Five Reasons to Watch Out for "Incorporated" Contracts

Subcontracts involving the automation or technology piece of a project often incorporate the terms of an upper tier contract to which the automation company is not a party. These "incorporated contracts" are far from benign, however. Parties to such subcontracts should be especially wary of these provisions because of the following concerns:

• Acting in the Dark.
  It is one thing to incorporate a contract to which your company is not a party. It is another thing to actually track the language of that separate contract and take its additional risks into consideration. Operating out of two contracts can be unwieldy.
• Notices of Change.
  Often, parties to an automation subcontract are required to give written notice of a change, and the timing and content of such notice may depend on what is in the incorporated contract.
• Dispute Resolution.
  Parties to an automation subcontract may be bound to resolve disputes by whatever manner is set forth in the incorporated contract, which may require, for example, arbitration.
• Limitation on Damages.
  In many subcontracts, an automation subcontractor's damages may be limited in certain circumstances to whatever the contractor can recover. In such instances, parties should be especially aware of any damage limitations contained in the incorporated contract.
• Warranties.
  Automation subcontractors should determine what warranties are part of the incorporated contract that might relate to its work.