An entire agreement clause (or EA clause) can have significant impact on the relationship between contracting parties. In this guide we’ll explain what an entire agreement clause is, why they are used, where you’ll come across them and what you need to know about them.
It's important to note that the effectiveness and interpretation of an entire agreement clause can vary depending on the specific language used in the clause and the surrounding circumstances, and as a result, entire agreement clauses are a frequent source of litigation.
To ensure you understand the implications of an EA clause in your contracts, or those you have been sent to sign, speak to our expert commercial solicitors. We’re on-hand to help your business achieve its goals, maximise opportunities and navigate legal risk.
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What are entire agreement clause?
EA clauses are designed to ensure that the arrangements that have been agreed between the parties is limited to what is actually written in the contract and nothing more.
A typical example is ‘This Agreement ... constitutes the entire agreement between the parties and supersedes and extinguishes all previous agreements...’.
No pre-contracts, letters of intent, formal or informal understandings or undertakings are to have effect or be relied upon.
Their positive effect is to promote certainty in the terms of the relationship between the parties.
Their negative effect is to limit the remedies available to one party for statements or promises or projections or arrangements made in negotiations pre-contract.
Where might I come across an entire agreement clause?
- They are common! They are generally tucked away at the back in the ‘Miscellaneous’ or ‘General’ section and can be headed ‘Entire Agreement’, ‘Whole Agreement’ or ‘Non-Reliance’ clauses.
- Often found in situations with long pre-contract relationships in which a great deal of information is exchanged eg. large and long-drawn out projects.
- However, they will appear in any arrangements in which sales patter - promises, assurances, compromises - are designed to induce one party to enter into a contract.
What do I need to know about them?
- Ask yourself why does my counterparty want to include one? Is there something that you have relied on which might not be true?
- If you are unsure, request your lawyer to specifically exclude from the EA clause the statement, promise, side agreement or course of dealing, etc on which you are relying.
- NB: Consumer contracts - if you are dealing with an individual, you will not be able to exclude liability for statements made prior to signature, which have induced them to enter into the contract and on which they rely.
- So, review your sales team scripts and be sure of what it is they are saying.
- If acting as a consumer yourself, take detailed notes of all the statements made to you during negotiation, especially those on which you rely in making your decision to enter into an agreement.
Points to note
- No EA clause is completely watertight as interpretation will depend on the circumstances in each case. They are unlikely to succeed in excluding all possible types of claim.
- EA clauses are intended to prevent claims arising from statements made or information provided before a contract is signed. They are not to be relied upon for statements, etc made after signature.
- It is tempting to skim over these clauses as being part of the standard ‘boilerplate’ at the back of the contract which everyone ignores but that would be unwise. The number of disputes about them and the amount of time the courts have spent in analysing and interpreting them shows their importance and potential for difficulty.
- Clear and specific wording is needed to avoid a claim for misrepresentation. It is more likely to require a separate ‘non-reliance’ clause to try to do that. This is a large and complex topic so we’ve created a separate advice note on misrepresentation in contract law.
- They may not be effective to exclude implied terms because they do not exist ‘prior’ to the signature of the contract. Clear reference to specific implied terms in the EA clause may work but it depends entirely on the circumstances of the case.
- Even with clear drafting an EA clause will not be able to exclude liability for fraud or fraudulent misrepresentation.
