When it comes to drafting a solid, presumably "water tight" entire agreement clause, one size certainly does not fit all. Depending on the relative sophistication of the parties, the scope of negotiations, the type of bargain, and a host of other factors that both lawyer and client should keep in mind, it can be hazardous to chart the choppy waters of contract litigation on the freighter of your entire agreement clause if you first haven't attended to all possible leaks.
So let's put on our draftsman's cap and see what the case law says.
First off, what is an entire agreement clause? Generally, it's a clause in a contract that, in the example below, might set out the following:
This Agreement constitutes the sole understanding between the parties. There are no representations, warranties, terms, conditions, undertakings or collateral agreements, express or implied, verbal or written, between the parties other than as expressly set forth in this Agreement.
This type of clause, depending on the circumstances of the bargain, and the preferences of one's lawyer, may contain more or less detail than the above-noted example, but the gist to keep in mind is that the clause is supposed to protect the bargain from any later attack by one of the parties alleging that a verbal promise, inducement, description, or even a side agreement (written or oral) should alter the terms of the agreement that was signed.
One would normally assume that an exclusion clause such as this, if clear and unambiguous as to its meaning, would hold each party strictly to the four corners of their signed agreement, allowing no extraneous (or parol) evidence to be admitted to alter the bargain.
However, as noted in the decision of Pizza Pizza Ltd. v. 805837 Ontario Inc. 1997 CarswellOnt 5494, "the law in Ontario appears to be more flexible in terms of assessing the circumstances of each case to determine the effect of an entire agreement clause." In that decision, involving a franchise contract dispute, the issue arose as to whether the entire agreement clause in that case was sufficient to exclude liability for allegations of negligent misrepresentation by the defendant franchisee. The franchisee alleged that, as an inducement to enter into the franchise agreement, the plaintiff franchisor had made made various representations as to profit projections, success, and pooled costs.
