Extinguishing Representations
/This paper takes a quick look at recent case law on the interpretation of entire-agreement clauses. If you rely on such clauses to exclude claims for misrepresentation, they may need revising.
In 2017 Mr Fawaz Al-Hasawi agreed to sell the heavily-indebted Nottingham Forest Football Club for nominal consideration of £1. The seller’s virtual data room showed liabilities of just under £6.6M. Actual liabilities turned out to exceed £10M.
The buyer claimed that the information in the data room constituted a misrepresentation. The seller applied to the court to strike out the misrepresentation claim on the basis of the Share Purchase Agreement’s entire agreement clause.
The English High Court found that the words: "this agreement ... constitutes the entire agreement between the parties and supersedes and extinguishes all previous discussions, correspondence, negotiations, drafts, agreements, promises, assurance, warranties, representations and understandings..." were insufficient to exclude liability for misrepresentation.
The judge held that clear wording is required to exclude liability in tort for misrepresentation, and, as those words can refer to contractual matters, they do not clearly exclude such liability.
This is a case that we consider could have gone either way. The judge at first instance had analysed the text and context, applying the same Court of Appeal authority that the High Court relied on, but came to the opposite conclusion. As such the case can serve as guidance for drafting a provision that would survive both the court of first instance's and the High Court's approach. In this paper, I consider the lessons to bear in mind when drafting entire-agreement clauses.