entire agreement clause

Entire agreement clauses (also known as whole agreement clauses) are incorporated into business and other commercial contracts to ensure that previous agreements and arrangements are excluded from the contract to be entered into by the parties. The purpose of the clause is to increase contractual certainty, and often are drafted to exclude the content of previous conversations and statements made in document which either of the parties may wish to rely on in the future so that exposure to claims for misrepresentations are greatly diminished.

Legal Effect of Entire of Agreement Clauses

Entire agreement clauses do this by providing that the agreement between the parties is limited to the terms and conditions contained in the contractual documentation agreed by the parties, and thus excluding prior statements, arrangements and understandings between the parties.

The background to a contract may involve a series of legal documents to be signed by the parties, and documents otherwise incorporated by reference, oral statements and a combination of the two. An entire agreement clause provides that the agreement is limited to the documents referred to in the agreement to be signed and this excludes extraneous material which is not referred to in the contractual documentation.

Collateral contracts are also more difficult to assert. The parol evidence rule operates to exclude a range of evidence in respect of the agreement reached by the parties; the rule is not limited to excluding oral evidence, but extends to documentary evidence.

Legal effect is given to the precise terms of the clause appearing in the contract, in the context of the whole agreement. Thus standard terms of an entire agreement may not be suited to the agreement intended to be entered into by the parties. 

Often, commercial contracts are entered into in reliance of statements made during the course of negotiations. Where a contract contains an entire agreement clause which excludes reliance on pre-contractual statements, depending on the precise wording of the clause, this statement will not be actionable for the purpose of claiming that a misrepresentation has taken place or breach of contract. An entire agreement clause will not render fraudulent misrepresentation and other forms of fraud inactionable.

Example: Entire Agreement Clause

A simple boilerplate entire agreement clause might read as follows in appropriate circumstances:

This agreement contains the whole agreement between the parties in respect of the subject matter referred to and supersedes any previous understanding, arrangement or agreement between the parties. The parties have not relied upon any statement or misrepresentation which is not expressly incorporated into this agreement.

Variations of clauses such as these are made where the parties wish to exclude some but not all previous representations which are not included in the contract; the parties may intend for some prior agreements to remain in force (and the circumstances may require it), and/or important conversations or proposals which are not incorporated into the agreement.

In complex or higher value transactions, an unqualified entire agreement clause may be unwarranted, as it may cause more problems than it solves for one of the parties. The seller of goods and services usually insists on wiping the slate clean with as at the date of the contract with broad-based whole agreement clauses.