The inclusion of an “entire agreement” clause in many contracts is essentially a declaration that the contract represents the final and complete agreement between the parties, excluding all other previous agreements and representations. In other words, the contract supersedes any prior agreements that the contracting parties might have made with regard to the subject of the contract. So why is a contract considered as an entire agreement?
The first reason is that the contract contains and covers all the terms which the two parties have come to the agreement. This means that any external document has to be expressly incorporated into the contract. Besides, This is to prevent any ambiguity about the status of any earlier agreements or understandings. Both parties shall only base on the contract to perform their obligations. The last point is to prevent any disagreements and dispute arsing from the difference between the previous drafts and the contract so that the contract can be immediately executed for both parties’ sakes A contract normally includes wording the following elements: •An entire agreement statement: a statement in the contract that the parties agree that the terms of the contract between them are to be found within the text of the contract document and nowhere else. All entire agreement clauses include this element •An exclusion of liability for misrepresentation: most entire agreement clauses include one or more of the following: - An acknowledgment by the parties that they have not relied on any representation which is not set out in the contract; - A statement excluding liability for misrepresentation
- A statement limiting remedies for misrepresentation to those available for breach of contract - A carve-out for fraud: an express statement that the entire agreement clause is not intended to exclude liability for fraudulent misrepresentation. This carve-out is sometimes not included and some argue it is unnecessary. If it is included, a carve-out for fraud from any other clause that seeks to limit the parties’ liability should be included in the contract, or the courts may draw conclusions from the discrepancy. When reviewing an entire agreement clause, there are some important pitfalls to be aware of and avoid: - If the contract includes schedules or other attachments, it is important to check that the definition of the “contract” includes these schedules or other attachments. - If there are multiple contracts forming part of the same transaction, it is important to include them in the wording of the entire agreement clause, for example: “This agreement and [list other agreements] constitute the entire agreement between the parties….”. Examples of a comprehensive entire agreement clause would be as follows: “1. This agreement [and [list other relevant agreements, if applicable]] constitutes the entire agreement between the parties and supersedes and extinguishes all previous drafts, agreements, arrangements and understandings between them, whether written or oral, relating to this subject matter. 2. Each party acknowledges that in entering into this agreement it does not rely on, and shall have no remedies in respect of, any representation or warranty (whether made innocently or negligently) that is not set out in this agreement. 3. No party shall have any claim for innocent or negligent misrepresentation based upon any statement in this agreement. 4. [optional] Nothing in this clause shall limit or exclude any liability for fraud.”
Question 2. What do you know about applicable law ?
When negotiating an applicable law, an exporter should bear in mind that the total agreement between the importer and him is the sum of the contract and the applicable law. Therefore, the contract is greatly affected by the way bot sides choose the applicable law. There are 3 main kinds of applicable laws that are...