An entire agreement clause is a standard clause, often found in
the fine print of a contract, which is intended to reduce
contracting parties' rights and obligations solely to those
contained in a single written agreement. These clauses ensure
clarity and certainty of terms, which is particularly helpful when
contractual negotiations have taken place over a period of time and
via oral discussion or email. As the Ajilon cases
demonstrate, the enforceability of entire agreement clauses may
depend on the sophistication of the parties.
The Ajilon cases involved an IT firm (Ajilon
Consulting), which entered into independent contractor agreements
with two consultants, Gardiner and Langley (the consultants).
Ajilon had recruited the consultants to work as business analysts
for Loblaws on a per project basis. Both consultants were
interviewed, offered positions and asked to sign Incorporated
Contractor Agreements with Ajilon (the Agreements). The Agreements
included identical entire agreement clauses which read as
This Agreement constitutes the entire agreement between the
Parties pertaining to the consulting engagement set forth herein
and supersedes all prior negotiations, understandings and
agreements between the Parties, written or oral ....
Following execution of the Agreements, the consultants turned
down other work opportunities. Shortly thereafter, they were
informed by Ajilon that Loblaws no longer required the services and
that the Agreements were being terminated. It was later determined
that Ajilon was aware that the project at Loblaws was not certain
and required final approval.
In the circumstances, the consultants brought separate actions
in Small Claims Court alleging negligent misrepresentation by
Ajilon. Ajilon denied that there had been any negligent
misrepresentation. It argued, further, that the entire agreement
clauses prevented the consultants from relying on representations
and operated as a bar to negligent misrepresentation claims. The
Small Claims Court judge found in favour of the consultants,
ordering damages against Ajilon in both cases. Both decisions were
Divisional Court Decision
The Divisional Court upheld the findings of the Small Claims
Court judge, holding that entire agreement clauses found in
contracts induced by negligent misrepresentation are not generally
enforceable in the context of an unsophisticated party unless
notice of the clause or notice of the clause's intended effect
is brought home to the unsophisticated party during bargaining. As
such notice had not been provided to either consultant, the entire
agreement clauses could not be enforceable.
In reaching this conclusion, the Divisional Court relied on the
Supreme Court of Canada's approach to exclusionary clauses,
which focuses on unconscionability and public policy as part of a
three part test (see Tercon Contractors Ltd. v. British
Columbia). In applying this approach, the
Divisional Court found that the entire agreement clauses in the
Ajilon Agreements were unconscionable because of the inequality of
bargaining power and the use of that inequality by Ajilon to secure
the consultants' consent to the Agreements. More specifically,
Ajilon was in a "stronger informational position" than
the consultants in that it controlled the access to information
regarding the Loblaws project.
Although the Ajilon cases dealt specifically with
entire agreement clauses in the context of independent contractors,
the decisions serve as a general reminder to employers to exercise
caution when asking employees to sign off on employment agreements.
Where agreements contain restrictions or sophisticated legal
concepts, those clauses may be overlooked or be misunderstood by
unrepresented employees, especially where they are found in a
contract's fine print. To ensure that employees in such
situations appreciate the implications of standard clauses,
employers should draw their attention to same and provide employees
with an adequate opportunity to consider such contractual terms and
consult with counsel if necessary.
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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