'Threshing The Undergrowth For Some Chance Remark' — English High Court Considers Impact Of Entire Agreement Clauses On Pre-Contractual Negotiations

Introduction

Claims alleging pre-contractual misrepresentation are common nemeses of banks and other financial institutions, and any organisation that regularly contracts with counterparties. As the 2018 World Cup gets under way, football (more specifically, the ownership of Nottingham Forest FC) was an appropriate context for the English High Court to have considered the extent to which such claims can survive the contractual protection of entire agreement clauses, in a decision which appears at first sight to sit uneasily with previous Court of Appeal authority in this area.

Background

Entire agreement clauses will be familiar to anyone who has negotiated, drafted or reviewed a contract as one of the most significant - and commonly litigated - "boilerplate" provisions of a contractual document. Their aim is simple: the parties to a written contract agree that the terms of that written document constitute the entirety of the parties' agreement, and there can be no future claim that pre-contractual statements and representations not included in the written instrument in fact constitute additional terms of the contract, or a side agreement. In the oft-quoted words of Lightman J, entire agreement clauses aim "to preclude a party to a written agreement threshing the undergrowth and finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim"1.

Without an entire agreement clause, promises or assurances made in the course of negotiations might be deemed to have effect as collateral warranties; the effect of the entire agreement clause is that such promises or assurances shall have no contractual force, save insofar as they are reflected and given effect in the contractual document. As the Court of Appeal held in 20112, if the final written agreement contains an effective entire agreement clause, it will prevent the parties from claiming that the contract is partly contained in statements that were not included in that agreement.

The value of entire agreement clauses will be obvious; they strive to achieve certainty as to the terms and scope of the relevant contract. The impact of such clauses on claims for misrepresentation is less certain. Where litigants have sought to rely on "pure" entire agreement clauses (i.e. which do not also contain additional "non-reliance" statements) to defend themselves against claims for misrepresentation, the courts have...