 79 N.E.2d 736 (1948); Shah v. Monpat. Constr., Inc., 65 A.D.3d 541, 544, 884 N.Y.S.2d 116 (2d Dep't 2009)." Madison Indus., Inc. v. Garden Ridge Co., 2011 N.Y. Misc. LEXIS 3370; 2011 N.Y. Slip Op. 31866(U) (Sup. Ct. N.Y. Co. 2011). See also Taboola, Inc. v. Sandra Rose, LLC, 2020 N.Y. Misc. LEXIS 2693; 2020 N.Y. Slip Op. 31866(U) (Sup. Ct. N.Y. Co. 2020) (T&Cs were found to have been incorporated into the publisher's agreement) (citing Madison, supra).
In Madison, supra, and of interest here, is that the letter agreement stated the following:
"Please visit www.gardenridge.com often to remain current on the Terms and Conditions in this manual."
The complaining customer's argument in that case was that it should not have been bound by the defendant's T&Cs, and in particular, the forum selection clause, because it never saw them. The court held that this argument was not only without merit under the doctrine of incorporation by reference, but as a contracting party, it was presumed to know the terms and consents to which it was bound, stating: "Failure to read a contract is not an excuse or defense to enforcement of the contract terms" (citing Fiore v. Oakwood Plaza Shopping Ctr., 78 N.Y.2d 572, 582, 585 N.E.2d 364 (1991)) (emphasis added).
- Ordinary Contract Formation Principles Apply to the Web
New York's Court of Appeals, in Wu v. Uber Tech., Inc., ' N.Y.3d -, 2024 N.Y. LEXIS 1896; 2024 N.Y. Slip Op. 05869 (2024), recently addressed a question certified to it concerning the entirely web based "clickwrap" process Uber used to solicit assent and in so doing, bind customers to an agreement to arbitrate.
In addressing this question, the Court extensively reviewed the policies behind the long-standing principles applied to contracts, observing that:
- "Because contract formation is governed by an objective rather than a subjective standard, there is no requirement that a party have correctly understood - or even reviewed - the terms presented by the offeror for their manifestation of acceptance to be effective." Id.
- "Instead, courts ask whether the offeree was put on inquiry notice of the contractual terms (see Starke v. Squaretrade, Inc., 913 F.3d 279, 289 (2d Cir. 2019) (applying New York law); Blossom v Dodd, 43 N.Y. 264, 268-70 (1870)." Id.
- "An offeree is placed on inquiry notice of contractual terms when those terms are clearly and conspicuously presented to the offeree as a contract and made available for review (see Blossom, 43 N.Y. at 268-69) ['The delivery and acceptance of a paper containing the contract may be binding, though not read, provided the business is of such a nature and the delivery is under such circumstances as to raise the presumption that the person receiving it knows that it is a contract, containing the terms and conditions'])." Id.
- "It then becomes the responsibility of the offeree, before manifesting assent, to 'inquire' further by reading and assessing the proposed terms to determine whether they are acceptable." Id.
- "Under well-established law, a person who accepts a written contract without first undertaking this review generally bears the risk that the agreement may contain provisions they do not like or expect (see Morris v Snappy Car Rental, 84 N.Y.2d 21, 30, 637 N.E.2d 253, 614 N.Y.S.2d 362 [1994]...
