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Entire Agreement Clauses are not necessarily a 'Catch All'

Monday, 13 June 2011

Entire agreement clauses are standard to many contracts and intend to provide that the contract that they are contained in is the whole agreement between the parties, replacing any prior agreements or representations.

The recent case of AXA Sun Life v Campbell Martin [2011] EWCA Civ 133 involved a dispute between AXA and its representatives whereby, at the termination of a contract, AXA sought the return of sums alleged to be owed to them.

The defence of the representatives included the argument that AXA had made misrepresentations that induced them to enter the contract and also breached certain collateral warranties. AXA relied upon an entire agreement clause in response.

The Court of Appeal were unanimous in holding that the clause would exclude the collateral warranties, but could not in this case exclude liability for misrepresentations. Rix LJ held that the words chosen by AXA to describe what would be superseded by the clause all pointed to forms of agreement. Although the word 'representation' was used in this list, it was in this context construed as referring contractual obligations as opposed to mere statements.

It is clear therefore that to supersede any liability for misrepresentations, very clear and precise wording would be necessary. Burnton LJ considered that such clauses could be subject to the reasonableness test of the Unfair Contract Terms Act 1977, with reasonableness being a matter of fact and degree. Nonetheless, although unreasonableness is not automatic, entire agreement clauses are more recently being construed narrowly to limit their operation. Contracts should therefore be drafted with care and those considering a defence of misrepresentation should analyse the chosen wording carefully.