Axa Sun Life Services plc v Campbell Martin and Others

[2011] EWCA Civ 133

Entire agreement clauses are frequently relied upon in an attempt to prevent one party from asserting that the written contract is not the sole repository of the terms of the contract and that there is another term of that contract which has been broken by the other party. The defendants here were appointed to act as AXA’s authorised representative to sell investment and other products on its behalf. In each case the agreement, which was in AXA’s standard form, had been terminated and AXA was claiming outstanding monies. The defendants argued that the standard agreement incorporated certain implied terms imposing obligations on AXA and that they were induced to enter into the agreement by negligent and fraudulent misrepresentations and/or by collateral warranties given by AXA.

AXA said that the defendants were prevented from raising these arguments (other than fraudulent misrepresentation, which cannot be excluded) as a result of clause 24 of the agreement which provided:

"This Agreement and the Schedules and documents referred to herein constitute the entire agreement and understanding between you and us in relation to the subject matter thereof. Without prejudice to any variation as provided in clause 1.1, 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 but this will not affect any obligations in any such prior agreement which are expressed to continue after termination."

The defendants also said that the clause was contrary to the requirements of reasonableness under the Unfair Contract Terms Act 1977.

The CA held that clause 24 did not exclude misrepresentations of fact. The clause only sought to ensure that prior representations did not become terms of the contract. In relation to the implied terms they were implied in order to give business efficacy to the agreements. As such they were intrinsic to the agreements and could not therefore be excluded. Collateral warranties were, however, excluded. The CA thought that the purpose of entire agreement clauses, such as clause 24, was obvious. A clause such as clause 24 gave both sides certainty as to the terms of their contract. "Sensible parties", when faced with a written agreement of the length and detail of the Agreements, would not expect it to be attended by oral collateral agreements, and would expect their contract to be contained in the document they sign.

LJ Stanley Burnton said that he had no doubt that clause 24 did not exclude or supersede misrepresentations as to matters that are not the subject of the terms of the Agreement. Notwithstanding the words "This Agreement … constitute the entire agreement and understanding between us in relation to the subject matter thereof" were not sufficiently clear for this purpose. For example, a representation by AXA such as "We are the largest insurance company in the country", if false and relied upon, is not superseded by the clause. The exclusion of liability for misrepresentation has to be clearly stated. It can be done stating the parties’ agreement that there have been no representations made; or that there has been no reliance on any representations; or by an express exclusion of liability for misrepresentation. However, as here talk of the parties’ contract superseding such prior agreement will not by itself absolve a party of misrepresentation.

Further, in relation to the entire agreement clause, the CA said this was subject to Section 3(2)(b)(i) of UCTA and therefore subject to the UCTA reasonableness test. The purpose of such a clause was to provide legal certainty as to the terms of the contract and, in circumstances in which the sums involved in any dispute are likely to be relatively modest, if unchallenged it has the effect of limiting the costs involved in litigation. The agreements were entered into between commercial organisations and within a commercial context. In addition the clause in question was not unusual within the insurance industry. Finally, if the defendants were dissatisfied the agreement could be terminated on only two months notice. Therefore it was reasonable. As financial advisors, the defendants were accustomed to dealing with written agreements and the CA thought it fair to assume that they would generally, if not always, advise their own clients to ensure that they were content with the written terms of their policies.