{"id":11118,"date":"2025-11-03T13:30:57","date_gmt":"2025-11-03T13:30:57","guid":{"rendered":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/?p=11118"},"modified":"2025-11-03T13:35:13","modified_gmt":"2025-11-03T13:35:13","slug":"incorporating-arbitration-clause-whats-the-deal","status":"publish","type":"post","link":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/","title":{"rendered":"Incorporating Arbitration Clause \u2013 What\u2019s The Deal?"},"content":{"rendered":"<h2 id=\"introduction\"><span class=\"ez-toc-section\" id=\"Introduction\"><\/span>Introduction<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In the world of business contracts, arbitration is often the go-to method for resolving disputes. Rather than dragging a matter through the courts, many companies prefer to settle their differences through arbitration, a more efficient and private process.<\/p><div id=\"ez-toc-container\" class=\"ez-toc-v2_0_83 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #0c0c0c;color:#0c0c0c\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #0c0c0c;color:#0c0c0c\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#Introduction\" >Introduction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#English_Law\" >English Law<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#Aughton_Ltd_v_MF_Kent_Services_Ltd_1991_57_BLR_1\" >Aughton Ltd. v. M.F. Kent Services Ltd. [(1991) 57 BLR 1]<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#Sea_Trade_Maritime_Corp_v_Hellenic_Mutual_War_Risks_Association_Bermuda_Ltd_The_%E2%80%9CAthena%E2%80%9D_2006_EWHC_2530\" >Sea Trade Maritime Corp. v. Hellenic Mutual War Risks Association (Bermuda) Ltd. (The \u201cAthena\u201d) [2006] EWHC 2530<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#Habas_Sinai_Ve_Tibbi_Gazlar_Isthisal_Endustri_AS_v_Sometal_SAL_2010_EWHC_29_Comm\" >Habas Sinai Ve Tibbi Gazlar Isthisal Endustri AS v. Sometal SAL [2010] EWHC 29 (Comm)<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#Indian_Law\" >Indian Law<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#Landmark_Judgments\" >Landmark Judgments<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#R_Engineers_and_Contractors_Private_Limited_v_Som_Datt_Builders_Limited_2009_7_SCC_696\" >R. Engineers and Contractors Private Limited v. Som Datt Builders Limited (2009) 7 SCC 696<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#Inox_Wind_Limited_v_Thermocables_Limited_2018_2_SCC_519\" >Inox Wind Limited v. Thermocables Limited, (2018) 2 SCC 519<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#Giriraj_Garg_v_Coal_India_Ltd_Ors_2019_2_SCC_192\" >Giriraj Garg v. Coal India Ltd &amp; Ors., (2019) 2 SCC 192<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#NBCC_India_Ltd_v_Zillion_Infraprojects_Pvt_Ltd_2024_SCC_OnLine_SC_323\" >NBCC (India) Ltd. v. Zillion Infraprojects Pvt. Ltd. 2024 SCC OnLine SC 323<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#MS_Mac_Associates_v_Parvinder_Singh_FAO_COMM_2612023_CM_APPL_665262023\" >M\/S Mac Associates v. Parvinder Singh FAO (COMM) 261\/2023 &amp; CM APPL. 66526\/2023<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.legalserviceindia.com\/Legal-Articles\/incorporating-arbitration-clause-whats-the-deal\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n\n<p>But here&#8217;s where things can get tricky:<\/p>\n<ul>\n<li>What if your contract doesn\u2019t have an arbitration clause directly, but refers to another document that does?<\/li>\n<li>Does that mean arbitration automatically applies?<\/li>\n<\/ul>\n<p>According to Section 7(5) of the Arbitration and Conciliation Act, 1996, the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.<\/p>\n<p>This issue has sparked quite a bit of debate, and the Indian judiciary has made some landmark rulings that clarify the rules around incorporating arbitration clauses by reference.<\/p>\n<h2 id=\"english-law\"><span class=\"ez-toc-section\" id=\"English_Law\"><\/span>English Law<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3 id=\"aughton\"><span class=\"ez-toc-section\" id=\"Aughton_Ltd_v_MF_Kent_Services_Ltd_1991_57_BLR_1\"><\/span>Aughton Ltd. v. M.F. Kent Services Ltd. [(1991) 57 BLR 1]<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>It was held that a general reference to a contract would be insufficient to incorporate any arbitration clause, unless sufficient cause existed to suggest to the contrary, and a special reference was, therefore, necessary.<\/p>\n<h3 id=\"athena\"><span class=\"ez-toc-section\" id=\"Sea_Trade_Maritime_Corp_v_Hellenic_Mutual_War_Risks_Association_Bermuda_Ltd_The_%E2%80%9CAthena%E2%80%9D_2006_EWHC_2530\"><\/span>Sea Trade Maritime Corp. v. Hellenic Mutual War Risks Association (Bermuda) Ltd. (The \u201cAthena\u201d) [2006] EWHC 2530<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The difference between incorporation in a single contract case and a two contract case was recognized.<\/p>\n<table border=\"1\" cellpadding=\"5\">\n<tbody>\n<tr>\n<th>Case Type<\/th>\n<th>Rule<\/th>\n<\/tr>\n<tr>\n<td>Single Contract Case<\/td>\n<td>If the reference is to standard terms in a contract that would be a case of \u2018single contract\u2019 and the use of general words to incorporate the arbitration agreement by a reference is permissible. As the reference in that case was to a standard form of contract which was a single contract case, Justice Langley held that the general words of incorporation were enough to incorporate an arbitration clause.<\/td>\n<\/tr>\n<tr>\n<td>Two Contract Case<\/td>\n<td>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 reference is made, then it would be a two contract case. In such a contract general reference to the earlier contract would not be sufficient to incorporate the arbitration clause.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h3 id=\"habas\"><span class=\"ez-toc-section\" id=\"Habas_Sinai_Ve_Tibbi_Gazlar_Isthisal_Endustri_AS_v_Sometal_SAL_2010_EWHC_29_Comm\"><\/span>Habas Sinai Ve Tibbi Gazlar Isthisal Endustri AS v. Sometal SAL [2010] EWHC 29 (Comm)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The following broad categories in which the parties attempt to incorporate an arbitration clause were recognized by the Court, which are as follows:<\/p>\n<ol>\n<li>A and B make a contract in which they incorporate standard terms. These may be the standard terms of one party set out on the back of an offer letter or an order, or contained in another document to which reference is made; or terms embodied in the rules of an organisation of which A or B or both are members; or they may be terms standard in a particular trade or industry.<\/li>\n<li>A and B make a contract incorporating terms previously agreed between A and B in another contract or contracts to which they were both parties<\/li>\n<li>A and B make a contract incorporating terms agreed between 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.<\/li>\n<li>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.<\/li>\n<\/ol>\n<p>Justice Christopher Clarke followed the ratio in the case of \u2018the Athena\u2019 (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.<\/p>\n<h2 id=\"indian-law\"><span class=\"ez-toc-section\" id=\"Indian_Law\"><\/span>Indian Law<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3 id=\"landmark-judgments\"><span class=\"ez-toc-section\" id=\"Landmark_Judgments\"><\/span>Landmark Judgments<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3 id=\"r-engineers\"><span class=\"ez-toc-section\" id=\"R_Engineers_and_Contractors_Private_Limited_v_Som_Datt_Builders_Limited_2009_7_SCC_696\"><\/span>R. Engineers and Contractors Private Limited v. Som Datt Builders Limited (2009) 7 SCC 696<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>It was a landmark decision when it comes to how arbitration clauses are incorporated into contracts. Essentially, the Supreme Court made it clear that an arbitration clause from a separate document could become part of a contract, but only if certain conditions were met. Here are the key points:<\/p>\n<ul>\n<li>Clear Reference to the Document: The contract should contain a clear reference to the documents containing arbitration clause.<\/li>\n<li>Intent to Incorporate the Clause: The reference to the other document should clearly indicate an intention to incorporate the arbitration clause into the contract<\/li>\n<li>Capability: 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.<\/li>\n<\/ul>\n<p>This judgment also made an important distinction: a general reference to another document containing terms and conditions is not enough to automatically include the arbitration clause. For it to apply, the reference needs to specifically mention the arbitration clause itself. However, if the contract explicitly states that it adopts another party\u2019s general terms (including their arbitration clause), then that clause will be incorporated.<\/p>\n<p><strong>EXCEPTION:<\/strong> The only exception to the aforesaid position is that where the contract provides that the standard form of terms and conditions of an independent trade or professional institution (as for example the standard terms and conditions of a trade association or architects association) will bind them or apply to the contract, such standard form of terms and conditions including any provision for arbitration in such standard terms and conditions, shall be deemed to be incorporated by reference. Sometimes the contract may also say that the parties are familiar with those terms and conditions or that the parties have read and understood the said terms and conditions.<\/p>\n<h3 id=\"inox\"><span class=\"ez-toc-section\" id=\"Inox_Wind_Limited_v_Thermocables_Limited_2018_2_SCC_519\"><\/span>Inox Wind Limited v. Thermocables Limited, (2018) 2 SCC 519<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The Court was in agreement with the judgment in M.R. Engineer\u2019s case with a modification that a general reference to a standard form of contract of one party along with those of trade associations and professional bodies will be sufficient to incorporate the arbitration clause.<\/p>\n<h3 id=\"giriraj\"><span class=\"ez-toc-section\" id=\"Giriraj_Garg_v_Coal_India_Ltd_Ors_2019_2_SCC_192\"><\/span>Giriraj Garg v. Coal India Ltd &amp; Ors., (2019) 2 SCC 192<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The Court reiterated that in \u2018two-contract case\u2019, a specific reference to the arbitration clause contained in an earlier contract is required for its incorporation in the main contract between the parties. However, in a \u2018single-contract case\u2019, a general reference to the standard form contract will have the effect of incorporating the arbitration clause in the main contract.<\/p>\n<p>It was held that the arbitration clause (Clause 11.2) was contained in a standard form document, i.e, the 2007 scheme, to which there was a reference in the individual sale orders. Since the parties to the main contract were same as in the individual sale orders, the Supreme Court held that this would be a \u2018single-contract case\u2019. Therefore, the arbitration clause contained in the 2007 scheme would stand incorporated in the individual sale orders.<\/p>\n<h3 id=\"nbcc\"><span class=\"ez-toc-section\" id=\"NBCC_India_Ltd_v_Zillion_Infraprojects_Pvt_Ltd_2024_SCC_OnLine_SC_323\"><\/span>NBCC (India) Ltd. v. Zillion Infraprojects Pvt. Ltd. 2024 SCC OnLine SC 323<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The Court discussed when an arbitration clause can be considered to be \u2018incorporated\u2019 in an agreement as opposed to being a mere \u2018reference\u2019 to arbitration. The court reiterated that if there is a reference in the second contract to the terms and conditions of the first contract, the arbitration clause would not ipso facto be applicable to the second contract unless there is a specific mention\/reference thereto. The present case is not a case of \u2018incorporation\u2019 but a case of \u2018reference\u2019. As such, a general reference would not have the effect of incorporating the arbitration clause.<\/p>\n<h3 id=\"mac\"><span class=\"ez-toc-section\" id=\"MS_Mac_Associates_v_Parvinder_Singh_FAO_COMM_2612023_CM_APPL_665262023\"><\/span>M\/S Mac Associates v. Parvinder Singh FAO (COMM) 261\/2023 &amp; CM APPL. 66526\/2023<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>It was held that the arbitration clause in the contract between different parties cannot be merely extended to other parties without explicit reference and intention of the parties to arbitrate the disputes arising out of the contract.<\/p>\n<h2 id=\"conclusion\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The decisions discussed above highlight the need for parties to a contract to be vigilant about dispute resolution clauses in cases where terms are spread out across multiple documents, which a contract may refer to. Given the Supreme Court\u2019s observations, parties to a commercial agreement ought to explicitly provide for a dispute resolution clause in the final contract, instead of merely relying on reference to other documents. This would ensure greater certainty about the intent of the parties to arbitrate and ensure the validity and enforceability of the arbitration clause.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Introduction In the world of business contracts, arbitration is often the go-to method for resolving disputes. Rather than dragging a matter through the courts, many companies prefer to settle their differences through arbitration, a more efficient and private process. But here&#8217;s where things can get tricky: What if your contract doesn\u2019t have an arbitration clause<\/p>\n","protected":false},"author":568,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"two_page_speed":[],"_jetpack_memberships_contains_paid_content":false,"_joinchat":[],"footnotes":""},"categories":[13],"tags":[28],"class_list":{"0":"post-11118","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-arbitration-law","7":"tag-top-news"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts\/11118","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/users\/568"}],"replies":[{"embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/comments?post=11118"}],"version-history":[{"count":0,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/posts\/11118\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/media?parent=11118"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/categories?post=11118"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.legalserviceindia.com\/Legal-Articles\/wp-json\/wp\/v2\/tags?post=11118"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}