Entire Agreement Clauses: The Agreement, The Whole Agreement And Nothing But The Agreement?

Published in Dechert's Commercial Matters March 2012

The main purpose of an entire agreement clause in a contract is to limit the parties' rights and obligations to the provisions contained in the relevant agreement. They operate to exclude liability for any pre-contractual statements which either party may have made to the other prior to signing on the dotted line (unless those statements are expressly repeated in the agreement).

Whether entire agreement clauses enable parties to exclude claims based on misrepresentation and/or implied terms has been the subject of numerous disputes. However, one recent Court of Appeal case, AXA Sun Life v Campbell Martin, has provided useful guidance on how to draft such clauses to ensure that no implied terms or pre-contractual negotiations will be construed as forming part of the contract.

AXA Sun Life Services plc v Campbell Martin Ltd and Others

AXA appointed agents to sell products under general retainer agreements containing a series of standard clauses. When the agreements were terminated, questions arose as to whether the entire agreement clause in each such retainer agreement was effective to exclude claims based on alleged:

misrepresentation; breach of collateral warranties; and breach of implied terms. The entire agreement clause provided as follows:

"This Agreement ... constitutes the entire agreement and understanding between you and us... this Agreement shall supersede any prior promises, agreements, representations, undertakings or implications whether made orally or in writing between you and us relating to the subject matter of this agreement..."

It was accepted by the parties that the entire agreement clause was effective to exclude claims based on collateral warranties. However, the parties disagreed as to whether the clause was effective to exclude claims based on misrepresentation and any implied terms. The Court of Appeal held that:

the wording "this Agreement shall supersede any prior promises, agreements, representations..." did not exclude liability for misrepresentation. The Court concluded that the language of superseding representations within the context of an entire agreement clause could, at most, prevent those terms from taking effect as terms of the contract (endorsing the approach taken in the earlier case of BSkyB Ltd v HP Enterprise Services UK Ltd). The problem with the clause therefore was that it was concerned only with the terms of the contract (as the language of...