Will an entire agreement clause exclude claims for misrepresentation?

Published on 20 December 2018

Will an entire agreement clause exclude claims for misrepresentation?

The background

In April 2017 Mr Fawaz Al-Hasawi sold the heavily indebted Nottingham Forest FC via a share purchase agreement.  The shares in the business were sold for nominal consideration and Mr Al-Hasawi agreed to indemnify the buyer to the extent that the existing liabilities exceeded £6.6m. 

During pre-contractual negotiations, Mr Al-Hasawi sent the buyer a spreadsheet showing that the liabilities of the Club totalled £6.56m.  The buyer alleged that the Club owed in excess of £10m.  The buyer sought to claim for the debts in excess of £6.6m under the contractual indemnity, or alternatively, to claim under Section 2 of the Misrepresentation Act 1967. 

The entire agreement clause provided: “This agreement (together with the documents referred to in it) constitutes the entire agreement between the parties and supersedes and extinguishes all previous discussions, correspondence, negotiations, drafts, agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter”.

At first instance, the Master struck out the misrepresentation element of the claim.  He found that the various contractual indemnities showed that the parties intended liability to be dealt with under the contract.  He also found that use of the word “representations” in the entire agreement clause was effective (distinguishing it from the clause in AXA Sun Life v.  Campbell Martin [2011] EWCA 133).  The buyer appealed the decision to the High Court. 

The decision

The High Court reversed the decision of the Master.  The judge ruled that:

  • the inclusion of contractual remedies did not imply that all other types of claim should be excluded
  • the entire agreement clause did not say anything about excluding claims (except for collateral warranties).It could therefore not be inferred that claims for misrepresentation were excluded, and
  • it was not correct to distinguish the use of the word “representations” from its use in the AXA case.

Why is this important?

The “entire agreement” clause is one of the most common boilerplate clauses.  The court’s decision essentially affirms the current position under existing case law – contracting parties need to be explicit if they want an entire agreement clause to exclude misrepresentation.

Any practical tips?

Ensure that your boilerplate contains not only an entire agreement provisions, but also an exclusion of/non-reliance on pre-contractual representations, etc.  Parties should also be careful as to what information is being provided pre-contract and is being relied upon – exclusions/limitations do not provide a complete answer!

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