Entire agreement clauses

A recent case provides a salutary reminder that an "entire agreement" clause does not necessarily do what it says on the tin.

Many commercial contracts will contain a clause to the effect that the contract constitutes the entire agreement between the parties relating to its subject matter. In the Court of Appeal decision in Axa Sun Life Services plc v Campbell Martin Ltd and others, it was held that this did not preclude a claim for misrepresentation in respect of pre-contractual statements which had not been incorporated into the contract, notwithstanding that the clause contained the usual wording that the contract terms superseded any prior representations.

The court held that "representation" in this context was to be construed restrictively as referring to representations which might otherwise have become a term of the agreement, not in the sense of inaccurate statements on which a party had relied but which are not terms.

This seems a slightly arbitrary distinction, but underlines the fact that if the parties wish to exclude potential liability for statements made during the course of negotiations a basic "entire agreement" clause will not suffice - there must be a separate, clear exclusion of liability for misrepresentation.