With Stewart Argo, Associate – Commercial
The purpose of an entire agreement clause is to identify the express contract terms and exclude any terms not expressly contained in the contract, and which often contain terms limiting liability for misrepresentation. In this webinar, we will give some background to the reasons behind the clauses and key considerations when drafting third party rights clauses into a contract.
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Stewart Argo
Legal Director
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Webinar transcript
(Please note this is auto-generated and un-edited)
0:10
Hi! I'm associate in the commercial IP came here at Shakespeare Martineau, I help clients with a wide range of commercial issues, including commercial contracts IP, data, protection of intellectual property. And I assist clients with the legal documentation underpinning their commercial transactions. Welcome to say, is Training Webinar, which the first of the three part series on boilerplate clauses. Those laws is off the far towards the end of the contract, which are rarely consider to negotiate in detail, but, which regulate the operation of the contract, and control, and modify the rights and obligations of the contract parties. In this first part, I'll be discussing in ... and third party watch clauses.
0:51
On your screen, you will see the chat icon. Please use this to ask any questions, and we will respond to you directly after this webinar.
1:00
Let's start off with an entire agreement. The purpose of an time agreement clause is to identify the express contract terms and exclude any town not expressly contained in the contract. Clause often contains terms limited liability for misrepresentation.
1:18
When deciding whether to include this clause in your contract, you should consider the extent of pre contract information or discussion.
1:26
If the agreement says base previous arrangements, where the pre-contract representations were made, whether you wish to limit the party's liability for misrepresentation.
1:36
Generally, some form of anti agreement clause would be included in all contracts. In particular, supplier, you would likely want to include in time agreement clause in all contracts for supply of goods or services to exclude any representations made by sales staff, or in sales materials that you do not wish to have contractual effect.
1:56
However, if you're the customer, provide, you have not made any representations around purchasing quantities, future orders, or other clauses, or elements, and until agreement is likely to be more benefit to a supplier. So with that in mind, if you're looking to produce a short form, such passion towns, this might be one the clauses that you consider emitting or including a shortened version of.
2:20
So here is a typical entire agreement clause.
2:24
This agreement together as a document referred to in it, constitutes the entire agreement between the parties and supersedes and extinguishes, all previous discussions, correspondence, negotiations, drafts, agreement, promises, assurance, warranties representations, and understanding to train them, whether written or overlay to subject matter.
2:42
Question is, does this clause is clear claims for misrepresentation? This clause is actually considered by the Court of Appeal, in a case of Al-hassan, Away, and not enforceable club limited. And others, the closest to share purchase agreement between the parties. And in this 28, in case, the claimant agreed to buy from the defendant, the entire issue share capital and not doing Facebook implemented, the club was heavily indebted to the shares are sold for a nominal consideration. And the claimant was given the benefit of an indemnity from the defendant against any live entities of the club over six point six million. During negotiations, the defendant provided to the claimant a spreadsheet representing the liabilities of the club as £6,566,213. The client's case was at the at the relevant date, the club's liabilities, where in fact in excess of £10 million.
3:35
The claimant bought a claim under the indemnity and also claim under the under also claim for misrepresentation.
3:42
The defendant made an application for summary judgement to strike out the claim from a presentation on The basis that the clause that we just looked at was actually their contract and therefore excluded any claims to misrepresentation.
3:55
The Court of Appeal overturned the first instance judge's decision and held that the clause did not take food acclaim from your presentation.
4:05
In the context of anti agreement clause it makes perfect sense to talk about something which might have amounted to a program being extinguished just as it could be regarded as superseded by the term set out in the written agreement. It does not, therefore, for any finding that representations are extinguished in any respect, others are, they cease to have any contract effect that they might otherwise have gone.
4:26
Therefore, the effect of this clause was limited to setting out what the terms of the agreement were and extinguishing any prior agreements. With those programs, including representations seem to have contractual effect, the clothes did not extend to include extracting claims for misrepresentation.
4:44
A similar clause was a tissue in access on life, so it says ... and others again.
4:50
This is a case in which Misrepresentation was alleged AXA had initially brought a claim against Kambo Martin Limited and others for monies that claim would do from Campbell. Following the termination of Agreement between the parties, the claim was disputed by defendants, who alleged that they had been induced intentions of the agreement by misrepresentations and collateral Warren because made by X and free contract.
5:12
The anti agreement clause in question is very similar to the one in our ....
5:18
In this case, the Court of Appeal held that in time agreement close, again, did not escalate claims in this representation. But just as Rick's held at the clause, was concerned, only, with matters agreement, and not with with misrepresentation at all. And the single critical word representations, not misrepresentations, is likely context refer to representations which might be argued but for the clause, to have become terms the agreement.
5:45
These Court of Appeal decisions are useful reminders that an entire agreement clause will not by itself operate to exclude liability for research and patient further was required.
5:58
There are therefore, three elements to untie agreement clause.
6:03
Lastly, the entire agreement statement, as, as was the subject to the salary, case, I suggest you include this in most Con tracks. If the contract system, or the one document, and show the old documents relevant to, the contractual arrangements are referred to in the clause, or somewhere else in the agreement where there is more than one document forming the contract. Consider the precedence of documents and clarify this in the contract, if necessary.
6:29
If you are displacing existing agreements, deal with these expressly by referring to the existing arrangements being superseded.
6:38
The second is a non reliance of pre contractual representations statement. This is the express wording that you need to get to, that is needed to exclude pre-contract statements.
6:49
As this is an exclusion clause, you need to use clear wording for it to have effect.
6:55
Need to, when drafting a clause, you need to be aware of the limits on the Unfair Contract Terms Act in 19 77.
7:02
So you cannot exclude liability for fraud and any exclusion that's contain a standard terms and conditions will be subject to the October reasonableness test.
7:12
I mean, if you do want to rely on pre-contract statements, you need to watch out for the inclusion of such a statement and to ensure that you include any pre-contract statement within the terms of the contract if you want to rely on them in future.
7:28
The third element is an exclusion of remedies for misrepresentation.
7:33
The same considerations apply to, to this, this element as a Statement of non reliance on pre-contract representations, is an exclusion clause and, therefore, you can't escape forgiveness representation. And it's also subject to the reasonableness test on doctor again, use separate sub clauses to ensure that, if one element is struck out, then the other the other element will be there are more chances that remaining in the contract.
8:00
Again, you should use that with a severance close which we will discuss at a later stage.
8:07
Turning to third party rights.
8:10
A third party rights clause is often included in contrast to address the rise, wished the contracts watch third party at 1099 gives us a party who has not a contracting party to the agreement.
8:22
Under the Contracts Watch Third Party at 19 99, a contract, because I'm a benefit to third, party, was identified by name. Description of Class, may be enforced by that third party. And the parties may need the third parties consent to vary or send the contract.
8:39
In light of this act, of a third party rights provision is to limit any rights, which are non third party has to enforce contract terms, to veto variation of rescission. Well, let's talk about it.
8:54
So, you might decide that it's obvious that a third party will not be able to bring a claim under the contract.
8:58
For example, the contact does not, obviously, benefit on third party or the nicer parties named, however. You should exercise caution when deciding to emit a third party rights clause.
9:11
When the contract, because there's benefit on a third party, may not always be clear.
9:16
The dangers of not increase as you close is demonstrated in the case of chuckling Clarksdale Bank PLC.
9:23
This case concerned funds provided by the claimants to the bank towards development of Cape Verde results. The bank entered into contract with an investment company in the form of a letter of instruction, which contain statements about how the investor's deposits would be held.
9:38
The letter of instruction specifically envisaged that the deposits would be held in a segregated account on certain terms. Including the Solicitor's Undertaking would be required for the release of funds.
9:49
The claimant substitute discovered that certain schemes and investment company were fraudulent and that funds have been released by the bank with. Alison is undertaking.
9:57
The claim is issued preceding as a bank for breach of that instruction.
10:02
At the time the contract was entered into the claims are not aware that this contract assisted or they didn't have an incident to know whether the claimant is named in the contract. That was simply a reference to a client account.
10:15
The Court of Appeal held that the claimants were entitled to claim the benefit of the contract under the contract, that parties at 19 99. The reference to a client account, And the contract was held to be an express identification of a class.
10:28
And then the claim is well within that class, and therefore, there was no reason why the same contract for time could not also satisfy the requirements under the act.
10:38
The term forced to confer a benefit on third party.
10:41
The Court of Appeal also notice that there was not a requirement, that the third party, who was in touch to the benefit of a contract was aware of the contract at the time it was made, or at any particular time, thereafter.
10:53
This decision, so, the importance of including a provision in contrast to that party, right, even where it may appear that class beneficiaries have not been identified in the contract.
11:03
So, in terms of drafting of considering a third party rights clause, if any third parties to benefit from any writing the contract should amend the clause to carve out each light from the general equation a third party rights. And, if applicable, include wording to exclude third parties, writer consent, to rescission, or to a variation of the contract.
11:23
So that brings us to end of this Webinar. I hope you found it useful and relevant. If realized, says any point in more detail or have any other queries, please do contact me. My details on the slide and I'd be happy to help. Finally, please do visit SH MA or Demand on our website to access the recordings of our webinars and SH how many talks.
11:41
Please do join in on our conversation on LinkedIn and Twitter.
11:45
Thank you.