Contractual Estoppel

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Entire agreement and non-reliance clauses

Entire agreement and non-reliance clauses

4.01 A party to a contract who finds herself on the receiving end of a contractual claim may be tempted to resist it by reference to informal exchanges that preceded the making of the written contract or took place at the time it was made. Or, dissatisfied with how her contractual bargain has played out, a party may seek to improve her position by making a claim in reliance on such informal exchanges. In either case, that party will rely on those exchanges as contract-inducing representations or collateral warranties which defeat the other party’s claim or expose her to liability. In response to that sort of tactics, there developed and became settled a practice of including into written contractual instruments provisions that are called “non-reliance” and “entire agreement” clauses.1 4.02 The two types of provisions have found widespread use in the drafting of commercial contracts. Both are aimed at that elusive objective, commercial certainty. They seek to give contracting parties comfort that their exposure to liability that might arise out of their mutual dealings in the run up to the contract is determined solely by the terms of the contract. This concerns especially liability that might arise out of statements, correspondence, and other exchanges (in whatever form) which did not find their way into the written record of contractually agreed terms.

What is an entire agreement clause

4.03 An entire agreement clause is a contractual provision by which parties to a contract agree that the entirety of their agreement on a specified subject matter is recorded in a written instrument or instruments identified by the clause. This may or may not be supplemented with language that spells out the effect of the clause, which is that the agreed record supersedes whatever exchanges are left out of it, so that those do not bind

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the parties.2 Even though the language of supersession may be absent, the intention is inherent even in the most abbreviated forms of the clause. Normally an entire agreement clause designates as “entire agreement” the instrument of which it is part, but it can also refer to extraneous materials in the form of other contractual documents (possibly making up a “suite of contracts”) that the parties agree to be part of the “entire” record of agreed contractual terms. Determination of the scope of the clause is a matter of construction, and its operation is strictly limited to the subject matter on which the parties are found, on the usual principles of construction, to have agreed.3 4.04 “Entire agreement clauses come in different forms”.4 The core language of “entire agreement and understanding” has been in place for decades.5 An abbreviated formula that an instrument is the “entire agreement” without more has been held sufficient,6 and equally brief variants have been used.7 The parties are not restricted in their choice of language, as long as on the true construction the term

constitutes an agreement that the full contractual terms to which the parties agree to bind themselves are to be found in the agreement and nowhere else and that what might otherwise constitute a side agreement or collateral warranty shall be void of legal effect.8

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