Introduction
Entire agreement clauses –
sometimes referred to as merger or integration clauses – are common boilerplate
provisions in many commercial contracts.
The purpose of such clauses is
to prevent the parties from adducing evidence extrinsic to the written contract
in order to show that the terms of the bargain were different from those
recorded in the contract.
That is to say, the parties
include an entire agreement clause to prevent statements and representations
made either before or after the contract was entered into from having any
contractual force (unless they were duly incorporated into the contract by
amendment in accordance with its terms).
One reason for excluding
evidence outside the written contract is that, particularly in the case of oral
statements, it may take time to resolve what was said and agreed to by the
parties. Secondly, the parties have greater certainty as to their contractual
rights and obligations when they know these are all contained in one written
agreement. Finally, written and oral statements made prior to entering into the
final agreement may be misleading in that they are as likely to amount to mere
aspirations as they are to evidence of any final consensus arrived at between
the parties.
General Considerations
When reviewing an entire
agreement clause, there are some important pitfalls to be aware of and to
avoid:
Schedules and Attachments
If the contract includes schedules
or other attachments, it is important to check that the definition of the
“contract” includes these schedules or other attachments.
Multiple Contracts
If
there are multiple contracts forming part of the same transaction, it is
important to include them in the wording of the entire agreement clause, for
example: “This agreement and [list other agreements] constitute the entire
agreement between the parties….”
Special Considerations
under Omani Law
Excluding Misrepresentation
Entire agreement clauses in
common law jurisdictions typically aim to exclude liability for
misrepresentation, but carve out liability for fraudulent misrepresentation. In
other words, the parties agree not to claim for “negligent” or “innocent”
misrepresentation in connection with the agreement, but also state expressly
that they are not seeking to limit or exclude claims for fraudulent
misrepresentation.
Such distinctions are not,
however, meaningful under Omani law. Article 103 of the Omani Civil
Transactions Law (Royal Decree (“RD”) 29/13) (the “Civil Code”)
defines misrepresentation as follows:
Misrepresentation
is when one of the two contracting parties deceives the other by means of
trickery of word or deed which leads the other to consent to what he would not
otherwise have consented to. Deliberate silence concerning a fact or set of
circumstances shall be deemed to be a misrepresentation if it is proved that
the person misled thereby would not have made the contract had he been aware of
that fact or set of circumstances.
Omani law does not recognise
negligent or innocent misrepresentation. On the contrary, there must be an
intention to deceive by fraudulent means. The onus is on the party alleging
misrepresentation to establish that (a) they were deceived by the
misrepresentation; and (b) the deception was intentional.
Accordingly, the provisions
relating to liability for misrepresentation in standard entire agreement
clauses should be tailored to accord with the different treatment of the
concept in Omani law. Any attempt to limit or exclude liability for negligent
or innocent misrepresentation would be at best superfluous and at worst
confusing.
Construction of the Contract
There are other considerations
to be borne in mind when drafting entire agreement clauses under Omani law. The
Civil Code provides, in Article 165, guidance in the construction of contract
terms:
If the wording of a contract is clear, it may not be departed from by way of interpretation to ascertain the intention of the parties. If there is scope for an interpretative construction of the contract, an enquiry shall be made into the mutual intentions of the parties beyond the literal meaning of the words, and guidance may be sought in so doing from the nature of the course of dealings, current trade custom, and the trust and confidence which should exist between the parties.
Further, the Omani courts have
long applied the civil law principle of ‘pacta sunt servanda,’ the Arabic
rendering of which is equivalent to ‘the contract is the law governing the
parties.’ A recent Omani Supreme Court judgement held that the parties to a
contract are obliged to fulfil their respective obligations under the contract
in good faith, and the terms of the contract may not be amended or invalidated
by the court seized of the matter save where there is manifest ambiguity in
their construction.
The principle is codified in
Article 156 of the Civil Code, which provides that a contract must be performed
in accordance with its contents. However, the article goes on to state that the
parties’ obligations go beyond those contained in the contract, and include
their obligations under the law, custom, justice and normal conduct.
A generic entire agreement
clause will not exclude any of the above, but an express and specific term of
the contract could arguably prevail over trade usage. Even specific clauses
would, however, be unlikely to be effective in excluding the requirement to act
in good faith, or legislative provisions considered to go to public order.
Elements of an Entire
Agreement Clause
An entire agreement clause in
an agreement expressed to be subject to Omani law should contain the following
elements:
An Entire Agreement
Statement
A statement in the contract
that the parties agree that all the terms of the contract between them are to
be found within the text of the contract document and nowhere else, and these
terms supersede any prior written or oral agreement between the parties.
Non-reliance on
Representations Not Contained in the Agreement
A statement that the parties
have not relied on any statements or representations other than those contained
in the written contract.
Summary
Entire
agreement clauses seek to prevent a party to a contract from citing evidence
not contained in the body of that contract to support a claim that the
agreement between the parties was in fact different from that set down in the
written contract. Such claims are often brought in connection with alleged
misrepresentation.
Under Omani law, misrepresentation must involve an intention to deceive by fraudulent means. It goes to the root of the contract and gives the victim of the misrepresentation the right to rescind the contract. It follows that the provisions in standard entire agreement clauses relating to misrepresentation, and the remedies therefor, are redundant under Omani law.
Negligent and innocent misrepresentation are not recognised concepts in Omani law; and the remedy for (fraudulent) misrepresentation is provided for at law and cannot be limited or excluded by contract.
Under Omani law, misrepresentation must involve an intention to deceive by fraudulent means. It goes to the root of the contract and gives the victim of the misrepresentation the right to rescind the contract. It follows that the provisions in standard entire agreement clauses relating to misrepresentation, and the remedies therefor, are redundant under Omani law.
Negligent and innocent misrepresentation are not recognised concepts in Omani law; and the remedy for (fraudulent) misrepresentation is provided for at law and cannot be limited or excluded by contract.
