Suzanne Thompson, Corporate and Commercial department solicitor at DBF Law

What is an entire agreement clause?

An entire agreement clause (also known as a whole agreement clause) is usually one of the last so-called “boiler plate” clauses you find in a commercial contract. It is a contractual provision which aims to prevent the party relying on it from being liable for any statements or representations (including pre-contractual representations) except as expressly set out in the agreement. A standard entire agreement clause (short form) will usually read along the following lines:-

1.1 This agreement constitutes the entire agreement between the parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter.

 

1.2 Each party agrees that it shall have no remedies in respect of any statement, representation, assurance or warranty (whether made innocently or negligently) that is not set out in this agreement. Each party agrees that it shall have no claim for innocent or negligent misrepresentation [or negligent misstatement] based on any statement in this agreement.

 

Why should an entire agreement clause be included in a commercial contract?

The recent case of NF Football Investments Ltd and another v NFCC Group Holdings Ltd and another [2018] EWHC 1346 (Ch) (6 June 2018) highlights why the inclusion of an entire agreement clause in a commercial contract is usually a good idea.

In this particular case, following the execution of a share purchase agreement (SPA), the buyer brought a claim for misrepresentation against the seller, alleging that the seller had misrepresented the company’s liabilities. However, because the SPA contained an entire agreement clause, which stated that the SPA replaced any previous discussions and set out the entire agreement between the parties, the High Court held that the parties had intended to exclude misrepresentation claims. The High Court’s decision was assisted by the fact that (1) the clause had been drafted particularly widely to include contractual matters such as agreements, warranties and promises, as well as assurances and negotiations; and (2) the SPA already contained a contractual mechanism to resolve the dispute, as the seller had indemnified the buyer for any misrepresentations in relation to the company’s liabilities.

Whilst the above decision is only a first instance judgment, it goes to show the importance of a well drafted entire agreement clause (and commercial contract generally) in that it can defeat a claim for misrepresentation.

For advice on updating your commercial contracts or terms and conditions please contact a member of our Corporate/Commercial team. Alternatively if you need advice or assistance with a dispute involving a commercial contract please contact our Dispute Resolution team.

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