Entire agreement

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Boilerplate Anatomy

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A “typical” entire agreement clause:

Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter. Each of the parties hereby acknowledges that in entering into this Agreement it has not relied on any oral or written representation, warranty or other assurance (except as provided for or referred to in this Agreement) and waives all rights and remedies which might otherwise be available to it in respect thereof, except that nothing in this Agreement will limit or exclude any liability of a party for fraud.

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A boilerplate clause designed to buttress the time-honoured parol evidence rule, that if it is clear you meant to entirely reduce your agreement to writing, once you have done so the “four corners” of the written agreement, and no other extraneous evidence, will be the tribunal’s only guide to divining its intention.

Eagles of the law will say it reduces a certain amount of uncertainty, certainly, but at what cost? Legal expense, for one thing: a clause we imagine was meant to close the door on litigation has, all the same, managed to generate quite a lot of the stuff.

Side letters, amendment agreements and master trading agreements

Some lesser-spotted legal eagles, apparently struggling with the basic essence of the idea, have even inserted entire agreement clauses into arrangements which are patently nothing of the sort — amendment agreements and side letters, for example — and following ineluctable gravity down a path paved with the remains of men or women who were not prepared to die in a ditch about them, these too have ossified into boilerplate.

Another common yet curious habitat for an entire agreement clause is a master trading agreement. How exactly a framework agreement that only means anything once amplified by a subsequent agreement, and has no economic impact if it is not, can possibly be “the entire agreement and understanding of the Parties with respect to its subject matter” is beyond the little brain of this bear, but yet ISDA’s crack drafting squad™ and ICMA’s crack drafting squad™, among others, both heartily say it.

Are you feeling lucky?

But even where it is not by its own lights a self-contradiction, an entire agreement clause supposes that learned counsel have understood every commercial nuance and forensic contingency, even if their clients have not. Fat chance. It also presumes that, having done so, they will have successfully memorialised those terms in prose that speaks with utmost clarity and comprehensivity, to the commercial bargain. The JC knows a lot of lawyers and would urge caution against this assumption.

Now if the lawyers have indeed done so — look, let’s just say — then there is surely nothing left to doubt, the parties will be happy, there will be no dispute, and all will be well in the world. But should the parties later find themselves at gunpoint, the legal agreement has already failed at this avowed intent. To now cast your lot with the legal eagles and whatever they did manage to confabulate is rather to double down on an enterprise you should already be regretting. If the merchants’ own discussions, captured in contemporaneous correspondence, cast a different light upon the bargain, then wouldn’t that, rather than their advisers’ post facto magniloquence, be a better clue to a good resolution?

It also creates a Möbius loop. For either your written agreement, on its face, by its own terms and within the parties’ shared expectation, is the final definitive record of your whole agreement “with respect to its subject matter” — now there’s some wieselspiele for our times — in which case, your statement to that effect is not needed, or (as the Court of Appeal found in Hipwell v Szurek [2018] EWCA(Civ) 674Let me Google that for you) it is not, in which case the wording won’t save you. If something that goes without saying, indeed, went without saying, an entire agreement clause won’t stop it, as it were, still going. Nothing you can write in the agreement will change that.

What it really means

Since the bracing authority of Rock Advertising Limited v MWB Business Exchange Centres Limited it seems to this old fellow, that everything of merit an entire agreement clause sets out to do is already covered: in hindsight. by the parol evidence rule; in prospect, by a “no oral modification” clause, if you are incautious enough to want one of those.

What’s in the box

A “classic” entire agreement clause contains the following components of flannelry:

  • A statement that the document (and, ahh, ancillary documents it refers to, their schedules, annexes, side letters and any other appended napkins, used envelopes or scraps of paper — you can see the unfolding problem here right?), represents the totality of the bargain.
  • A disclaimer of all prior representations, intimations and innuendos that might otherwise have induced entry into the contract.
  • An exclusion of liability for any such misrepresentations, innuendos etc (for the sort of chicken licken that might not trust its own disclaimer, for the avoidance of doubt.
  • If you are really minded to go to town, a restriction limiting a party's remedies for misrepresentations — which you have just comprehensively disclaimed, remember — to contractual remedies only.
  • A final, emotional concession, to prove that your heart is not entirely made of stone, allowing that this clause won’t excuse your outright fraud. Not, of course, that any contractual term could immunise a party who seeks to rely on it from its own fraud.

Tricks for les joueurs jeunes

  • Would an entire agreement clause prevent a court implying terms to give a contract business efficacy? No, said the Court of Appeal, rejecting the fatuous claim of a landlord in Hipwell v Szurek that an entire agreement clause in a lease contract that didn’t mention electrical wiring meant it wasn’t responsible for the maintenance and repair of the wiring, which proceeded to administer the tenant, and her café’s customers, periodic electric shocks.[1]

See also

References

  1. I am not sure if they did actually get shocks, but it is fun to imagine.