Entire Agreement - and Similar - Clauses

Abstract:     
Commercial contracts very commonly include clauses along the lines that the document, as executed by the parties, is their 'entire agreement'. The intention behind such a clause is simply to make the document in which it is contained an exhaustive statement of the express terms of the contract.

There is no magic in the words 'entire agreement'. Thus, the intention may be expressed in other words, such as by providing that the document is the 'entire understanding' of the parties, or including a clause that states 'all the terms and conditions' of the bargain are set out in the contract, and so on. Entire agreement clauses and similar clauses are therefore examples of provisions which expressly state an agreement that the document embodies the entire agreement or understanding between the parties or that the document sets out all the express terms and conditions of the bargain. As explained below, many such clauses have other objectives as well.

The purpose of this article is to review the use of entire agreement clauses. More specifically, our concern is to show that:

· entire agreement — and similar — clauses perform a useful and very important function, namely, to integrate the parties' bargain in a document;

· because the function reflects a particular conception of the nature of an entire agreement clause, the utility of the clause may be compromised by the introduction of other purposes; and

· where the clause purports to achieve more than integration of the bargain in a document, the drafting of an entire agreement clause must take full account of validity issues likely to be raised, particularly under Australian law.

As with any contractual provision, the meaning and legal effect of an entire agreement clause is a matter of interpretation. We should, however, begin with a brief consideration of the classification of contracts and the operation of the parol evidence rule.

Keywords: Contract law, entire agreements, parol evidence rule

JEL Classifications: K12, K10

Accepted Paper Series