Incorporation of Terms: Are Your T&Cs Actually Enforceable?

The Basic Rule

Under English law, a term can only be incorporated into a contract if reasonable notice of it was given before or at the time the contract was formed. Once the contract is formed, which typically happens when an offer is accepted, terms cannot be added unilaterally.

This deceptively simple rule has a number of important consequences.

When Is a Contract Formed?

In commercial contexts, contract formation can happen quickly and informally. A verbal agreement confirmed by email, an accepted purchase order, or a course of dealing can all constitute a binding contract. If your standard terms are not in play before that point, they may never be incorporated.

Common failure scenarios include:

• Sending terms and conditions with an invoice, after goods have already been delivered or services performed
• Including terms in a welcome pack that is sent after a customer has already signed up
• Providing a link to online terms without ensuring the counterparty has accessed or acknowledged them
• Relying on a previous course of dealing where terms were exchanged, without renewing them for each new contract

What Counts as ‘Reasonable Notice’?

Reasonable notice does not require the other party to have actually read the terms, but it does require that the existence of the terms was communicated in a way that a reasonable person would have encountered them. Courts consider:

• Whether the terms were clearly referenced in the contractual documentation
• Whether they were accessible, for example, via a clearly displayed URL or a copy provided on request
• Whether any particularly onerous or unusual terms were specifically drawn to the attention of the other party

Signatures and Click-Through Agreements

A signed contract incorporating terms by reference is the most robust method of incorporation. Where the counterparty has signed a document that refers to your terms, it is very difficult for them to argue they were not aware of those terms.

In digital contexts, click-through agreements, where a user must affirmatively tick a box or click to confirm acceptance, are generally effective, provided the terms are accessible at the point of acceptance. Passive presentation of terms without any active acceptance step is more vulnerable to challenge.

Online Terms of Business

Many businesses publish their terms on their website and assume this is sufficient. It is not, without more. Courts require that the counterparty was directed to the terms in a way that gave them reasonable notice of them. A link buried in a footer, or terms published in general but not referenced in the specific transactional documents, may not be incorporated.

Best practice for online terms includes:

• Referencing the terms explicitly in every order confirmation, invoice, or transactional email
• Requiring active acceptance (checkbox or click-through) for new customers
• Keeping version-controlled records of when terms were updated and which version applied to which transaction

To maximise the likelihood that your terms are incorporated:

• Ensure terms are provided before or at the moment of contract formation
• Require written acknowledgement or signature where possible
• Reference terms clearly and accessibly in all pre-contractual communications
• Specifically flag unusual or onerous terms
• Address the battle of the forms risk with an express priority clause
• Audit your process periodically to ensure terms are actually being delivered in practice

For a review of your terms incorporation process, please contact our corporate and commercial team for practical, tailored advice.

James Bowles

Senior Associate