Entire agreement clauses are commonly found in various types of commercial agreements. These clauses often provide that: (i) the contract constitutes the entire agreement between the parties with respect to the subject matter of the contract, (ii) the contract supersedes all prior agreements, understandings, negotiations and discussions, and (iii) there are no conditions, representations or warranties, expressed or implied, other than those included in the contract.
The purpose of entire agreement clauses is to maintain the certainty of commercial transactions by limiting the source of the parties' obligations and to prevent reliance by a party on pre-contractual verbal or written representations, statements or terms that are not incorporated in the contract.
The validity of entire agreement clauses has repeatedly been recognized by the courts in Québec who have held that these clauses constitute an admission by the parties that they are not bound by any other agreement or understanding. It is important to note, however, that Québec courts have also recognized that there are exceptions to the rule and that, under certain circumstances, a court may consider evidence of pre-contractual representations.
In the recent case of 9183-7831 Québec inc. v. Location Faubourg Boisbriand inc. ("Boisbriand"), 2011 QCCS 5304, the dispute centered on a commercial lease and the landlord's obligations under such lease. The tenant attempted to lead evidence of pre-contractual discussions and the landlord objected to the admissibility of this evidence on the basis of an entire agreement clause in the lease. The Québec Superior Court listed the following circumstances where a court will consider extrinsic evidence notwithstanding an entire agreement clause:
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In the event of error;
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In the event of fraud;
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When there have been misrepresentations;
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In a consumer contract;
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In contracts contrary to public order; or
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To interpret an ambiguous clause in a contract and determine the common intent of the parties.
Given that none of the above exceptions applied in Boisbriand, the Court maintained the landlord's objection and refused to take into account any alleged pre-contractual representations. Ultimately, the Court held that the parties were governed by the terms of their written agreement and dismissed the tenant's claims based on alleged promises and terms that were not reflected in the lease.
The Boisbriand decision serves as a useful reminder that while entire agreement clauses will not always prevent a court from examining evidence outside of the contract, they are often effective tools in limiting the source of parties' obligations to what is provided for in the "four corners" of their agreement.
Authored by Audrey Préfontaine.
If you have any questions regarding the foregoing or if you would like to obtain a complete copy of the case, please contact Audrey Préfontaine (514.841.6572) or David Stolow (514.841.6567) from our Montréal office.
Davies Ward Phillips & Vineberg LLP is an integrated firm of more than 240 lawyers with offices in Toronto, Montréal and New York. The firm is focused on business law and is consistently at the heart of the largest and most complex commercial and financial matters on behalf of its clients, regardless of borders.
The information and comments herein are for the general information of the reader and are not intended as advice or opinions to be relied upon in relation to any particular circumstance. For particular applications of the law to specific situations, the reader should seek professional advice.