dcsimg

Top bins? An entire agreement clause effective to preclude a misrepresentation claim

David Siesage

In NF Football Investments v NFFC Group Holdings, the court struck out the purchaser’s claim for misrepresentation, as the claims were excluded by an entire agreement clause in the share purchase agreement.

The purchaser of Nottingham Forest Football Club complained that the seller had represented the club’s liabilities as as being £6.5m when in fact they were over £10m.

The entire agreement clause said:

“This agreement (together with the documents referred to in it) constitutes the entire agreement between the parties and supersedes and extinguishes all previous discussions, correspondence, negotiations, drafts, agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter”.

The purchaser relied on AXA Sun Life v Campbell Martin where the Court of Appeal, following an extensive review of the case law, held that the following was not sufficient to preclude a claim for misrepresentation:

“This Agreement and the Schedules and documents referred to herein constitute the entire agreement and understanding between you and us in relation to the subject matter thereof. Without prejudice to any variation as provided in clause 1.1, this Agreement shall supersede any prior promises, agreements, representations, undertakings or implications whether made orally or in writing between you and us relating to the subject matter of this Agreement but this will not affect any obligations in any such prior agreement which are expressed to continue after termination.”

The Court of Appeal saw the reference to “representations” being superseded as being effective only to exclude a possible collateral warranty and to stop representations becoming a term of the contract. It suggested that to exclude liability for misrepresentation, you need to say: that no representations have been made, or that no representations have been relied upon, or, simply, that there is to be no liability for misrepresentation.

The judge noted that AXA was limited to its particular entire agreement clause, though it offered helpful guidance. Entire agreement clauses, he said, do not have to be in any prescribed form, as the effect of a particular clause is always a matter of interpretation in the context of its particular contract. In the context of this SPA, it was clear that the parties intended to exclude liability for misrepresentation. The language used was wide and not exclusively contractual. The SPA’s detailed provisions showed that the parties intended all disputes to be resolved within the agreed contractual procedure, so the purchaser’s claim was struck out.

Nonetheless, the safer course is to adopt the language that the court in AXA recommended. The issue of the reasonableness of the exclusions was not considered.

Comments published on Compact Contract do not necessarily reflect the views of Allen & Overy or its clients.

Read comments below or add a comment

Leave a comment

Your email address will not be published. Required fields are marked *