In the recent Court of Appeal decision Axa Sun Life Services Plc v Campbell Martin Ltd an entire agreement clause did not exclude liability for pre-contractual misrepresentations although the clause was reasonable under the Unfair Contract Terms Act (UCTA).
What is an Entire Agreement Clause?
An entire agreement clause asserts that the SaaS agreement constitutes the whole agreement between the parties and seeks to prevent the parties from relying on any preceding agreements, negotiations or discussions in any subsequent claims.
Entire agreement clauses form part of the standard provisions of many SaaS agreements, and are frequently used by SaaS suppliers to argue that a customer cannot rely upon pre-contractual misrepresentations. (e.g. verbal promises, product claims, or previous agreements).
Unfair Contract Terms Act (UCTA)
The validity of an entire agreement clause in a SaaS agreement will be determined by a court by applying UCTA. In the AXA case as the agreement was based on AXA’s standard terms of business, UCTA states that a party contracting on its standard terms cannot exclude or restrict liability in respect of its breach unless the clause is reasonable.
AXA standard terms contained the following entire agreement clause:
“This Agreement…constitute[s] the entire agreement and understanding between you and us in relation to the subject matter thereof…[and] shall supersede any prior promises, agreements, representations, undertakings or implications where made orally or in writing”
The Court of Appeal held that this entire agreement clause did not exclude AXA’s liability for pre-contractual misrepresentations, even though it was reasonable under UCTA.
Excluding Liability for Pre-Contractual Misrepresentation
It is essential that clear wording is used to exclude liability for misrepresentation. It is not enough to simply state that the agreement “supersedes” any previous representations. The entire agreement clause of your SaaS agreement should state that you have no liability in respect of errors or misleading information that may have been communicated by one party to another and liability for misrepresentation must be specifically excluded.
However, note that under English law liability for fraudulent misrepresentation cannot be excluded or limited.
Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any other IT legal issues contact me:
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