Knowledge Hub
for Growth


Contracts: entire agreement clauses

An entire agreement clause provides that only those terms set out in the actual agreement form part of the contract. It ensures that any statements, representations, notes and so on which were made before the contract was signed do not have contractual force, unless they are specifically referred to in the contract as doing so. As a result, entire agreement clauses provide certainty for the parties but only if they are drafted correctly and mirror the intentions of the parties. They are common causes of litigation.

Your legal team will be able to assist with ensuring that the entire agreement is worded correctly but they will not have been present at all of the contractual discussions or have copies of all correspondence between the parties, especially at the early stages, and so your consideration of this clause is crucial.

Here, we discuss the need for an entire agreement clause, the likely location of the clause in the contract, what’s included in an entire agreement clause and its different sub-clauses and whether entire agreement clauses are effective.

What is an entire agreement clause?

An entire agreement clause prevents any pre-contractual statements, representations, agreements and so on from having contractual effect, unless they are set out in the contract itself. It ensures that pre-contract chats, emails, draft documents and so on do not form part of the final contract and so results in increased certainty for the parties.

The purpose for such a clause was set out in an important case for contract law, Inntrepreneur Pub Co v East Crown Ltd [2000] 2 Lloyd's Rep 611, as being:

'… 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 ... For [an entire agreement] clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere, and that, accordingly, any promises or assurances made in the course of the negotiations … shall have no contractual force, save in so far as they are reflected and given effect in that document.'

But why do we need this type of clause? It can best be illustrated by an example. Suppose that A Limited is selling its plant and machinery to B Limited and during the course of the sale negotiations, a representative of A Limited tells the B Limited representative that a particular machine has never broken down. The sale agreement, which includes a standard entire agreement clause, does not include this statement. Following the sale, B Limited brings a claim against A Limited for the shoddy machinery and seeks to rely on this statement. The entire agreement clause would prevent B Limited from relying on this statement because, whether or not the statement was made prior to entering into the contract, it was not included in the contract itself.

It is therefore crucial that any statements or terms which are intended to have contractual force are referred to in the contract itself or carved out of the entire agreement clause. Conversely, it is also crucial that an entire agreement clause is included in a contract to prevent the possibility of every single statement made during the negotiations phase from coming under scrutiny by the courts.

When will an entire agreement clause not apply?

The presence of an entire agreement clause in a contract will not always preclude the bringing of a claim or the use of certain statements, however. For example, having an entire agreement clause will not affect the following:

  • A claim which is brought by a party to the contract as a result of events which arise after signing of the contract may still be successful. Entire agreement clauses prevent claims in relation to representations and statements made before signing.
  • The use of notes, negotiation correspondence and so on which may assist in interpreting the terms of the contract in the event of a claim.
  • A claim for rectification on the basis that the contract does not set out the terms as agreed between the parties.
  • Implying terms into the contract, provided that the entire agreement clause does not specifically refer to implied terms (see Implied terms below).
  • Implying overarching duties into the contract.

Where will you find an entire agreement clause?

Entire agreement clauses are generally found towards the end of a contract, in the section known as the boilerplate clauses. The boilerplate is usually considered to be solely the domain of the legal teams. It is often thought to comprise the ‘legalese’ and of little consequence to the terms of the deal or business relationship.

In actual fact, the clauses in this section are every bit as important as the rest of the contract and although the wording used is often fairly standard, your legal team will have carefully considered each and every clause in light of your actual transaction.

We strongly advise that you take legal advice before entering into any contract but at the very least, please bear in mind that these boilerplate clauses are not just there to make the contract look official. They do have an effect and should not be inserted into a contract unless their effect is understood.

You can access our webinar on the importance of the boilerplate in contract law:

The sections of an entire agreement clause

A standard entire agreement clause will usually comprise the following:

  • A statement that the terms of the contract are only to be found in the contract (see What is an entire agreement clause? above). Wording along the lines of, ‘This agreement constitutes the entire agreement between the parties and supersedes and extinguishes all previous agreements…’ will be found here.
  • A statement that the parties to the contract exclude any liability for misrepresentation (see Misrepresentation below). This wording seeks to prevent a party from bringing a claim for misrepresentation and may include:
    • a no representation statement, which provides that no party to the contract has made any representations during negotiations or before the contract was entered into. Note that even if representations have been made, case law has shown that this wording will still be effective as the courts are of the view that the parties can agree that this is the position even if it is not factually correct;
    • a non-reliance statement, that is, there has been no reliance on any representation which is not included in the contract;
    • a statement excluding liability for misrepresentation; and/or
    • a waiver of non-contractual remedies, thereby resulting in a party only being able to bring a claim for breach of contract rather than a claim for misrepresentation. The type of claim will affect the type of remedy that a party can be awarded if the claim is successful, so a claim for breach would result in the payment of damages, whereas a successful claim for misrepresentation could result in the contract being set aside or rescinded, with the parties being put back into the position they were in before they entered into the contract. If this wording is included, it is important that it does not preclude any remedies that the parties may wish to keep.
  • A statement that claims for fraudulent misrepresentation can be brought notwithstanding the general exclusion of liability for misrepresentation referred to above. The courts will not accept the limiting of liability for fraud and so this wording is included to ensure that the courts will not find the whole clause to be unreasonable and so invalid.

As a result, an entire agreement clause can be fairly lengthy when compared to the other boilerplate clauses and will usually be separated into distinct sub-clauses. This allows the courts to sever parts of the clause without affecting the remainder if they consider any part to be unenforceable.

Implied terms

Implied terms are terms that are not expressly set out in the contract, but which are implied into it for various reasons. Case law has considered whether implied terms are separate to the contract and so should be excluded under an entire agreement clause in the same way as a pre-contractual statement is, or whether they form part of the contract and so cannot be excluded in this way.

Questions have arisen as to whether entire agreement clauses can exclude implied terms. The courts have held that clear and express wording is required to exclude implied terms from the contract and that their exclusion (or not) will also depend on the type of implied term under consideration.

An intrinsic implied term is, as the name suggests, an implied term that is intrinsic to the actual agreement. It is considered as forming part of the actual contract and so cannot be excluded. In the case of Axa Sun Life Services plc v Campbell Martin Ltd and others [2011] EWCA Civ 133, the Court of Appeal held that certain implied terms could not be excluded by the entire agreement clause because they were intrinsic to the agreement, even though the clause specifically sought to exclude implied terms.

The case of JN Hipwell & Son v Szurek [2018] EWCA Civ 674 also considered this point. The tenant of a café brought a claim against her landlord after she had been forced to close the business due to electrical wiring problems. The lease did not specify who was responsible for maintaining the electrics and also included an entire agreement clause. The Court of Appeal held, that despite the entire agreement clause, a term should be implied into the lease that the landlord had responsibility for the electrics, on the basis that a term can be implied into a contract where it is required to give the contract business efficacy.

Conversely, it would appear that a non-intrinsic implied term can be excluded by the entire agreement clause provided it is clearly written, although this may not be advantageous as the parties are unlikely to know in advance whether they will want to argue that a term is implied or not. Added to that is the lack of clarity as to what a ‘non-intrinsic’ term actually is.

Type of Implied TermCan an entire agreement clause exclude them?
General implied termYes. Clause must mention them specifically
Terms implied due to custom or previous dealingsYes. Clause must mention this type of implied term specifically
Terms implied by statuteYes. Clause must mention this type of implied term specifically

BUT...
Depends on laws relating to the limiting of liability
Implied terms needed to make contract work or ‘intrinsic’ implied termsNo. Cannot be excluded even if the clause tries to do so
‘Non-intrinsic’ implied termsPossibly able to be excluded if specifically mentioned in the clause.

BUT...
Case law does not clarify what a ‘non-intrinsic' implied term is, and it may not be possible to know in advance whether it is beneficial to include or exclude these terms

Misrepresentation

The topic of misrepresentation is large and complex enough to warrant separate advice in its own right.

For the purposes of this advice, if you wish to exclude liability for misrepresentation, such exclusion must be specifically stated in the entire agreement clause. Case law has shown that inserting entire agreement wording on its own with no specific reference to misrepresentation will not be sufficient to exclude such liability.

Although case law has shown that no representation statements and/or non-reliance statements can be valid (see The sections of an entire agreement clause above), the courts are of the view that they specifically exclude liability for misrepresentation. Wording which excludes liability for misrepresentation is subject to section 3 of the Misrepresentation Act 1967, which provides that to be effective it must satisfy a reasonableness test as set out in section 11(a) of the Unfair Contracts Terms Act 1977. This reasonableness test provides that to be valid the term must be fair and reasonable having regard to the circumstances which were, or ought reasonably to have been, known to or contemplated by the parties when the contract was entered into. The question whether a term is reasonable or not is a question of fact and will be determined by the courts on a case by case basis, taking into account all the circumstances. The wording is more likely to be considered as reasonable where the parties have negotiated the terms of the transaction, have taken legal advice, have similar business experience to each other and are of equal bargaining power.

Consumer contracts

If you deal with individuals on a basis outside of their profession or trade, you are likely to be dealing with a consumer and it is important to be aware that entire agreement clauses are unlikely to have any effect in contracts with consumers.

The Competition and Markets Authority is of the view that consumers rely on statements and representations which are made to them prior to entering into a contract and that statements made to consumers to encourage their entry into a contract should bind the party making them.

Points to note

Don’t ignore the boilerplate
It is important to remember that the boilerplate clauses in a contract are just as important as the more ‘active’ clauses. It is often the legal teams who deal with the boilerplate but the parties to the contract should understand their purpose.

Clear wording
The courts generally seem to construe entire agreement clauses strictly. For this reason and for certainty’s sake, they must be worded carefully and precisely and cover all relevant areas. For example, if you wish certain implied terms to be captured by the clause, and so not be considered as part of the contract, this must be clearly set out. Your legal team will be able to advise on this but if any statement, promise, undertaking or similar was made during negotiations or the parties to the agreement have an accepted method of working together, you must ensure that your legal advisers are aware of it so that it can be dealt with accordingly.

Inclusion of all documents and priority
It is extremely important to remember that all documents which are to form part of the transaction are referred to in the entire agreement clause. Failure to do so may result in an ancillary agreement being excluded from the transaction. This will not be an issue where there is only one contract but in a complex transaction, it is vital that all relevant documents are referred to. It is also imperative that the contract makes clear, either in the entire agreement clause or elsewhere, which transaction document takes priority in the event of inconsistency or conflict with the other documents.

Similarly, complex or lengthy transactions often require the inclusion of last-minute side agreements or ancillary documents. It is crucial that the entire agreement clause is updated to reflect these.

Consumer issues
As a trader, it is extremely improbable that you will successfully exclude liability for statements made to a consumer prior to their entering into the contract, particularly if those statements were made to encourage their entry into the contract. It is, therefore, vital that you and your representatives are careful of what you say. Conversely, as a consumer, be sure to take detailed notes of all negotiations and statements made. We advise that this be done during the negotiations, rather than after the event and that you explain to the trader that you are doing so.


What next?

Our commercial contracts solicitors have plenty of experience with such entire agreements terms and can provide you with commercial and practical advice at all stages of the contractual process.

Call us on 0800 689 1700 or fill out this short form and we’ll contact you to discuss your situation and legal requirements. There’s no charge for your initial consultation, and no obligation to instruct us. We aim to respond to all messages received within 24 hours.

  • This field is for validation purposes and should be left unchanged.

Your data will only be used by Harper James Solicitors. We will never sell your data and promise to keep it secure. You can find further information in our Privacy Policy.


Our offices

A national law firm

A national law firm

Our commercial lawyers are based in or close to major cities across the UK, providing expert legal advice to clients both locally and nationally.

We mainly work remotely, so we can work with you wherever you are. But we can arrange face-to-face meeting at our offices or a location of your choosing.

Floor 5, Cavendish House, 39-41 Waterloo Street, Birmingham, B2 5PP
Stirling House, Cambridge Innovation Park, Denny End Road, Waterbeach, Cambridge, CB25 9QE
13th Floor, Piccadilly Plaza, Manchester, M1 4BT
10 Fitzroy Square, London, W1T 5HP
Harwell Innovation Centre, 173 Curie Avenue, Harwell, Oxfordshire, OX11 0QG
2-5 Velocity Tower, 1 St Mary’s Square, Sheffield, S1 4LP
A national law firm

Like what you’re reading?

Get new articles delivered to your inbox

Join 8,153 entrepreneurs reading our latest news, guides and insights.

Subscribe


To access legal support from just £125 per hour arrange your free no-obligation initial consultation to discuss your business requirements.

Make an enquiry