Entire Agreement clauses

Posted by Keith Lewington in Excello Law Blogs on Monday, July 28th, 2014

Buried somewhere in all those legal words towards the end of a contract, there is usually an innocuous clause called an “entire agreement” clause, which says that the document contains the entire agreement between the parties and supersedes all prior agreements and discussions. A sensible enough precaution: make sure everything is there in the one document. But beware – it means that everything must be in that document, and you can’t subsequently argue that everyone had understood there to be a provision which wasn’t in the final version. In deciding what a contract means, the court has to look at the factual background and what the parties knew, as a matter of fact, at the time they entered into the agreement. But it has long been the case in England that the court cannot look at background negotiations to decide what the parties probably meant by the words used or infer that changes in wording in the course of negotiations meant the parties intended one thing or another. In a recent case, the Court of Appeal was asked to look at written heads of agreement to clarify what was actually written in the final contract, but said it could not do that partly because of the rule explained above, and partly because the agreement contained an entire agreement clause, which said (expressly) that the parties intended the document they had signed to supersede and override the heads of terms. Very occasionally, the courts will “rectify” a contract by implying additional terms into it, but only in circumstances where it is obvious that those terms must have been “understood” between the parties and the terms are essential for the contract to make sense. Otherwise, when the contract says it is “the entire agreement and understanding between the parties” – it is!

This article was written by Keith Lewington
Keith Lewington

Keith is a company and commercial lawyer who worked as a partner in a major regional law firm for more than 25 years. His work covers a wide range of company and commercial work, but he deals particularly with company reorganisations and shareholders’ agreements and with bespoke commercial contracts. He has experience of many industry sectors, including acting for IT suppliers and software providers and in the motor industry, and also advises charities and social enterprises on constitutional matters and mergers . He also advises on data protection and personal privacy issues. You can email Keith at [email protected]

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