Entire Agreement
Contract Type:
NDA
Jurisdiction:
This Agreement constitutes the entire agreement between the parties and supersedes and extinguishes all previous agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter. Each party agrees that it shall have no remedies in respect of any statement, representation, assurance or warranty (whether made innocently or negligently) that is not set out in this Agreement. Each party agrees that it shall have no claim for innocent or negligent misrepresentation or negligent misstatement based on any statement in this Agreement.
Explanation
This clause provides that the agreement represents the complete and final contract between the parties in relation to its subject matter. Key points:
1) Entire agreement: The agreement constitutes the sole and comprehensive agreement between the parties. It encompasses all terms, and replaces and extinguishes any previous drafts, agreements, promises or representations on the same subject matter, whether made verbally or in writing.
2) Supersedes and extinguishes: Any previous written or oral agreements, promises or assurances between the parties on the same topic are replace and invalidated by this agreement. They are no longer part of the parties' contractual relationship or enforceable.
3) Subject matter: The entire agreement clause applies to the specific subject matter of the agreement. It does not necessarily invalidate pre-existing or separate agreements between the parties on other subjects. However, where there are overlapping topics, this clause may take precedence.
4) No remedies: The clause expressly states each party gives up any right to remedies or claims based on previous representations, statements or assurances not included in the final written agreement. This includes claims for misrepresentation, whether innocent, negligent or fraudulent.
5) Final written form: By including this clause, the parties signal their intention that the signed written agreement constitutes the definitive and final statement of terms in relation to its subject matter, rather than any previous drafts or oral discussions. Only what is documented in the agreement forms part of the contract.
The key purposes and benefits of an entire agreement clause are:
1) Achieving a "clean break" between the parties by extinguishing previous drafts, promises or representations to avoid ambiguity, disputes over negotiated positions and attempts to re-introduce abandoned terms.
2) Providing certainty through a single written statement of terms, rather than a combination of pre-contractual documents and conversations which may conflict or be interpreted differently by the parties.
3) Limiting the risk of misrepresentation claims by requiring each party to undertake their own due diligence and rely only on written representations within the final agreement.
4) Preventing attempts to imply more onerous or broader terms into the contract than officially documented and signed. Only what the parties have formally consented to in writing is included.
5) Achieving a legally binding and enforceable contract by evidencing intention for the signed document alone to govern the parties' relationship, rather than being subject to amendment through oral discussion.
In summary, an entire agreement clause aims to give primacy to the written contract over previous or external communications, provide certainty through a single integrated statement of terms and reduce risks of dispute or claims by abandoning previous drafts and limiting representations to those made in final agreed form. It helps establish a self-contained and legally robust contract between the parties.
Early common law allowed extensive reference to pre-contractual communications and "surrounding circumstances" to interpret agreements, implying broad terms and undermining written contracts. The parol evidence rule emerged to give primacy to final written agreements over external evidence of intention but was narrowly applied. Agreements were often ambiguous, and courts implied wide-ranging terms to effect "reasonable" outcomes.
By the 19th century, commercial expansion drove demand for certainty in dealings. Courts affirmed contracts should be interpreted based primarily on their written terms rather than implying additional obligations. However, the rule excluding pre-contractual evidence was still evolving, and ambiguity remained common. Entire agreement clauses developed in some contracts to strengthen the position that only documented terms were binding. But approaches were ad hoc, and enforceability uncertain given limits to privity of contract.
In the U.S., the rule on parol evidence was increasingly strictly applied but remained subject to exceptions. Approaches varied globally. Agreements sought to restrict external evidence and claims from misrepresentation but drafting was problematic. Courts resisted clauses that seemed to entirely exclude their discretion or ability to imply terms. There were also concerns over unfairness from blanket abandonment of previous promises. However, respect grew for parties' rights to clarify intentions in commercial dealings.
By the early 20th century, entire agreement clauses were widespread but continued subject to interpretation. Courts upheld parties' rights to specify terms as final but retained discretion to invalidate unreasonable clauses or allow external evidence if necessary to prevent injustice or clarify ambiguity. Merger clauses developed, indicating specific pre-contractual materials were abandoned, but required precision and were similarly discretionary. Misrepresentation exclusions also spread but were weighed against policy.
Today, entire agreement clauses are standard but effectiveness remains context dependent. Blanket claims may be reformed. Courts consider sophistication of parties, existence of remedies for misrepresentation and public policy implications in determining whether to strictly apply or allow evidence beyond the contract. However, respect for commercial parties to define clear bargains has increased. Remedies bar clauses have also spread but remain contentious and discretionary, especially regarding fraud.
In summary, demand for certainty in commerce and freedom of contract has driven movement toward enforcement of well-drafted entire agreement clauses. But discretion remains to prevent unfairness or unreasonableness from strict application of written terms or blanket preclusion of evidence and claims. Courts will not necessarily invalidate previous promises or implied duties in all circumstances.
Express clauses give primacy to final agreements and mitigate risks of dispute, but they are not absolute and continue subject to equitable considerations even between commercial entities with equal bargaining power. The trend is toward respecting clearly expressed intent where fair but perfect clarity remains challenging, and justice may warrant allowance for context. Overall, the spread of entire agreement clauses reflects efforts to uphold private bargains but acknowledge limits of written law.
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