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TMI Blog2018 (1) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... to. Apart from the other conditions, the Standard Terms and Conditions contain a clause pertaining to dispute resolution. The said clause provides for a dispute to be resolved by a sole arbitrator in accordance with the provisions of the Arbitration and Conciliation Act, 1996. The material on record indicates that the Respondent accepted all the terms and conditions mentioned in the Purchase Order except the delivery period as is evident from a letter dated 15.12.2012. 4. The Respondent, pursuant to the Purchase Order, supplied wind power cables to the Appellant. While laying the cables supplied by the Respondent-company, the Appellant discovered that the outer sheaths of the cables of 150 sq. mm. were cracked. This forced them to stop the WTGs so as to avert damage to expensive equipment. According to the Appellant, the Respondent-company did not replace the cables. The Appellant, therefore, was constrained to issue a notice dated 30.10.2014 proposing the name of a sole arbitrator in terms of the Standard Terms and Conditions. In the absence of any response, the Appellant moved the High Court of Judicature at Allahabad by filing an application under Section 11 (6) of the Act. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined in it. While distinguishing 'reference' to another document from 'incorporation', this Court observed that the relevant factor was the intention of the parties either to adopt the document in its entirety or to borrow specific portions of the said document. In this connection, the Court held as follows: (M.R. Engineers' case, para 17-19) "17. We will give a few instances of incorporation and mere reference to explain the position (illustrative and not exhaustive). If a contract refers to a document and provides that the said document shall form part and parcel of the contract, or that all terms and conditions of the said document shall be read or treated as a part of the contract, or that the contract will be governed by the provisions of the said document, or that the terms and conditions of the said document shall be incorporated into the contract, the terms and conditions of the document in entirety will get bodily lifted and incorporated into the contract. When there is such incorporation of the terms and conditions of a document, every term of such document (except to the extent it is inconsistent with any specific provision in the contract) will apply to the contract. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by applying the usual principles of construction and attempting to infer the parties' intentions by means of an objective assessment of the evidence. This may make questions of incorporation irrelevant, if for example it is clear that the contractual documents in question are entirely separate and no intention to incorporate the terms of one in the other can be established. However, the contractual document defining and imposing the performance obligations may be found to incorporate another document which contains an arbitration agreement. If there is a dispute about the performance obligations, that dispute may need to be decided according to the arbitration provisions of that other document. This very commonly occurs when the principal contractual document refers to standard form terms containing an arbitration agreement. However the standard form wording may not be apt for the contract in which the parties seek to incorporate it, or the reference may be to another contract between parties at least one of whom is different. In these circumstances it may be possible to argue that the purported incorporation of the arbitration agreement is ineffective. The draftsmen of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) An arbitration clause in another document, would get incorporated into a contract by reference, if the following conditions are fulfilled: (1) the contract should contain a clear reference to the documents containing arbitration clause, (2) the reference to the other document should clearly indicate an intention to incorporate the arbitration clause into the contract, (3) the arbitration clause should be appropriate, that is capable of application in respect of disputes under the contract and should not be repugnant to any term of the contract. (ii) When the parties enter into a contract, making a general reference to another contract, such general reference would not have the effect of incorporating the arbitration clause from the referred document into the contract between the parties. The arbitration clause from another contract can be incorporated into the contract (where such reference is made), only by a specific reference to arbitration clause. (iii) Where a contract between the parties provides that the execution or performance of that contract shall be in terms of another contract (which contains the terms and conditions relating to performance and a provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ... (2) The reference in an agreement to a written form of arbitration clause or to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement." 12. It will be useful to understand the interpretation of the incorporation issue in England. The question whether the general words of incorporation are sufficient to incorporate an arbitration agreement arose for consideration of the High Court of Justice, Queen's Bench Division, Commercial Court in Sea Trade Maritime Corporation v. Hellenic Mutual War Risks Association (Bermuda) Limited, The Athena [2006] EWHC 2530 (Comm). In the said case the difference between incorporation in a single contract case and a two contract case was recognized. If there is a reference to a secondary document in a contract between two parties and that secondary document is a contract to which at least one party is different from the parties to the contract in question, it would be a two contract case. In other words, if the secondary document is between other parties or if only one of the parties to the contract in dispute is party to an earlier contract to which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween A (or B) and C. Common examples are a bill of lading incorporating the terms of a charter to which A is a party; reinsurance contracts incorporating the terms of an underlying insurance; excess insurance contracts incorporating the terms of the primary layer of insurance; and building or engineering sub contracts incorporating the terms of a main contract or sub-sub contracts incorporating the terms of a sub contract. (4) A and B make a contract incorporating terms agreed between C and D. Bills of lading, reinsurance and insurance contracts and building contracts may fall into this category." 15. In Habas's case (supra), Justice Christopher Clarke followed the ratio in the case of 'the Athena' (supra) and held that in single contract cases (categories 1 and 2), a general reference would be sufficient for incorporation of an arbitration clause from a standard form of contract. In cases falling under categories 3 and 4 mentioned above which are two contract cases, it was held that a stricter rule has to be followed by insisting on a specific reference to the arbitration clause from an earlier contract. Reliance placed on the judgment of Sir John Megaw in Aughton v MF Kent Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a standard form set of terms and conditions the courts are more likely to accept that general words of incorporation will suffice. This is because the parties can be expected to be more familiar with those standard terms, including the arbitration clause. In Sea Trade Maritime Corp v. Hellenic Mutual War Risks Association (Bermuda) Ltd, (The "Athena") No.2 the Court drew a distinction between what is described as a "two contract case", that is where the arbitration clause is contained in a secondary document which is a contract to which at least one party is different from the parties to the contract in question, and "a single contract case" where the arbitration clause is in standard terms to be found in another document. Relying on dictum of Bingham LJ in Federal Bulk Carries Inc v. C. Itoh & Co Ltd (The "Federal Bulker"), Langley J stated that: "In principle, English law accepts incorporation of standard terms by the use of general words and, I would add, particularly so when the terms are readily available and the question arises in the context of dealings between established players in a well-known market. The principle, as the dictum makes clear, does not distinguish betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Put another way, if general words of incorporation are sufficient for the latter, they should be even more so for the former. The courts also appear to have accepted as a "single contract" case a situation where the contract referred to is between one of the parties to the original contract and a third party, where the contracts as a whole "were entered into in the context of a single commercial relationship".(Para 2-050) [Emphasis Supplied] 18. This Court in M.R. Engineers' case, which is discussed in detail supra, held the rule to be that an arbitration clause in an earlier contract cannot be incorporated by a general reference. The exception to the rule is a reference to a standard form of contract by a trade association or a professional institution in which case a general reference would be sufficient for incorporation of an arbitration clause. Reliance was placed by this Court on Russell on Arbitration 23 rd Edition (2007) . The development of law regarding incorporation after the judgment in M.R. Engineers requires careful consideration. It has been held in Habas Sinai Ve Tibbi Gazlar Isthisal Endustri AS v Sometal SAL [2010] EWHC 29 (Comm) that a standard form of one par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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