Australia: Are "Entire Agreement Clauses" - Entirely Reliable?

Addisons Contractual Interpretation Series
Last Updated: 22 October 2012
Article by David Ferguson and Kieren Parker

This is one of a series of articles in which we review the judicial interpretation of some words and phrases that are commonly used in contracts. In this article we look at "entire agreement clauses".

Context

Entire agreement clauses are one of the most common boilerplate provisions in contracts. While their effect depends on the wording and context of the clause1, entire agreement clauses seek to do what their name suggests: stipulate that the written agreement sets out all of the terms of the contract between the parties. Often the clause will include a statement to this effect as well as wording that excludes any other terms not expressly set out in the document. An entire agreement clause may also seek to confirm that the parties have not relied on any pre-contractual representation.

But do entire agreement clauses live up to their title?

Misleading and Deceptive Conduct under Statute

Claims for pre-contractual conduct are often based on misleading or deceptive conduct prohibited under the Competition and Consumer Act 2010 (CCA).2 An entire agreement clause cannot, in itself, exclude liability for such claims, regardless of how broadly it is drafted.

As the High Court commented in Campbell v Backoffice3:

"...of itself, neither the inclusion of an entire agreement clause in an agreement nor the inclusion of a provision expressly denying reliance upon pre-contractual representations will necessarily prevent the provision of misleading information before a contract was made constituting a contravention of the prohibition against misleading or deceptive conduct by which loss or damage was sustained."

Despite this, an entire agreement clause can still have some benefit. Courts will take such a clause into account when deciding whether a party was actually induced by the misleading or deceptive conduct of the other, albeit as one factor to be considered among others.4

Misrepresentation under Common Law

An entire agreement clause is capable of excluding liability for pre-contractual misrepresentation under the common law, particularly if the clause includes wording to the effect that the relevant party has not relied on the pre-contractual conduct of the other. In Arnot v Hill-Douglas5, Young CJ noted "it is quite possible to exclude reliance on representations"6, although the clause considered in that case was not strong enough to do so.7 However, a non-reliance clause will not be enforceable against a party if the other party actually knew that the first party was relying on pre-contractual representations not set out in the contract.

Estoppel by Representation

In Franklins v Metcash8, Franklins entered into a supply agreement to purchase certain products from Metcash. Metcash claimed that, during pre-contractual negotiations, Franklins had represented that it would purchase the products at a specific price and that Metcash would be entitled to certain rebates and discounts. Metcash claimed that it relied on these representations in entering the supply agreement and that, as a result, Franklins was estopped from insisting on any other payment terms.

While the Court of Appeal ultimately decided that the estoppel claim was not made out, it commented that:

"...an entire agreement clause... [that] specifically denies efficacy to all previous negotiations and representations, could not overcome an equitable estoppel, once established. An "entire agreement clause" might create a factual difficulty in the way of proof of the elements of equitable estoppel, most obviously, proof of inducement or reliance ... However, it does not create an insuperable obstacle of principle." 9

Although this suggests that an entire agreement clause cannot prevent equitable estoppel claims, the NSW Supreme Court case of Chint Australasia v Cosmoluce10 provides a conflicting view. There the Court commented that:

"In my view the plaintiff is correct in its submission that, notwithstanding the division in the authorities, the balance of the authorities in the Equity Division of the Supreme Court of New South Wales favours the view that no estoppel based on pre-contractual conduct can be established in the light of an "entire agreement" clause of the kind contained in ... the Distribution Agreement." 11

Curiously, the NSW Court of Appeal in Franklins made no reference to Chint in its ruling.

Implied Terms

An entire agreement clause will not prevent the court implying a term unless the agreement expressly excludes the implication of that term.12

In BAE Systems Australia v Cubic Defence New Zealand,13 the Federal Court accepted that implied terms "may be excluded by express words of a contract", but stated that "those words would need to be very clear before a court held that that result had been achieved". In that case the entire agreement clause was not clear enough, since it precluded "reliance on representations, statements, advices or information extraneous to the contract, but not implied terms of the nature alleged".14

Both federal and state laws, including the Competition and Consumer Act 2010 (Cth), imply certain warranties and conditions into certain contracts, or provide for guarantees which have this effect. For some types of contracts these warranties can be excluded. For example, a contract for the sale of goods which is not a "consumer sale" (where the goods are bought for private use or consumption) can exclude the warranties and conditions implied by the Sale of Goods Act 1923 (NSW).

Practical Implications

An entire agreement clause can provide useful, rather than absolute, protection from the effect of pre-contractual conduct and other factors outside of the terms of a written contract. In order to achieve the highest level of protection, a party should ensure that the clause (or other appropriate clauses in the agreement):

  • provides that the written contract contains the whole agreement between the parties;
  • excludes any implied terms (including, to the extent permitted, warranties and conditions implied by statute);
  • excludes liability in relation to representations, warranties, undertakings etc not set out in the contract;
  • contains wording to the effect that the relevant party has not relied on the pre-contractual conduct of the other.

Footnotes

1 Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190.
2 Competition and Consumer Act 2010 (Cth) Schedule 2, Part 2-1, s 18 (previously Trade Practices Act 1974 (Cth) s 52).
3 Campbell v Backoffice Investments Pty Ltd [2009] HCA 25 at [130].
4 See Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) ATPR 40-783; Warwick Entertainment Centre Pty Ltd v Alpine Holdings (2005) 224 ALR 134; Chint Australasia Pty Ltd v Cosmoluce Pty Ltd [2008] NSWSC 635; Campbell v Backoffice Investments Pty Ltd [2009] HCA 25 at [31].
5 Arnot v Hill-Douglas [2006] NSWSC 429 (Arnot).
6 Arnot at [87] (emphasis added). Young CJ noted the English case of Inntrepreneur Pub Co (GL) v East Crown Ltd [2000] 2 Ll Rep 611 at 614 in his decision.
7 The clause was as follows: "To the extent permitted by law, in relation to the subject matter of this contract, this contract: (a) embodies the entire understanding of the parties; and constitutes the entire terms agreed on between the parties; and (b) supersedes any prior written or other agreement between the parties."
8 Franklins v Metcash [2009] NSWCA 407 (Franklins). See also Alstom for a recent decision that an entire agreement clause cannot prevent equitable estoppel claims.
9 Franklins at [554].
10 Chint Australasia Pty Limited v Cosmoluce Pty Limited [2008] NSWSC 635 (Chint).
11 Chint at [141].
12 Hart v MacDonald (1910) 10 CLR 417; Etna v Arif [1999] 2 VR 353; Eagle v Delta Haze Corporation [2000] VSC 513; Insight Oceania Pty Ltd v Philips Electronics Australia Ltd [2008] NSWSC 710 at [158]; GEC Marconi Systems v BHP Information Technology [2003] FCA 50 at [922]; ACCC v Seal-A-Fridge Pty Ltd [2010] FCA 525; Alstom.
13 BAE Systems Australia Ltd v Cubic Defence New Zealand Ltd [2011] FCA 1434.
14 See also Vodafone Pacific v Mobile Innovations [2004] NSWCA 15.

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.

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