Entire agreement clauses are often employed as a means of defining the parameters of an agreement. However, in reality such clauses are far from definitive and may be subject to a variety of limitations.

What is an entire agreement clause?

Standardised entire agreement clauses are common in contracts, and generally state that the contract constitutes the entire agreement between the parties.

They are employed by parties for a number of reasons, including to ensure the terms of a contract are limited to those express written terms, negating any contractual force that may be given to other statements, representations or terms which are not expressly included in the contract, or to provide certainty.

Are entire agreement clauses absolute?

An operative entire agreement clause is not absolute. Terms can be implied into a contract notwithstanding an entire agreement clause.

Should a party seek to rely on a separate promissory statement, courts will look to all the circumstances surrounding the contract, including the fact that the parties agreed to the inclusion of an entire agreement clause despite the alleged existence of a separate promise. Much will depend on the wording of the clause and the context in which the clause is meant to operate.

Entire agreement clause limitations

Entire agreement clauses may be limited in several ways:

  • Interaction with statute

An entire agreement clause cannot exclude the operation of statute. It cannot for example exclude terms implied by the Competition and Consumer Act 2010 (Cth) (the Act).

To illustrate, notwithstanding an entire agreement clause, a party may not engage in misleading and deceptive conduct under s18 of the Act. However, the existence of an entire agreement clause may be used as evidence for lack of reliance on pre-contractual statements (see for example Keen Mar Corp Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1989) 67 LGRA 238).

  • Misrepresentation

An entire agreement clause cannot preclude a claim or exclude liability for contractual misrepresentation where one party was aware of the other’s reliance on the pre-contractual representation not set out in the contract (see Arnot v Hill-Douglas [2006] NSWSC 429 [87]).

  • Rectification

An entire agreement clause will not prevent rectification of a contract, provided there is clear evidence that a common mistake occurred during the recording of the agreement (see MacDonald v Shinko Australia Pty Ltd [1992] 2 Qd R 152).

Contract variations

Circumstances change over time (particularly in long-term contracts) which may necessitate amendments to what was originally contemplated by the parties.

Generally, written variations to contracts are required – and are certainly prudent, especially if there is an entire agreement clause. Many contracts also contain anti-oral variation clauses which state that any contract variations must be in writing signed by both parties. These clauses are included as a means of establishing the minimum requirements needed to effect change on the contract and to protect parties against unfounded allegations surrounding inadvertent contract variations.

However, it is important to recognise that oral agreements can be found to vary the terms of the contract even if an anti-oral variation clause is included.

Courts appear reluctant to reject an oral variation if it is clearly intended to be binding, even if the contract contained an anti-oral variation clause. Importantly however there must be clear evidence of an oral variation agreed by those who had the authority and intention to make it.

You can read more about oral variations to written contracts here.

The above discussion works to detail just a handful of means by which an operative entire agreement clause may be limited. This acts as a reminder that such clauses are not absolute, and as such, one must show caution in relying too heavily on them.