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Incorporation

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Typography

Incorporation. When certain phrases, terms or words in one document are merged into a contract the former are said to be "incorporated" into the latter to make one complete "whole".

The terms or words can be imported into the contract from another contract or from legislation. One obvious example is-where a bill- of lading incorporates terms, conditions and exceptions of a charterparty. Another example is where The Hague or Hague-Visby Rules, which were not designed to apply to charterparties, are incorporated into a charterparty expressly by a "Paramount clause".

Incorporation can cause problems if the incorporation clause or clauses are not drafted carefully. For example, if a Paramount clause incorporates the Hague Rules or the Hague-Visby Rules into a charterparty, the conditions in the Rules may prevail over charterparty conditions of carriage. If an incorporation clause is incorrectly drafted it may not be considered to incorporate what it is supposed to incorporate. For example, in Adamastos Shipping v. Anglo-Saxon Petroleum, 1958, a Paramount clause appropriate to a bill of lading was inserted into the charterparty. The clause in the charterparty stated that: "This Bill-of Lading shall have effect subject to the provisions of . . ." It would appear that the wrongly worded incorporation clause would not have incorporated the United States Carriage of Goods by Sea Act 1936 (and Hague Rules) into the charterparty. However, the House of Lords did its best to give effect to the presumed "intention" of the parties to incorporate the Rules into "this charterparty". This decision can also be seen as an attempt to resolve the ambiguities because of the fact that Article V of the Hague Rules dearly states: “ . . . The provisions . . . shall not be applicable to charter parties . . ." It was said in the House of Lords that:

"... parties to a charterparty often wish to incorporate the Hague Rules in their agreement; . . . They wish to incorporate into the contractual relation between owners and charterers the same standard of obligation, liability, right and immunity as under the rules subsists between carrier and shipper."

The House of Lords did emphasise that a carelessly worded incorporation clause can be a dangerous way of incorporating the Hague Rules or Hague-Visby Rules into a charterparty.

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