UK: Entire Agreement Clauses

Commercial Thinking

Entire agreement clauses continue to generate disputes which, in turn, lead to further judicial re-statements and refinements of previous decisions. They also continue to generate articles such as this.

One of the issues considered by the Court of Appeal in the case of AXA Sun Life Services plc v Campbell Martin Limited (and three other actions brought by AXA where common issues arose) [2011] EWCA Civ 133 was the entire agreement clause, standard in AXA's agency appointment agreements, which excluded liability for representations and, in particular, misrepresentations. The defendants alleged that various representations had been made by AXA to each of them before they entered into their agreement, including the representation that they would be able to operate on a multi-tied basis. AXA's standard form of agreement, in fact, appointed them as its tied agent which precluded them from operating on a multi-tied basis.

The dispute, and the decision of the court, was very much based upon the specific wording of the entire agreement clause, the most relevant part of which read as follows: "this Agreement shall supersede any prior promises, agreements, representations, undertakings or implications whether made orally or in writing between you and us relating to the subject matter of this Agreement".

It was accepted by all parties that the clause was effective to exclude collateral warranties, that is, collateral agreements the terms of which were not to be found in the agreements themselves. The argument centred on whether the wording was effective to prevent AXA being liable for alleged misrepresentations.

As may be expected, AXA argued that these words operated to eliminate misrepresentations and/or to exclude liability for misrepresentations, at least as far as concerned misrepresentations as to the terms of the agreements. The court noted, however, that the clause dealt mainly with contractual matters and that there was just this one reference to "representation" and no reference to "misrepresentation" (as distinct from accurate or true representations). The court further noted that the wording did not, in terms, state that no representations had been made or that no reliance had been placed upon representations (contractual estoppel) or that liability had been excluded. The clause provided only that any such representations were "superseded".

The court conducted a review of previously decided cases relating to clauses excluding or purporting to exclude representations or liability for representations. In particular, similar wording to that in the current case was considered in BSkyB Limited v HP Enterprise Services UK Limited [2010] EWHC 86 (TCC). In that decision Ramsey J concluded that prior representations were superseded in that they did not become a term of the agreement unless included in the agreement. The wording of the entire agreement clause in that case, however, did not take away a right of the party to whom a representation had been made to rely on that representation when entering into the agreement and to claim on it. Clear words are needed to exclude liability for misrepresentation and the clause in the BSkyB case did not include any such clear wording. In the AXA case, the court arrived at the same decision.

The court considered that to exclude liability for misrepresentation, the clause must state the parties' agreement that no representations have been made; or that there has been no reliance of any representations; or contain an express exclusion of liability for misrepresentation.

It is worth noting that the allegations of misrepresentation were allegations of negligent misrepresentation. The law does not, in any event, permit exclusion of liability for fraudulent misrepresentation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.