Beware: Decisions Raise Major New Weakness For Commercial Contracts

A few recent court decisions may disrupt the enforceability of contracts (including real estate agreements), and not in a good way.

These decisions deal with entire agreement clauses, which were once thought to be a complete defence to situations where one party tries to escape their obligations under the contract.

The entire agreement clause

An "entire agreement clause" is a very common provision in real estate contracts and is almost always found in instruments like purchase-and-sale agreements, commitment letters, commercial leases and development agreements.

Essentially, an entire agreement clause states that there are no agreements between the parties outside of the bounds of the contract. This means the contract itself is the only instrument that governs the relationship between the parties and none of the parties to the contract may rely on any other representations that were supposedly made before (or after) the contract is executed.