The issues before the High Court were (1) whether general words in a contract are sufficient to incorporate terms from previous contracts, and (2) if general words are sufficient, whether the words of incorporation were effective in this instance.
There had been 14 previous contracts made between Habas and Sometal S.A.L. – 3 were prepared by Habas and the other 11 by Sometal S.A.L. or by their agent’s, Metkim. The contracts prepared by Metkim set out terms relating to material, quantity, price and shipment and either provided that “the rest will be agreed mutually“, “the rest will be as per previous contracts” or that “all the rest will be same as our previous contracts“. Although the contract on which Sometal S.A.L. relied on did not contain a ‘London arbitration clause’ governing jurisdiction, it incorporated the term, “all the rest will be same as our previous contracts“.
In making the distinction between the incorporation of terms in ‘single contract’ cases (contracts made between the same parties) and the incorporation of terms in ‘two-contract’ cases (contracts made between different parties) the High Court found that in single contracts, which the contract in question was, “general words of incorporation are capable of incorporating terms which include an arbitration clause without specifically referring to it“. With regard to the second issue, the High Court found that when the parties referred to “all the rest” being the same there was no reason why this excluded previous contracts which incorporated the ‘London arbitration clause’. For this reason the High Court found that the ‘London arbitration clause’ had been incorporated into the contract Sometal S.A.L. relied on and dismissed the application.