Entire Agreement Clauses Preclude Statutory Obligations
In Al-Hasawi v Nottingham Forest Football Club Ltd [2018] EWHC 2884 (Ch), the High Court overturned a Masters decision that concluded that a full contractual clause excludes any liability for claims of misrepresentation. The High Court held that the entire contractual clause did not have the effect of excluding allegations of misrepresentation and that the parties had not separately agreed to such an exclusion. However, there are many restrictions on the validity of entire contractual clauses. Issues relating to the validity of entire contractual terms appear to arise increasingly frequently in disputes, in particular disputes relating to long-term contracts such as joint ventures, long-term supply contracts, long-term financing agreements or amendments and/or renewals of such agreements or arrangements where the parties have had a long business. Contracts can contain a variety of clauses, but one of the most common is a full agreement clause. These clauses stipulate that the contract is a complete agreement between the two parties that offers protection to both parties. In the Court`s view, despite the overall contractual clause, this was an appropriate result that did not preclude the inclusion of clauses in the contract if the relevant criterion (i.e. commercial efficiency/necessity) was met. to exclude a party to a written agreement that sifts through the undergrowth and that, in the course of negotiations, finds a (accidental) remark or explanation (often long forgotten or difficult to retain or explain) on which a claim such as that of the present case relating to the existence of a secondary guarantee can be substantiated, the court found that there was a “clear and obvious gap” in the lease. With the exception of an insurance contract from the landlord, the lease did not include any express provision for the exterior of the premises or their power supply. The power supply was not part of the tenant`s obligation to keep the “furniture” in good condition and in good decorative order. In addition, the lease provided that the landlord could enter the premises to repair, maintain or renew the service supports, including the means by which gas and electricity were transported to the premises. Therefore, the Court of Appeal found that it was necessary to close the gap and involve an agreement by the landlord that the electrical installation and other service supports provided were safely installed and covered by a required certificate.
Moreover, the entire contractual term did not preclude the implication of that clause. Conversely, other types of implied clauses, such as those resulting from a particular custom or commercial practice or from a prior course of business between the parties, may be considered “extrinsic” to the written agreement in the sense that they are not part of the written agreement itself, but require proof of external facts. If an entire agreement contains clear words to exclude such implied clauses, it is likely to be effective.8 For example, a provision that “this instrument […] and there are no other promises, representations, warranties, uses or business operations that affect them” (emphasis added) to exclude any condition that may have been implied on the basis of the use or course of business in Exxonmobil Sales and Supply Corporation vs. Texaco Ltd. The court ruled in favour of the seller. As was acknowledged in Axa Sun Life, that decision has jurisdiction only to interpret the entire contractual term at issue. In addition, the interpretation of a particular clause must be determined in the context of the agreement as a whole. Based on these facts, the court concluded that the parties intended to cover the entire contractual clause to cover the claims in a false statement. In particular, subject to the applicable legal and customary limitations of liability, it will in principle be possible to exclude clauses that may be implied by law, provided that the entire contractual clause contains clear words to that effect. In addition, entire contractual clauses themselves are increasingly giving rise to disputes in the energy and raw materials sectors, where financing and supply contracts are generally long-term and where the effects of a dispute on the validity of an entire contractual term can therefore be serious. Recent case law has shown that it is important to carefully consider the effect of entire contractual clauses when they are included in commercial contracts. In particular, if a party wishes to exclude liability for pre-contractual representations, the contract must expressly exclude such liability, although liability for fraudulent pre-contractual representations can never be excluded.
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