Is it really the “entire agreement”?

So, you think you’ve come to an agreement with someone. You’ve had lots of discussions with them, back and forth emails and calls and you’ve noted some of the key points to the agreement down. But how do you know what terms form the agreement?

Verbal vs. Written Agreements

Agreements can be verbal or written. Time and time again, we have seen clients who either:

• Have no written agreement between them
• Have a tapestry of written agreements, strings of emails and accounts of calls which they claim to be the agreement.

The only problem is the records seem to contradict each other, and the parties are not in agreeance to the other side’s account of events or terms.

Preventing Disputes

How can we prevent this? The answer is simple – you have a robust written agreement which includes all of the terms of the contract and an entire agreement clause.

The Importance of Entire Agreement Clauses

Entire agreement clauses are crucial in contract law as they ensure that the written agreement represents the complete and final agreement between the parties.

They typically exclude any prior agreements, negotiations, or understandings that are not explicitly included in the written contract. This is particularly important because it prevents parties from introducing extrinsic evidence to alter, contradict, or add to the terms of the written agreement.

Mitigating Disputes

The primary purpose of an entire agreement clause is to provide certainty and clarity by confining the contractual relationship to the terms set out in the written document. This means that any pre-contractual statements or negotiations that are not included in the final contract cannot be used to claim additional terms.

Furthermore, entire agreement clauses help mitigate the risk of disputes over what was agreed upon during negotiations. By formally acknowledging that the written document contains the entire agreement, the clause makes it more challenging for parties to argue that there were additional, unwritten terms or promises.

Including Other Documents

It is possible to draft an entire agreement clause to include certain other documents or prior agreements, however this is generally not advisable since papers can contradict each other. It is often better to just start again with a new agreement.

In the event you do need to include other documents, make sure you:

• Insert both an entire agreement clause, confirming the other written agreement should be included.
• Include a ‘priority clause’ / ‘order of precedence clause’. This is used to establish the hierarchy or order of priority among various documents or obligations.

This ensures that certain documents or obligations take precedence over others in case of any conflict or inconsistency.

Non-Reliance Clauses

It is important to note that entire agreement clauses do not typically exclude liability for pre-contractual misrepresentations unless they are combined with non-reliance clauses. Non-reliance clauses specifically address the exclusion of liability for statements made before the contract was executed, which is a distinct but related function.

A non-reliance clause should also be included in your agreement if you or your representatives may have made promises to the other side that you know are no longer captured in the written agreement.

Conclusion

In summary, entire agreement clauses are essential for ensuring that the written contract is the definitive source of the parties’ agreement, thereby providing legal certainty and reducing the potential for disputes over pre-contractual negotiations and statements

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FAQs

Q: What is the purpose of an entire agreement clause in a contract?

A: An entire agreement clause ensures that the written contract is the definitive and complete representation of the agreement, excluding prior negotiations or statements not explicitly included in the document.

Q: Can verbal agreements be considered binding?

A: While verbal agreements can be binding, they often lead to confusion or disputes due to lack of clarity, so having a clear, written contract is always recommended to avoid misunderstandings.

Q: What should be included if other documents are referenced in a contract?

A: If other documents are included, an entire agreement clause should confirm their inclusion, alongside a priority clause to establish which documents take precedence in case of conflicts.

For further advice on how to ensure your agreements are properly documented and the importance of entire agreement clauses, please fill out the form below. We’d be happy to arrange a consultation with one of our expert contract law specialists.

Written by Cassine Bering, Associate