Entire Agreement Clauses

19 May, 2011

Entire agreement clauses are included in contracts to signify the intent of the parties that the written terms should represent the agreement between the parties in its entirety and supersede all prior arrangements, negotiations, understandings and discussions. Entire agreement clauses are frequently tested in courts and there have been two recent cases which have considered their effect in more detail.

It is largely accepted that a well drafted entire agreement clause will be effective to exclude liability for collateral warranties. This point was recently reviewed by the Court of Appeal in the case of Axa Sun Life Services plc v Campbell Martin Ltd and Others1, which also sought to clarify whether an entire agreement clause could be effective to exclude liability for misrepresentations and implied terms.

The case (brought by Axa) concerned a dispute regarding commission. The respondent contested the claims, asserting that they had been induced to enter the agreement by misrepresentations and collateral warranties. The respondent also argued that further terms ought to be implied into the agreement. Axa argued that the entire agreement clause would operate to defeat all of the respondent’s claims.
 
The Court of Appeal affirmed that the entire agreement clause did exclude liability for the collateral warranties made by Axa. However, the court found that the clause would not exclude liability for misrepresentations finding that, where a party’s objective is to exclude liability for misrepresentations, this should be clearly and expressly set out, preferably in a separate clause. Similarly, it was held that the entire agreement clause would not prevent terms from being implied into the contract where necessary for business efficacy and where such terms are intrinsic to the agreement. Consideration was also given to the Unfair Contract Terms Act with a finding that the entire agreement clause was reasonable, and should not be struck out on this basis. 

Entire agreement clauses were considered again in Hawksford Trustees Jersey Ltd v Stella Global UK Ltd2 and another  in relation to rectification orders. Here, although the terms of the contract were not ambiguous, the court found that since they did not reflect the common intention of the parties (due to common mistake), they should be rectified by the court accordingly. The fact that the contract contained an entire agreement clause did not, in itself, preclude rectification on the grounds of mistake.

These cases highlight the importance of giving careful consideration to the drafting of entire agreement clauses. If the intention is to exclude liability for a misrepresentation or to ensure that a specific term is not implied into a contract, then this should be expressly stated and it should not be assumed that one template entire agreement clause will be suitable in all circumstances.

 

1Link to judgment: Axa Sun Life Services plc v Campbell Martin Ltd and Others [2011] EWCA Civ 133

 

2Link to judgment: Hawksford Trustees Jersey Ltd v Stella Global UK Ltd and another [2011] EWHC 503 (Ch)

 

Reviewed in 2015