JURISDICTION UPDATES
SINGAPORE
Entire agreement clauses may not exclude implied terms
is especially so if the parties are commercial entities or knowledgeable businessmen who sought legal advice during contractual
negotiations.
By Claire Gomez
Entire agreement (EA) clauses are commonly found in commercial
agreements, and usually provide that the terms in the document
constitute the entire agreement and understanding between the
parties. Such clauses are used to exclude the legal effect of any precontractual negotiations or promises, except where reflected in the
document. The parties thus have legal certainty that the signed
document circumscribes their contractual relationship.
In Ng Giap Hon v Westcomb Securities Pte Ltd & Ors [2009], the
Singapore Court of Appeal (CA) considered the effect of an EA
clause and the role of implied terms. The CA had to examine
whether the EA clause excluded the implication of terms and, if not,
whether terms ought to be implied. In that case, the company had
agreed to pay a remiser commission for transactions dealt through
him. The remiser claimed commission in respect of two customers
of the company who would have opened their accounts with him
if the company had not intercepted the account opening forms.
The remiser asserted the company owed him an implied duty of
good faith. The agreement’s EA clause read as follows:
“This Agreement embodies the entire understanding of the parties
and there are no provisions, terms, conditions or obligations, oral
or written, expressed or implied, other than those contained
herein. All obligations of the parties to each other under previous
agreements ([if] any) are hereby released, but without prejudice
to any rights which have already accrued to either party.”
In considering the nature of an EA clause, the CA reiterated and laid
down several principles:
(i) Pre-contractual statements are excluded by EA
clauses
The CA quoted Gavin Lightman J in Inntrepreneur Pub Co v East
Crown Ltd [2000], who said that an EA 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 negotiations… shall have no contractual force”. This
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(ii) EA clauses may be subject to reasonableness
requirements
The reasonableness requirements of the Unfair Contract Terms Act
(cap. 396) (UCTA) must be considered when drafting and interpreting these clauses. The reasonableness requirement will not
apply to contracts between commercial entities or knowledgeable
businessmen.
(iii) EA clauses will not in principle exclude the implication of terms into a contract
The CA’s reasoning was threefold: (a) an implied term by its very
nature would not have been in the contemplation of the parties
when they entered into the contract; (b) if a term were to be
implied in law, that term in particular would not have been in contemplation of the parties; and (c) a term cannot be implied if it is
inconsistent with the express terms of the contract.
(iv) EA clauses may exclude the implication of terms if
expressed in clear and unambiguous language
The CA did not dismiss the possibility that an EA clause might
exclude the implication of terms, but it cautioned that such exclusion must be expressed in clear and unambiguous language. The
clause would also be subject to the UCTA.
Parties who wish to prevent the implication of terms into their
contract, and confine their rights and obligations to those within the
written document, should ensure that any EA clause is clear and
unambiguous. This will avert the risk that a court may imply terms
into the parties’ agreement notwithstanding the EA clause.
ATMD Bird & Bird LLP
Corporate / Commercial Group
Shenton Way #18-01 SGX Centre 1
Singapore 068804
Tel: (65) 6428 9415
Fax: (65) 6223 8762
Email: [email protected]
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