Clause for celebration: the effectiveness of entire agreement provisions

Entire agreement clauses are very common. This recent decision confirms their effectiveness: JMW Solicitors v Injury Lawyers 4U.

Background – shareholder dispute 

Some firms of solicitors, including JMW, set up a company, Injury Lawyers 4U. The original shareholders' agreement was amended by a supplemental deed to change the price of participation depending on whether you were a founding shareholder or a new panel member. A new shareholders' agreement, entered into some time later, made no mention of this price differential and contained an entire agreement clause.  When, some time later, the directors formally stopped applying the differential pricing, JMW and others sued.  Their case was put as breach of the original shareholders' agreement (as amended by the supplemental deed), breach of the deed on its own as a collateral warranty, or, alternatively, estoppel by convention. They sought a declaration that the differential pricing still applied. Injury Lawyers 4U applied for summary judgment, relying on the entire agreement provision in the new shareholders' agreement, saying JMW had no reasonable prospect of success.

The effectiveness of an entire agreement clause

The court held that any argument that the provision in the supplemental deed superseded the new shareholders' agreement was “hopeless”. The court referred to: 

• The clear and unambiguous language used stating that the new shareholders' agreement constituted “the whole agreement”.
• The explicit reference to the fact that the new shareholders' agreement “supersedes any previous arrangement, understanding or agreement between them”.
• The recitals in the new shareholders' agreement indicating the parties’ intention to consolidate and update previous agreements “in their entirety”.
• What it discerned was the parties’ objective intention.

The entire agreement clause was also effective to defeat the claim of estoppel based on pre-contractual representations. For post-contractual representations you would look to a non-oral modification clause.

The court also did not accept that JMW had any prospect of being able to rectify the new shareholders' agreement. Fundamentally, the court did not accept that what the directors had done was any more than exercise their discretion to continue the price differential for a period while being under no legal obligation to continue to do so. 

Judgment: JMW Solicitors v Injury Lawyers 4U