Most commercial contracts will include a clause known as an “entire agreement clause”. This type of clause is used to signify the intent of the parties that the written terms of the contract should represent the agreement between the parties in its entirety and that it will supersede all preceding agreements, negotiations or discussions that have not been set out in the agreement. The primary purpose of such a clause is to prevent the parties to a written agreement claiming that statements made during contract negotiations, which are not included in the final agreement, constitute either additional terms of the agreement or a form of side or collateral agreement.
Entire Agreement Clauses provide commercial certainty for the parties to an agreement as the full extent of the agreement between them is contained in one single document. Entire Agreement Clauses also prevent potential litigation between the parties, which would not only be costly but also very time consuming, as they force the parties to acknowledge that they are not relying on any statements or representations made during the contractual negotiations other than those expressly set out in the document and therefore they are effectively waiving their rights to rely subsequently upon anything said before the formation of the contract.
Entire Agreement Causes must be reasonable under the Unfair Contract Terms Act 1977. If the parties are both commercial entities and the contract is made in a commercial context, it is unlikely that an Entire Agreement Clause excluding liability for pre-contract representations would be considered unreasonable. However, an Entire Agreement Clause cannot be used to exclude liability for fraudulent pre-contractual representations.
A typical Entire Agreement Clause will state that:
- The contract is the whole agreement between the parties.
- The contract supersedes any previous agreements or understandings.
- The parties do not rely on any representation made prior to the making of the contract.
Although the Courts will uphold Entire Agreement Clauses which are expressed in general terms, the parties should be aware of the limits to these clauses and consider whether to provide for express exclusions. If the parties wish to exclude certain liabilities or to ensure that a specific term is not implied into a contract then this should be expressly stated and they should not assume that the Entire Agreement Clause will cover the position.