Commercial contracts often contain an ‘entire agreement clause’. An entire agreement clause stipulates that the written agreement contains all the arrangements between the parties and usually reads along the lines of: “This agreement constitutes the entire agreement between the parties”. This article discusses the effect of an entire agreement clause in a contract drawn up under Dutch law.
Origin of the entire agreement clause
The entire agreement clause comes from US and English law and is related to the ‘parol evidence rule’ which applies in these traditions. Based on this principle, a written contract contains all the agreements between the parties and evidence from outside this contract is not admitted. This parol evidence rule is not absolute, however; sometimes the court rules that evidence from outside the written contract may nonetheless be admitted. If the parties want to be certain that the parol evidence rule is applied, they include an entire agreement clause in the contract.
Interpretation of contracts under Dutch law
The inclusion of an entire agreement clause has blown over from the English and American legal traditions to the Netherlands. However, Dutch law does not have the parol evidence rule (or an equivalent to this). The so-called Haviltex standard is the main rule in the Netherlands. Based on the Haviltex standard, what is decisive for the interpretation of a contractual provision is what the parties could both reasonably have attributed to this provision in the given circumstances and what they could reasonably expect from each other in this respect. In interpreting a contract, the court can therefore take note for instance of statements made by the parties and draft versions of the final agreement.
Haviltex vs. entire agreement clause
An entire agreement clause excludes these means of evidence (extrinsic to the contract). In its decision of 5 April 2013, the Supreme Court confirmed, however, that in interpreting commercial contracts, the Haviltex standard is the starting point and the circumstances of the case must therefore be taken into account. On grounds of the Haviltex standard, the effect of an entire agreement clause also changes depending on the circumstances of the case. These days, parties often include an entire agreement clause or copy it from a model contract more or less unthinkingly, without realising its effect. In such a case, it makes sense that in interpreting the contract, the court should nonetheless assign some significance to, for example, statements made and actions performed before the contract was concluded, despite the entire agreement clause. In short: whether the entire agreement clause defeats the Haviltex standard also depends on the circumstances of the case.
An entire agreement clause has a different effect in Dutch law than it does in English or US law. Including an entire agreement clause in a contract which is subject to Dutch law does not automatically mean that in interpreting the contract, the court will not assign any significance to, for example, statements made and actions performed before the contract was concluded.