Boris Ignachkov This article analyzes the case of Axa Sun Life Services Plc v Campbell Martin Ltd [2011] EWCA Civ 133, which is pivotal for law students studying contract law. It explores the limitations of “entire agreement” clauses in contracts, particularly regarding their ability to exclude liability for misrepresentation. The case provides valuable insights into contract drafting and interpretation.
Legal Principles and Key Points in Axa Sun Life Case
- In the case of Axa Sun Life Services Plc v Campbell Martin Ltd [2011] E.W.C.A. Civ 133, it was held that entire agreement clauses do not generally exclude one party from liability for prior misrepresentations. Unless the clause explicitly deals with liability for misrepresentation, it will be construed as only barring claims for breach of warranty.
Facts of the Case Axa Sun Life
- C was an insurance company that agreed to act as a representative for companies D on C’s standard terms.
- Clause 24 of C’s contract was an ‘entire agreement’ clause, superseding ‘any prior promises, agreements, representations, undertakings or implications whether made orally or in writing.’
- Clause 24 did not affect any obligations in any such prior agreements that would continue after termination.
- Clause 15.2 barred D from relying on rights of set-off, counterclaim or credit against C. Clause 1.6 of Schedule 4 stated that C’s statements as to monies owed to them by D were binding unless there was a manifest error.
- C brought an action against D for sums due under this contract. Against these claims, D sought to assert misrepresentation, breaches of warranties and implied terms.
Issues in Axa Sun Life Case
- Did the contract terms prevent D from relying on counterclaims of misrepresentation, breaches of warranties and implied terms?
- Even so, were the contract terms void for unreasonableness under the Unfair Contract Terms Act 1977?
Held by the Court of Appeal (Civil Division)
- Finding for D, that clause 24 did not exclude liability for misrepresentation as it did not explicitly refer to misrepresentation or use the normal formulas for clauses with that effect. D could rely on misrepresentation as a defence, but D could not rely on breach of warranties as such.
- While clause 24 and clause 1.6 of Schedule 4 were reasonable under the 1977 Act, clause 15.2 was void for unreasonableness. Since the rest of the contract preserved D’s rights to set offs and defences, clause 15.2 was incongruous with the contract.
Rix L.J.
- Given that clause 24 is concerned with agreements and not representations, and did not refer to ‘misrepresentations,’ it is not fertile ground for C’s argument that the clause supersedes misrepresentation.
- “The essence of agreement is that it is concerned with matters which the parties have agreed. The essence of misrepresentation, however, is that it is not concerned with what the parties have agreed, but rather with inaccurate statements (innocently, negligently or fraudulently inaccurate statements) which have been made by one party to the other, have been relied upon by the representee in entering into their agreement, and which may give the representee rights to rescind that agreement and/or claim tortious or quasi-tortious damages by reason of loss arising out of entering into the agreement. In a clause therefore in which three parts are plainly concerned only with agreement, including two other parts of the self-same sentence…and where the critical single word ‘representations’ (not misrepresentations) is likely in context to refer to representations which might be argued, but for the clause, to become terms of the agreement, and where the other important word ‘supersede’ is essentially a word of agreement rather than exclusion, I would thus provisionally conclude that misrepresentation and the exclusion of misrepresentation or liability for it are simply not the business of the clause at all” [81].
- Alman and Benson v Associated Newspapers Group Ltd [1980] held that for a clause to exclude liability for misrepresentation it would require an explicit term, along the lines of a term ‘acknowledging that the parties had not relied on any representations entering into the contract.’
- Similarly, Thomas Witter v TBP Industries [1996] held that a party seeking protection from liability for damaging untrue statements cannot be mealy-mouthed in his cause. They must make it readily apparent that they are limiting liability for falsehoods.
Significance of the Case on the Development of the Law
The Axa Sun Life Services Plc v Campbell Martin Ltd case is notable for its clarification of “entire agreement” clauses and their impact on contract law, particularly regarding misrepresentation:
- Clarification of Misrepresentation and Entire Agreement Clauses: The court made clear that entire agreement clauses do not inherently exclude liability for misrepresentation unless expressly stated. This emphasizes the necessity for explicit language, a principle similarly highlighted in cases like Inntrepreneur Pub Co (GL) v East Crown Ltd [2000], where the effectiveness of entire agreement clauses was also debated.
- Impact on Contractual Clarity and Fairness: This case has influenced contract drafting, ensuring terms are explicit about what liabilities or previous representations are excluded. This approach aligns with the reasoning in Thomas Witter Ltd v TBP Industries Ltd [1996] where the application of entire agreement clauses was scrutinized to determine the extent of their enforceability.
- Interaction with Statutory Provisions: The case underscores how entire agreement clauses interact with statutory protections such as those under the Unfair Contract Terms Act 1977. It builds on precedents like Watford Electronics Ltd v Sanderson CFL Ltd [2001], where the courts also examined the reasonable expectations of parties regarding the limits of contract terms.
Exam Questions and Answers
Below you will find answers to questions that are most commonly asked based on this case.
How does this ruling affect the enforceability of standard form contracts beyond the realm of misrepresentation?
The ruling in Axa Sun Life Services Plc v Campbell Martin Ltd emphasizes the importance of clear language in entire agreement clauses, affecting standard form contracts by necessitating greater transparency and explicitness in contract drafting. This affects not only misrepresentation but also clauses related to liability and warranty, ensuring that parties must clearly understand their rights and obligations. This principle echoes in cases like Gillette UK Ltd v Edenwest Ltd [1994], which underscored the need for clarity in contractual terms.
What implications does this case have for the interpretation of contractual terms in other areas of commercial law?
This case sets a precedent for the strict interpretation of contractual clauses, particularly entire agreement clauses, across different areas of commercial law. It highlights the necessity for explicit exclusion of liability for misrepresentation, which can influence contractual interpretations in fields such as technology, real estate, and service agreements. The approach is similar to that seen in Photo Production Ltd v Securicor Transport Ltd [1980], where the terms were strictly construed to determine the scope of liability.
How do courts approach the assessment of reasonableness in entire agreement clauses post this decision?
Post-Axa, courts assess the reasonableness of entire agreement clauses under the Unfair Contract Terms Act 1977, examining whether the terms are fair and transparent. The decision encourages courts to consider the context in which the contract was made and whether the clause disproportionately disadvantages one party. This is informed by cases like Director General of Fair Trading v First National Bank plc [2001] where the Supreme Court highlighted the importance of fairness in contractual dealings.
