Entire Agreement Clauses: What They Do (and What They Don’t)

Understanding precisely what an entire agreement clause does, and what it cannot do, is important for anyone negotiating or enforcing commercial contracts.

What Is an Entire Agreement Clause?

A typical entire agreement clause provides, in substance, that the contract constitutes the entire agreement between the parties in relation to its subject matter, and supersedes all prior negotiations, representations, understandings, and agreements.

The purpose is to provide certainty. Parties want to know that the written contract contains the definitive record of their obligations, that pre-contractual discussions, presentations, heads of terms, or casual assurances do not create additional obligations that could later be invoked in litigation.

What an Entire Agreement Clause Does

In its primary function, an entire agreement clause prevents a party from arguing that terms were agreed orally or by conduct during negotiations, and not reflected in the written contract. It limits the contractual relationship to the four corners of the document.

What an Entire Agreement Clause Does Not Do

Entire agreement clauses have limitations that parties frequently overlook:

• They do not exclude liability for fraudulent misrepresentation, any attempt to do so is void
• They do not necessarily exclude liability for negligent or innocent misrepresentation, to achieve this, a separate, specifically drafted non-reliance or misrepresentation clause is required
• They do not affect terms implied by statute
• They do not prevent claims based on collateral contracts or estoppel in all circumstances, though they make such claims significantly harder
• They do not prevent parties from agreeing subsequent variations, though they are often paired with an anti-variation clause requiring variations to be in writing

Misrepresentation and the Entire Agreement Clause

The interaction between entire agreement clauses and misrepresentation claims is particularly important in transactions involving commercial due diligence, property purchases, business acquisitions, and the like.

If Party A makes a representation during negotiations that induces Party B to enter the contract, and the representation turns out to be false, Party B may have a misrepresentation claim regardless of the entire agreement clause, unless the contract includes a properly drafted non-reliance clause that satisfies the statutory reasonableness test.

Anti-Variation Clauses

Entire agreement clauses are often paired with anti-variation provisions, which require any amendment to the contract to be in writing and signed by authorised representatives of both parties. These clauses are effective in principle but can be overridden by oral agreements that the parties clearly intend to be binding, particularly where one party has relied on the oral variation to its detriment.

When drafting or reviewing entire agreement clauses:

• Do not treat the entire agreement clause as a complete solution to misrepresentation risk, consider whether a separate non-reliance clause is needed
• Ensure the clause is sufficiently broad to cover all pre-contractual communications, including emails, presentations, and heads of terms
• Always take specific legal advice on the interplay between the clause and any representations made during negotiations

For advice on entire agreement clauses or disputes involving pre-contractual representations, please contact our corporate and commercial team for practical, tailored advice.

James Bowles

Senior Associate