Entire Agreement Clause

In employment law and in commercial contracts, it is quite common to see what is known as “an entire agreement” clause.  Similar clauses, with wording that outlaws any “oral variations” to a contract are also common.

Where a dispute arises, often pertaining to pay or financial agreements, then the existence of an entire agreement clause can mean that other separate discussions outside of the main contract are unenforceable.

Background

The Employment Appeal Tribunal (EAT) had to consider this issue in the recent case of Dobbie v Paula Felton.  In this case the financial terms allowed a consultant to be paid 40% of the fees received in relation to his own consultancy work.  There was a breakdown in the relationship and he went to the Tribunal claiming an unlawful deduction from wages in relation to fees where, rather than his own consultancy work, other employees had carried out the tasks.

The main argument he pursued was that there had been a separate agreement with a particular client.  When the case went to the EAT however they took an orthodox contractual view and held that because of an entire agreement clause, any such separate oral discussions or proposed terms that had been agreed outside of the main  contract containing the entire agreement clause were unenforceable.  It therefore held that he was entitled only to the 40% in relation to his own work and not anything to do with other employees’ work.

Comment

The case is a useful reminder of the importance of such clauses, particularly in commercial contracts or contracts for high level employees, where we frequently see disputes over agreed remuneration.