It’s commonplace for drafters to assume that unless they say so explicitly, schedules and exhibits attached to a contract don’t constitute part of that contract. Here’s an assortment of contract language reflecting this assumption:
Schedule A constitutes a part of this agreement.
All exhibits referenced in this agreement are made a part of this agreement.
The exhibits and schedules hereto are an integral part of this agreement and are deemed incorporated by reference herein.
All exhibits and schedules annexed hereto are expressly made a part of this agreement as though fully set forth herein.
This agreement (including any exhibits and schedules hereto) constitutes the entire agreement among the parties hereto.
All such language is redundant. Any exhibit or schedule attached to a contract would necessarily be referred to in the body of the contract. That reference by itself is all that’s required to make the exhibit or schedule part of the agreement. So do yourself a favor—omit any mention, however couched, of exhibits and schedules forming part of the agreement.
I mention this point in the discussion of incorporated by reference at MSCD 9.12, but I need to add it to chapter 5 (The Back of the Contract) in the next edition of MSCD.
It would be a mistake not to include one of the sentences to which you have referred, despite your arguments that it would be redundant to do so. Perhaps not every jurist thinks the same as you? And no matter how correct you may believe yourself to be (or how correct you may in fact be), adding one sentence under the accepted legal maxim “better safe than sorry” is the correct result.
Josh: I’m always happy to have people point out my mistakes: therein lies progress. But I’m not sure that you’ve demonstrated that I’ve made a mistake.
Regarding the views of others on this issue, I don’t recall anyone expressing an opinion one way or the other. The fact that countless agreements use language of the kind that I describe as redundant doesn’t mean anything: any number of deficient usages are in widespread use.
“Better safe than sorry” is not a bad adage for the drafter to keep in mind. But in this context, adopting the approach that I recommend involves no risk. To get me to believe otherwise, you’d have to show me case law in which a court accepted that a schedule or exhibit wasn’t part of an agreement that referred to that schedule or exhibit–a counterintuitive notion.
And if being safe means being reluctant to avoid this kind of redundancy, one risks ending up with a contract that’s cluttered with such stuff. And it’s the reader’s who’ll be sorry!
I hope this makes some sense. Thank you for your comment.
I’m way late to the party and I suspect Josh et al have moved on from this argument in the last eight years.
For what it’s worth, Ken, I agree with you. In my wee early years, I was paranoid and subscribed to the ol’ Bill Clinton “What Is The Meaning of Is” School of Law. Thankfully, many years ago a wise and seasoned entertainment movie studio lawyer called me in and ridiculed my excessive redundant “protection” language (then kicked me out of his office with an ultimatum to clean it up or get a job drafting contracts at Goldman Sachs where my talents in”confusing circular wording” would be appreciated). Best day in my contract drafting career.
Josh (not that you’re reading this), if the exhibit or schedule is referenced in a signed contract, then it’s a pretty heavy burden upon the petitioner to prove otherwise. The petitioner would have a better chance to convince opposing counsel that their officer’s signature is a forgery.
It’s neither better nor prudent to add the redundant language. If nothing else, it costs your client more in paid hours than it’s worth.
Thanks Ken.
Sorry Ken. You haven’t persuaded me to be the guinea pig for your position and to take the risk that obviously exists — despite your statement to the contrary.
You acknowledge the fact that “countless” agreements use language of the kind that you describe as redundant. But you say that this doesn’t mean anything, and that one would have to show you a court decision holding that the language you say should be removed — language that appears in virtually every U.S. agreement with schedules and exhibits that has ever be written — has an independent purpose before you can be persuaded NOT to remove such language.
I think you’ve got it backwards. Before I remove 1 sentence from my agreements, a sentence that can at worst be called redundant, and risk my client being subject to claims not otherwise available, and me being subject to suit for malpractice, I think I need to see the court decision that says that what has been done in hundreds of thousands of agreements before isn’t necessary.
Thanks Ken, but on balance I’ll take the risk of being called a redundant draftsman over the risk of being sued for malpractice. It is better to be safe than sorry.
Josh: You refer to “The risk that obviously exists.” I understand what you think the risk is. But what enables you to determine that it’s a meaningful risk?
The fact that a usage is in almost every agreement doesn’t mean anything. For instance, I’ve demonstrated in an article and in MSCD, as well as in a recent blog post (regarding Canadian law), that the traditional recital of consideration is entirely useless. The fact that the vast majority of drafters use it doesn’t change that.
You want a court to tell you it’s OK before you accept that an agreement perforce includes its exhibits and schedules? Such a case might be out there, but I confess that I haven’t bothered looking. When the meaning of words is as clear to me as the nose on my face, I don’t need a court to validate it. If there’s case law that says I’m wrong, that’s a different matter, but to my knowledge no such case law exists.
If the recommendation I make in this post gives you pause, I suspect it’s because our overall approaches are different. You might well balk at plenty of the other recommendations I make in MSCD.
But on the other hand, I have no basis for being complacent. In the coming weeks I’ll root around some more in the case law to see if I find anything relevant.
Ken – I think the fact that you and Josh are arguing about this (his arguments seem very reasonable to me) is an example of a very real and obvious risk of leaving such statements out of a contract: wasting your client’s money arguing about this in a court of law.
This is no longer an issue for me. Anyone who’s nervous about omitting such language is going to be nervous about omitting all sorts of other crud.
I often include a sentence (in a conspicious place) stating that the contract is not complete until all the exhibits are attached and initialed by the parties. The purpose of this statement is not to incorporate the exhibits–I agree with Ken’s point that mentioning the exhibits is enough–but to let the the parties know that the contract is incomplete without all the exhibits.
When I prepare a draft of a contract and provide it to my clients, I do not know whether it will be used without my seeing it again. I’ve found, in some instances, that a deal closed on my early draft, without the attached exhibits, even though in my mind the exhibits were an integral part of the contract.
My “integration clause” is also intended to give me the malpractice defense that Josh thinks is important, in addition to reminding my clients and the other parties that the exhibits need their attention.
Harry: Drafters often find themselves stating the obvious in a contract just to make sure that the parties understand what’s going on. The sort of provision you refer to would seem a good example of that. I probably wouldn’t feel the need to include such a provision if I were drafting for sophisticated parties represented by counsel, but that won’t always be the case.
I’m not sure that I believe that everyone assumes exhibits, attachments, schedules and the like are necessarily part of an agreement.
What do you do when the exhibits are not, in fact, something that you want part of the Agreement? For example, it happens in software licenses where a Licensor attaches as an exhibit a EULA which is to be presented to end users and not the licensee. It also happens when a particular notice form is attached for use later.
Mike: When I refer to something as being “part of the agreement,” I simply mean that it features in some manner in the agreement. To my mind, each exhibit you mention in your comment constitutes part of the agreement to which it is appended because presumably somewhere in the body of that agreement is a provision that refers to that exhibit. Regards, Ken
I think Henry’s approach (“I often include a sentence (in a conspicious [sic] place) stating that the contract is not complete until all the exhibits are attached and initialed by the parties”) is dangerous. Where does that leave the parties that signed a contract without attaching all the exhibits? Or what if the parties attached the exhibits but neglected to initial them (a very likely scenario in commercial contracts, in my experience)?
Presumably the parties intended to enter into a contract, but Henry’s wording seems to put the validity of the contract into question. While I suspect a court would enforce the contract anyway, our auditors would likely not let us recognize revenue under a contract that states it is not complete, regardless of the intent of the parties. That is perhaps a more real concern for my corporate client than that a court might not enforce the contract.
I agree with Ken that there is no reason to include wording incorporating attachments. However, my practice is to include a list of the attachments at the end of the contract following the signatures. This is for administrative purposes to reduce the chances that the attachments will be forgotten since early drafts of a contract may not include the attachments.
My biggest problem with the types of sentences that Ken cites is that we almost never mean them literally and across the board. For example, I attach the following exhibits to a contract:
A – description of services
B – calculation of fees
C – form of service level report
Exhibits A and B should be incorporated into the agreement for all purposes. Text in Exhibit A or B has the same status as text anywhere else in the agreement. But Exhibit C is attached only as an illustration. Text in it does not have the same status as text in the agreement. When the form of service level report says (as the one I am looking at right now does) that “All scores must be at least 90% to pass,” there is no legal consequence to that assertion.
These sentences that lump all exhibits together confuse the distinction. In a couple of lengthy agreements, I broke the attachments to the contract out into Schedules and Exhibits. One was incorporated fully and the other was for illustration (thought I don’t recall which was which). The risk of that approach is when someone else modifies your agreement.
On the main point, I find myself agreeing with Ken here. If a contract says (for example) “Party A will meet the minimum performance targets set out in Schedule 1”, there is absolutely no possibility that any court, competent or incompetent, will decide that Schedule 1 cannot be looked at because there is no clause stating that schedules form part of the agreement. If you can’t trust a court on this then you can’t trust a court on anything.
Perhaps we should call this syndrome “lawyer paranoia” – the completely irrational fear that courts do not understand the English language or the law and will construe any contract against you without any regard to what it actually says. I’m sure it keeps many lawyers awake at night.
I am in partial agreement with Mr. Adam’s argument. My personal view is to have a reference of the Schedules/ Annexures in the contract body, and in case there is a likelihood of conflict between the provisions of the contract and the Schedules/ Annexures, then to use a language to clarify that one supercedes the other, e.g., in case of a general contract having references of purchase orders, the later supercedes the former as it contains detailed commercial terms.
It is useless to have any specific language suggesting that Schedules form the part of the contract, as it adds no value to the general rule of interpretation that “a contract has to be read as a whole.”
It is interesting that I see people arguing with Ken over legal fact.
Ken, what about the language “attached hereto as an Exhibit and incorporated by reference herein.” I came across this in a contract I am reviewing and now I am left scratching my head and unclear on whether I need to amend the whole contract to include my updated attachment as an Exhibit or if I am covered by the “incorporated by reference herein” language. Is it just me or did the original drafter contradict themself by using both the “attached as an exhibit” and “incorporated by reference herein” language? Shouldn’t the contract state one or the other? Thanks! — Contract Paralegal in Virginia
The “incorporated by reference” bit is pointless. More generally, if you’re amending an attachment, you have to amend the contract. (MSCD has a chapter on amendments.)
Why are the supporting documents related to MSA are called as Schedules? any reason sir…
It’s best to distinguish the kinds of attachments. “Exhibits” are stand-alone documents, such as a company’s organizational documents; “schedules” are for factual information that could be included in the body of the contract but instead is put in an attachment because it’s lengthy or because it’s prepared on a different timetable or by different people.
If factual information, such as LLC members’ salaries and capital which are subject to change, is put in an attachment to an agreement, is this attachment an amendment requiring the same approvals, signatures, dates, etc as the original agreement
The language you suggest should be omitted is a catch-all that can be useful in organizations where business units are adding exhibits to agreements that are not already referenced in the template. Ideally, it would be nice to never confront this. However, the possibility of an un-referenced exhibit of material importance often necessitates the catch-all phrase which is only redundant in situations where the exhibit is already referenced. Hope that makes sense.
Were I writing this now, I’d acknowledge that there are contexts (for example, some master services agreements) where the text of the contract doesn’t refer to all the schedules, so you have to include this language. But I’d have thought you either have that situation or you don’t: it’s not something that creeps up on you.
Am I correct in understanding that an Exhibit referenced in the body of an agreement, should be separately executed, if it has subject-to-change, time-sensitive information provided in it and is placed after the execution page for the body of the agreement?