Why are these clauses becoming more common? Is their inclusion an attempt to restrict consultants' rights and remedies? Entire agreement clauses originated in leases and contracts relating to land. Their purpose was to promote certainty because they limit the parties to their rights under the express terms of the contract. They then become incorporated in other forms of commercial contracts.
If the terms of the written contract are complete and reasonable, these clauses are sensible, although not essential. Consultants might include such a clause in the appointment of a subconsultant if they wished to break a practice that had grown up over a previous course of dealing – for example, where an engineer has regularly appointed a subconsultant to carry out site investigations that were done in a particular way, and it wished to impose different procedures.
There are two possible effects of such clauses. First, they could exclude terms that might otherwise be implied into the contract.
Terms can be implied into a contract by the common law in order to give business efficacy to the arrangements. In a construction context, common implied terms are that the client should give access to the site or that it should provide information and decisions needed by the construction team.
If an entire agreement clause were included in the appointment, such implied terms might be excluded and the consultant would not be able to argue that it could not fulfil its services properly because of the lack of information or decisions from the client.
A consultant may not be able to argue that a client’s misrepresentation means it does not have to comply with the programme
Second, it could take away legal remedies if representations made by one party to the other, which induced it to enter into the contract, turn out to be untrue.
Representations are statements of fact. If the statement turns out to be untrue, it is a misrepresentation. All sorts of statements or assurances as to the facts of a particular matter can be made during the tender process or in negotiations. For example, the client may say that necessary consents have already been obtained or that certain agreements are in place, and the programme the consultant agrees to may depend on this being the case. If this is not so, and there is an entire agreement clause, the consultant may not be able to argue that the client's misrepresentation relieves it from the obligation to comply with the programme.
In a framework agreement, for example, the client could make statements on the number and value of projects that were to be let. If this turned out to be untrue and they were substantially fewer, the consultant might have no remedy even though its fee structure was based on those statements. Crucial statements could be made on which pain/gain calculations depended, but again an appropriately worded entire agreement clause could exclude any remedy.
It could, however, be said that all this is circular: that an entire agreement clause might itself be subject to obvious implied terms, or that the misrepresentation induced the party into accepting it, along with all the other terms of the appointment. Further, any attempt to avoid the consequences of the Misrepresentation Act will have to pass a reasonableness test – and will not exclude fraudulent misrepresentations.
In South West Water vs ICL (2000), Judge Toulmin decided that a representation that ICL would enter into a back-to-back contract was made recklessly and liability for this could not be excluded. He went on to say that the clause would have been unreasonable in any event, since ICL was seeking to rely on it to exclude liability for the misrepresentation of a fundamental matter that was solely within its knowledge.
Postscript
Rachel Barnes is a partner in solicitor Beale & Company, www.beale-law.co.uk.
