Court Of Appeal Clarifies Enforceability Of Entire Agreement Clauses

It is not uncommon to see a written contract include a clause that says:

This agreement shall constitute the entire agreement between the parties. There is no representation, warranty, collateral agreement or condition which effects this agreement other than as expressed therein.

This clause is typically described as an "entire agreement clause". These clauses are found in complex commercial agreements as well as in simple consumer contracts including in agreements of purchase and sale of real estate. Frequently, when disputes arise between parties to a contract, one party or the other will seek to rely upon what the other party said during negotiations or after the contract was signed.

Historically, the Courts focused the analysis of contractual obligations on the written language of the contract. Over the years, contract law has developed to allow the Courts to consider the pre-contractual discussions, looking beyond the written words to consider the factual matrix surrounding the formation of the contract. The law of contract has also developed to permit Courts to consider the post contractual conduct of the parties in order to shed light on what the parties intended the words in the written contract to mean. The examination of the conduct of the parties to a contract may support the conclusion that they intended the contract to have a specific meaning or create certain obligations.

Entire agreement clauses were designed to provide clarity to the contractual obligations agreed to by the parties by restricting the obligations to only what was specifically included in the written agreement. The Court of Appeal described recently that:

An entire agreement clause is generally intended to lift and distill the parties' bargain from the muck of negotiations1

While entire agreement clauses are common, there has been some uncertainty as to their enforceability as the law of contract evolved to permit the consideration of actions and comments outside of the written agreement. Do entire agreement clauses apply to prevent consideration of representations made in the course of negotiations? Do they apply to prevent enforceability of representations made after the written contract has been signed? In a decision that has not received much public attention, the Court of Appeal for Ontario recently gave some very helpful answers to these questions.

In Soboczynski v. Beauchamp, 2015 ONCA 282, the Court of Appeal commented upon the impact of an entire...