ENTIRE AGREEMENT CLAUSE
CITATION:  2 Lloyds Rep 611
The parties to a lease of a tied public house entered into an agreement for a lease containing a restriction requiring the tenant to obtain its beer from nominated suppliers. The agreement for lease contained an acknowledgement that ‘this agreement… constitutes the entire agreement between the parties’. The tenant completed the lease but soon began buying all its beer from other suppliers. The landlord issued proceedings for an injunction to stop the tenant from buying beer outside the tie, and sought damages for breach of that tie.
The tenant said that the landlord had, in the course of the discussions that took place before the agreement for lease was signed, indicated that it would release the tie on or before a specified date, which had since passed. It claimed that this amounted to a ‘collateral warranty’, which constituted a complete defence to the action. The landlord denied the claim. It said that the tenant’s expectations were derived from undertakings, the contents of which were in the public domain. Those undertakings had been given to the DTI, and not the tenant, and had subsequently been released.
ISSUE: Whether the entire agreement clause precluded the defendant from setting up alleged collateral agreement.
The Court observed:
“… such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere, and that accordingly any promises or assurances made in the course of the negotiations (which in the absence of such a clause might have effect as a collateral warranty) shall have no contractual force.”
- The judge obviously sympathised with the tenant, and could well understand why he might feel aggrieved, but took the view that he had no entitlement to any legal redress at all.
- The purpose of an entire agreement clause is to preclude a party to a written agreement from thrashing through the undergrowth and finding, in the course of negotiations, some (chance) remark or statement (often long-forgotten or difficult to recall or explain) upon which to found a claim… to… a collateral warranty.
- The judge observed that there may be circumstances in which a party to a pre-existing contract, who has made a representation, may be estopped from enforcing a particular term – but doubted whether there could be circumstances where something said in the course of previous negotiations could estop a party from enforcing a newly negotiated contract, because the rights and obligations of the parties were determined by its terms.