Clifford Chance

Entire agreement clauses are often seen as mere contractual boilerplate. Given the potential impact of getting the drafting wrong, we think they need very careful consideration.

If you have been involved in negotiating or administering a construction contract then you have most likely come across an entire or "whole" agreement clause. While such clauses are often not included in standard form documents, they are typically drafted in as part of standard amendments/particular conditions, most often in the "miscellaneous" section of the contract. As such, they are often overlooked as a mere boilerplate provision, despite being the subject of many construction project disputes.

Our view is that an entire agreement clause should be considered (and tailored) on a case-by-case basis to take account of the particular project circumstances.

What is an entire agreement clause?

The exact drafting of entire agreement clauses varies from contract to contract. However, they generally provide that the written contract in which they sit constitutes the entire agreement between the parties to the contract in respect of its subject matter and that the contract supersedes written and oral statements, representations and agreements made prior to the date of the contract in respect of the same subject matter. The primary aim is to confine the terms of the arrangement to those written into the contract itself and thereby avoid disputes and claims relating to statements and representations and any other contractual arrangements made prior to the date of the contract.

The certainty which can result from an entire agreement clause is particularly relevant for large-scale projects which tend to have lengthy pre-contractual periods involving the exchange of vast amounts of information. This is the case even with the implementation of best practice protocols throughout the tender process.

What key factors should you consider in reviewing or preparing your entire agreement clause?

• Legal enforceability: entire agreement clauses can operate as a type of exclusion clause, by denying a party a remedy that it might otherwise have had at law. In some jurisdictions, this means certain interpretation rules will come into play. For example, clear and express language may be required to exclude a party's liability for negligent misrepresentation (we often see entire agreement clauses that fail to meet this standard). There is a growing practice to bolster entire agreement language with additional confirmations of non-reliance and no-representation, but it should also be noted that many jurisdictions do not permit the exclusion of liability for 'gross negligence' and almost all jurisdictions prohibit the exclusion of liability for fraud / fraudulent misrepresentation.
• Prior arrangements: if the parties have entered into an early works or services agreement, it will be important (in light of an entire agreement clause) to ensure that those prior arrangements are appropriately addressed. Simply terminating them may leave ambiguities. Are early works/services deemed to be part of the new contract (for defects/liability purposes)? Are they wrapped into the new contract price arrangements?
• Parallel arrangements: there may be parallel arrangements which are to remain in place notwithstanding the execution of the construction contract. These will need to be expressly excluded from the scope of the entire agreement clause (e.g. direct agreements and NDAs).
• Interaction with other contractual provisions: an entire agreement clause may, in some cases, be broadly drafted so as to limit a party's liability for misrepresentations made within/pursuant to the contract itself, rather than being limited to pre-contractual statements and representations. That is rarely intended – if parties wish to limit the remedies for breach of express warranties in the contract, they should do so through a separate exclusive remedies type provision.
• Exclusion of implied terms: where the contract is comprehensive, parties may wish to exclude 'implied terms' to ensure that the parties' arrangement is confined to the contract itself. These may be terms implied by statute or required to give business efficacy to the contract. It follows that in shorter-form contracts, such an exclusion would merit greater consideration. There are of course some implied terms which cannot, at law, be excluded.

Importance of managing post-contract arrangements

While an entire agreement clause will typically govern pre-contractual statements and representations, it will not prevent a party from bringing a claim for post-contract arrangements. For that reason, it is important to implement robust contract administration procedures to manage post-contract arrangements (e.g. by properly documenting variations, issuing instructions in writing and keeping thorough records).

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A properly drafted entire agreement clause can provide comfort to the party seeking to rely on it that they will not be exposed to liability for claims brought by the other party for pre-contractual statements and representations. The extensive analysis that has been given to such clauses as part of court proceedings and arbitration is evidence of their importance, particularly in the major projects sector where vast amounts of information and correspondence is exchanged by the parties prior to entering into the construction contract. In light of that (and the possible impact of getting the drafting wrong), we recommend that you give your entire agreement clause drafting due care and attention. Although this is perhaps an unsurprising recommendation from us – these are really clauses which you should be discussing with your lawyers.