Don’t Ignore the “Entire Agreement” Clause

As a small business owner, you have probably seen this clause somewhere around page 12 of a contract: “This Agreement constitutes the entire agreement between the parties and supersedes all prior discussions, negotiations, and representations.” 

You likely see this provision so often that you overlook it as boilerplate since your main concern is the scope of work, the price of the contract, and your deliverables. Unfortunately, this provision can quietly erase weeks or months of negotiations that led to the deal in the first place.

What is the “Entire Agreement” Clause?

An “entire agreement” clause, sometimes called a merger or integration clause, is a contract provision stating that the written agreement represents the complete and final understanding between the parties. The purpose of the clause is straightforward: once the contract is signed, the written agreement controls.

Why is the “Entire Agreement” Clause Important?

The “entire agreement” clause usually comes into play when the parties disagree about what was actually promised. For example, you might have negotiated that the price of the contract would be fixed for a period of two years or that deliverables would take no more than 30 days. Those negotiations may have taken place over the phone, via email, zoom calls, and countless other conversations. Despite your negotiations, if these terms are not explicitly stated in the contract, the “entire agreement” clause suddenly becomes very important because the written agreement controls and the other party is not obligated to conform to those terms.

Many contracts now go a step further to include language stating that neither side relied on statements outside the agreement itself. This can create a significant hurdle because it can limit later arguments about alleged fraud or misrepresentations made during negotiations.

Practical Takeaways Before Signing a Contract with an “Entire Agreement Clause”:

1. Include Assumptions. Before signing such a contract, consider what assumptions you are making, besides your major concerns like scope and pricing, that are not actually written down. These could include items like timelines, exclusivity, support obligations, and renewal rights. These terms should appear in the agreement itself. 
   
2. Attach or Incorporate Key Documents by Reference. Directly attach or incorporate key documents by reference into the agreement, such as statements of work, product specifications, implementation schedules, or pricing exhibits. If those materials are not clearly incorporated, disputes can arise over whether they were agreed to.
3. Don’t Disregard “No Reliance” Language. Pay attention to language stating that no outside representations were relied upon. Those provisions can become highly significant if a dispute later arises over what was said during negotiations.

The SJS Law Firm can help your small business draft and review contracts with such merger clauses to ensure your contract reflects what you negotiated. For a complimentary consultation, please get in touch with us at (202) 505-5309.