Incorporating Terms by Reference in Commercial Real Estate Contracts: Knowledge and Assent, Limitations, Enforcement

Description

Incorporating terms by reference in commercial real estate agreements, whether commercial leases or purchase and sale agreements, is a common practice where a contract explicitly mentions another document, effectively making that document part of the agreement. There is convenience and efficiency in not fully including the other document's text within the agreement. However, there are significant risks that could invalidate the terms.

Where incorporation by reference clauses are boilerplate with vague descriptions, hidden far into the body of the agreement, and/or refer to other documents that the other party may or may not have seen, validity challenges may arise. When drafting and/or reviewing the agreement, counsel must verify that the parties had knowledge of and assented to the incorporated terms.

Counsel must also be sure that the incorporated terms do not contradict any other terms in the agreement. For example, if the main agreement were to have a forum selection clause stating one jurisdiction while the incorporated document’s forum selection clause stated another.

Listen as our expert panel discusses using incorporation by reference clauses in commercial real estate agreements, describes enforceability requirements, and offers best practices for when an existing agreement presents issues due to such a clause.