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Entire Agreement clause vs Implied term

Re: Entire Agreement clause vs Implied term

Postby theycantdothat » Thu May 21, 2015 10:47 am

I am not sure that the "entire agreement" clause is relevant here. It is essentially saying that what the parties have agreed is set out in the agreement and if it is not set out in the agreement they never agreed it. I do not think it helps in the interpretation of an ambiguous clause.


"This Agreement will start on the start date and will automatically renew for successive one year periods (each a "Term") on the same terms and conditions as those applicable in the final 12 month period of the immediately preceding Term unless either party terminates this Agreement at any time by giving the other party at least 180 days prior written notice."


The blue states that that the agreement continues for successive one year periods and the red sets out a condition which prevents automatic renewal. The condition is the service of a notice. If the notice is served there is no renewal. The fact that the notice requires not less than 180 days notice is irrelevant. The mere giving of the notice stops the automatic renewal. The requirement to specify a period of notice is just a matter of form, like insisting that the notice must be on pink paper. It would seem therefore that if the periods run from 1st January to 31st December the service of a notice at any time (including on 31st December) prevents a renewal on the following 1st January.
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Re: Entire Agreement clause vs Implied term

Postby atticus » Thu May 21, 2015 11:40 am

what about "unless either party terminates this Agreement at any time"?

It seems to me that tcdt's approach would work if the words "at any time" were not there.
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Re: Entire Agreement clause vs Implied term

Postby theycantdothat » Thu May 21, 2015 1:49 pm

The point is that the clause looks like a clause allowing either party to terminate the contract by notice. But it is not that, it is a clause which provides that the contract is automatically renewed unless a specified event takes place. The event is the service of a notice. If the notice is served there is no renewal. What the notice is required to say is irrelevant even if the notice is to take the form of a notice terminating the agreement. The wording is clearly awkward, but over all has the effect that a notice terminating the contract stops it being renewed.
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Re: Entire Agreement clause vs Implied term

Postby atticus » Thu May 21, 2015 2:36 pm

What we have is a clause that is not well drafted. You and I interpret it differently. I can see both points of view. Were I advising a client about it I would err on the side of caution.

However, there is no need to imply any term in order to construe it; it is a matter of interpreting what is there.
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Re: Entire Agreement clause vs Implied term

Postby PeterFMQ » Thu May 21, 2015 2:39 pm

tcdt - There is no renewal - on a 12 month term but there is still a renewal

Let`s work through it:
Jan 1 2015 to Dec 31 2015 is initial term.
Notice served e.g. Dec 31 2015 - you say "if the notice is served there is no renewal." But there must some form of "renewal" because either the contract is alive or it is not and it is not terminated until 30 June 2016 because the next day, Jan 1 2016 is the renewal date and a new term starts and ends on 30 June 2016 (i.e. 180 days from the date of the service of the notice- Dec 31 2015).

I agreed with atticus that this provision was not ambiguous but clearly perhaps it is! If so then the canons of construction come into play of course. let`s assume it is not.

The separate point was the extent to which the clear intention of the parties, by way of agreeing an express exclusion of any implied terms as contained in the entire agreement clause, would preclude the implication of terms but not implication of terms by way of being “dressed up” in the guise of interpretation. See e.g. Mr Justice Cranston in Compass Group UK and Ireland Ltd (t/a Medirest) v Mid Essex Hospital Services NHS Trust [2012] where he said:

"implication of a term is not an addition to the instrument but only spells out what it means: See Belize at paras [18], [21]. Conceptually, therefore, it seems impossible to agree to preclude the implication of the types of terms which are necessary to give business efficacy to the contract and which give effect to what the parties must be taken to have meant or which are intrinsic to the agreement: Axa Sun Life Services plc v Campbell Martin Ltd & Otrs [2011] EWCA Civ 133"

So if an agreement says "X may terminate this agreement if Y commits any breach" and a party argues for the implication of the word "material" to reads as "X may terminate this agreement if Y commits any material breach" is that process a matter of implication of a term or a matter of construction/interpretation of the express words and if the former can such a finding be precluded by an express exclusion of any implied terms? Difficult question...
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Re: Entire Agreement clause vs Implied term

Postby theycantdothat » Thu May 21, 2015 4:38 pm

Interpreting legal documents is a tricky business. It is not made any easier by changing judicial fashion. I do not think that the entire agreement clause is of any relevance here. What we have is a clause the meaning of which has to be unravelled. The effect of the entire agreement clause is not to exclude the rules of interpretation - that would be tantamount to saying there was no way of settling disputes about what a provision means.

Consider the following, the like of which is often met:

The Tenant may on or after 31st March 2016 give the Landlord three months' notice in writing terminating the Tenancy.

What is the literal meaning? Nothing more than that the Tenant can serve the notice. It is not spelled out that the tenancy expires on expiry of the notice. Taken literally the clause achieves nothing. I think though that we are entitled to suggest that the clause must have been intended to mean something. It is not totally nonsensical and it is difficult to argue that it should not be rewritten:

The Tenant may on or after 31st March 2016 give the Landlord three months' notice in writing terminating the Tenancy and on expiry of such notice the Tenancy shall end.

I think that is going to have to be the case even if the lease contains an entire agreement clause.

Unfortunately the case here is not so straightforward due to the lax drafting.

Suppose the clause said:

This Agreement will start on the start date and will automatically renew for successive one year periods (each a "Term") on the same terms and conditions as those applicable in the final 12 month period of the immediately preceding Term unless at any time High Street Newton is pedestrianised.

If the condition (High Street Newton being pedestrianised) is fulfilled the agreement is not renewed.

Now consider the following:

This Agreement will start on the start date and will automatically renew for successive one year periods (each a "Term") on the same terms and conditions as those applicable in the final 12 month period of the immediately preceding Term unless at any time either party gives to the other notice he is emigrating.

Give the notice of intention to emigrate and the agreement is not renewed.

Then:

This Agreement will start on the start date and will automatically renew for successive one year periods (each a "Term") on the same terms and conditions as those applicable in the final 12 month period of the immediately preceding Term unless either party terminates this Agreement at any time by giving the other party at least 180 days prior written notice.

Why is it not the case that the agreement is not renewed if you give notice to terminate the agreement? When we look at the clause we can get an idea of what was intended - the agreement could be ended by giving not less than 180 days notice, even if there is is doubt about when the notice can be served or take effect. However, the parties have said something quite different from what they meant. The clause taken literally produces an odd result, but not an absurd one which can be discounted.

We can see the drafting is faulty generally:

This Agreement will start on the start date and will automatically renew [the initial period is not stated] for successive one year periods (each a "Term") on the same terms and conditions as those applicable in the final [each period is 12 months so the final 12 months is the whole period - in any event why not just say "on the same terms and conditions"] 12 month period of the immediately preceding Term unless either party terminates this Agreement at any time by giving the other party at least 180 days prior written notice [the clause starts off insisting that the agreement consists of successive periods of 12 months but then talks about terminating on 180 days' notice - the wording does not actually say anywhere that the agreement can in fact be terminated by notice]
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Re: Entire Agreement clause vs Implied term

Postby dls » Thu May 21, 2015 6:13 pm

What is the literal meaning? Nothing more than that the Tenant can serve the notice. It is not spelled out that the tenancy expires on expiry of the notice. Taken literally the clause achieves nothing.


Sorry TCDT, but the sentence should be read that he can give a notice the effect of which will be to terminate the tenancy. I will give you no more than that there is a slight elision - it would not be worse for a slight improvement. I am not convinced that it would need it.
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Re: Entire Agreement clause vs Implied term

Postby PeterFMQ » Thu May 21, 2015 7:54 pm

tcdt - terminating the Tenancy and on expiry of such notice the Tenancy shall end. The words in bold are surplusage in that they add nothing to the words in italics.

But this is not the main issue.

The issue is the implication of terms and what that actually means in practice when up against a clause which seeks to exclude "implied terms".

Clause 1 reads "X may terminate contract upon any breach by Y".
Clause 2 reads: "all implied terms are excluded to the maximum extent permitted by law".

Y argues that Clause 1 should be read as meaning "X may terminate contract upon any material breach by Y" and that the addition of the word material is not an implication of a term which would be precluded by Clause 2, (query: does "term" include a single word?) it is that a matter of the proper and true construction of the contract.

X argues the word "material" is not written in the contract. That was deliberate. If the parties had intended the word material to apply they would have said so. The Court cannot "read into"/imply this word given the clear intention of the parties pursuant to Clause 2.

Y argues reading in "material" is not a matter of implication of terms; it is a matter of construction.

The answer, the fudge of course is that it is BOTH! That is my view but happy to concede I am wrong!...Thoughts...x
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Re: Entire Agreement clause vs Implied term

Postby atticus » Thu May 21, 2015 8:26 pm

If "material"needs to be implied then clearly without that word the qualifier "material" does not apply.
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Re: Entire Agreement clause vs Implied term

Postby theycantdothat » Thu May 21, 2015 10:19 pm

dls wrote:
What is the literal meaning? Nothing more than that the Tenant can serve the notice. It is not spelled out that the tenancy expires on expiry of the notice. Taken literally the clause achieves nothing.


Sorry TCDT, but the sentence should be read that he can give a notice the effect of which will be to terminate the tenancy. I will give you no more than that there is a slight elision - it would not be worse for a slight improvement. I am not convinced that it would need it.


There is a difference between what the clause says and what the court is likely to say its effect is. What the clause says is simply that the tenant may give notice. Clearly a clause which says a tenant can serve a notice which has no effect is pretty meaningless and there has to be an assumption that the parties must have intended it to mean something. The intention is plain and so the clause must be rewritten to give effect to the intention. However, drafting on the basis that the intention is obvious is unwise. You must draft on the basis that you say what you mean. Adding that the tenancy ends when the notice expires is saying what you mean and not adding unnecessary words. Apart from anything else, one aim of drafting has to be to do all you can to avoid strained arguments. That sometimes involves what may come over as stating the obvious. So, if someone going over your draft says, "Surely you mean X" the answer is not to tell him he is pedantic and that the meaning is obvious if it is not actaully expressed, but to redraft the provision. I know of a case where an experienced, if not brilliant, draftsman declined to make an alteration suggested by a colleague on the basis that the intention, where not expressed, was obvious and it cost the firm £100,000.
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