The entire agreement clause in a contract has broadly two purposes. The first is to prevent a party from claiming that earlier or side agreements are included in the contract. The second is to prevent a party from making a claim in misrepresentation in respect of a pre-contractual statement (e.g. a statement made during contract negotiations or a tender process).
Entire agreement clauses tend to include the following elements:
- Entire agreement statement – a statement that all the terms binding the parties are contained in the written contract and nowhere else.
- Exclusion of liability for misrepresentation – most entire agreement clauses also aim to exclude liability for misrepresentation. A misrepresentation is a false statement made by one party which causes the other party to enter into a contract with them and to ultimately suffer a loss.
- A carve out for fraud – any attempt to exclude liability for fraud (including fraudulent misrepresentation) will be ineffective and so most entire agreement clauses make it clear that the parties are not intending to do this.
Entire agreement clauses and the issues which they raise are not straightforward and have been subject to numerous court challenges (for example in relation to the status of implied terms). It is therefore important to obtain proper advice, and to use careful drafting, when including such a clause in contracts. A failure to include an effective entire agreement clause in a contract can materially impact upon the parties’ exposure under the contract.
For more information please contact Beverley Flynn or any member of our commercial contracts team.
Beverley Flynn
Victoria Hart