Entire Agreement Clause, Legal Matters

Photo caption: Mark Weintraub recommends including an "entire agreement" clause in any contract



Glen Kerstrom



Most legal disputes are the result of a breakdown of trust in a partnership. All too often, two trusting parties sign what they consider a boilerplate contract, trusting that a mutual understanding of the spirit of the agreement will cover any details not specified in the contract.



If that trust breaks down, however, the partnership can degenerate to a shouting match or even a court case over who promised what.



A simple addition to a contract, known as an "entire agreement clause," can prevent such disputes - a point illustrated by a B.C. Supreme Court ruling last December.





The case centred on a conflict between a caterer and a film production company. Bus Fare Entertainmet Industry Catering principal Geoff Titcomb said he didn't think he needed a lawyer when he asked Millennium Canadian Productions Ltd. manager Brian Dick to sign two copies of a contract in July 2001, because it was a standard contract in the entertainment industry.



Titcomb said he believed he had an understanding with Dick that the contract would be valid until December 7, 2001.


When Dick's production company cancelled the contract nine days later, Titcomb realized that he had nothing in writing specifying the contract's duration. That didn't stop him from suing Millennium for breaking promises to buy catering for more than four months.



Because the contract didn't include an entire agreement clause, Justice Bruce Harvey considered agreements and promises made outside the contract, such as alleged promises to contract catering for four months.


Harvey considered what Titcomb claimed was Dick's verbal promise to use Bus Fare Entertainment Industry Catering for the duration of Millennium's filming of the television seies UC:Undercover.



He then awarded Titcomb two weeks in damages. That's far less than Titcomb would have got if he had specified the duration in the contract and added an entire agreement clause, said Clark Wilson partner Mark Weintraub.



Weintraub believes comprehensive agreements should "always" contain entire agreement clauses. He explained that business owners who want certainty and predictability do not want promises, assurances or understandings left unwritten.



The past few decades have seen courts stymie businesses' desires for certainty and predictability by"going outside the four corners of a contract," Weintraub said.



Historically, contract drafters may have seen an entire agreement clause as redundant, non-essential or mere dressing, he said. But, entire agreement clauses have become increasingly useful.



Weintraub pointed to two recent B.C. Supreme Court cases involving companies with supplier contracts that contained entire agreement clauses.



In both cases, the judge refused to consider alleged promises not written into the contract because the contracts included entire agreement clauses that stressed that no other promises would be valid.



The June 2002 Otter Farm & Home Co-Operative versus Sekon case involved a gasoline supplier and a gas station operator who claimed that the supplier had verbally promised "pump support," or a rebate on the price of the gasoline to enable the operator to compete with other gas stations.



Verbal promises also factored in the February 2003 case, Mi-Bar Enterprises Ltd. versus Imperial Oil Ltd., that similarly involved a gas station and a supplier. Mi-Bar's operators claimed that the supplier had agreed that it would only terminate the contract if Mi-Bar had not performed its obligations adequately.


Because both those alleged agreements fell outside the contract, the court refused to consider them.



Singleton Urquhart partner Roger Holland agreed that the trend is for business owners to include entire agreement clauses in supplier contracts.



However, Holland said he can foresee some situations where business owners may specifically want to avoid such contracts. Sometimes business owners feel forced to sign contracts that they really do not want to sign, Holland said.



If the partner who does not want to sign the agreement spot that the contract does not contain an entrire agreement clause, it may make signing the contract easier because the business owner may see some leeway, Holland said.



Alternately, not having an entire agreement clause could be a way out if a partner is not happy with the agreement but finds the contract's termination clause even less palatable.



Holland said it was "conceivable" that the unhappy partner could invoke alleged promises to be read into the contract and prompt mutual cancellation of a contract.



Meanwhile, caterer Geoff Titcomb said he is getting some contracts redrafted to include entire agreement clauses, but that he is not always a stickler for written rules.



He has no written contract at all on some current catering jobs because he trusts his client, Titcomb said.