Entire agreement clauses in sports marketing agreements: a trap for the unwary!


by prof. dr. Ian Blackshaw[1]

 

Introductory remarks

So-called “boiler plate” clauses[2] are standard clauses found at the end of most commercial agreements. As their name suggests, these clauses are intended to reinforce and strengthen the agreements, and make them “water-tight” from a legal point of view.

As with standard clauses generally, they need to be used with care and only included where it is appropriate to do so; and, in any event, they need to be customised to reflect the particular commercial facts and circumstances of the deal. In other words, they should not be used slavishly and as a matter of course.

In fact, they can prove to be a blessing or a curse according to the particular case and their use may pose a trap for the unwary as we will point out in this article.

So, what are entire agreement clauses and when should they be used or, perhaps, more importantly, when should they not be used?

 

Entire agreement clauses

Such clauses, which are popular in sports marketing agreements, such as sponsorship and merchandising agreements,[3] are usually couched in the following terms:

This Agreement contains the whole agreement between the parties and supersedes any prior written or oral agreement between them in relation to its subject matter and the parties confirm that they have not entered into this Agreement upon the basis of any representations that are not expressly incorporated into this Agreement. No oral explanation or oral information given by any party shall alter or affect the interpretation of this Agreement.

When used correctly, such clauses can be very useful and have the effect of limiting all the parties’ rights and obligations to only the provisions that are actually contained within the agreement and any schedules forming part of the agreement.

This means that neither party can claim to have acted based on any statement, discussion or document not expressly contained within the agreement. This excludes so-called “side agreements” whether oral or in writing or any representations made in the course of the negotiations leading up to the conclusion of the agreement. Also, in the digital age, pre-contract e-mail exchanges made between the parties, which may or may not be important and may or not need to be expressly covered in the final agreement. Of course, any fraudulent pre-contract representations may not be excluded by virtue of an entire agreement clause.

Where the parties to an agreement intend certain pre-contract representations to be relied upon, such representations should be included as an express term of the agreement, either as a “condition”, that is a provision “going to the root of the contract” and, if breached, entitling the innocent party to rescind the agreement and also to claim damages; or a “warranty” which is more peripheral to the main purpose(s) of the contract and, if breached, entitling the innocent party to claim damages only.[4]

Before signing a contract containing an entire agreement clause, it is advisable for the parties to satisfy themselves that the contract really does incorporate the entire agreement reached between them and that nothing of importance – on either side – has been omitted.

Entire agreement clauses can have serious legal, financial and practical consequences for a party relying on a pre-contract “understanding” that has not been included in the final contract as the English High Court case of White v. Bristol Rugby Club[5] clearly demonstrates. Incidentally, this decision has been generally criticised as being an unduly harsh one but that, of course, is debatable!

 

The facts of the White and Bristol Rugby Club case

Julian White was a professional rugby player. Until 30 June 2001, he was under contract to a London club, Saracens. However, he wished to return to the West Country and, to that end, at the beginning of 2000 he instructed his agent to start looking for clubs in the West Country, who might employ him when his contract with Saracens came to an end.

As a result, his agent negotiated the terms of a three-year contract with Bristol Shoguns to run from 1 July 2001 at an annual salary of £ 80,000. At White’s request, it was agreed that he would be paid £ 15,000 of his salary in advance on signing the contract. A provision to that effect was included in a draft contract drawn up by Bristol’s chief executive. Under that provision:

Upon signing this contract, an advance of £ 15,000 will be paid to the player which will be deducted out of his first year’s salary. Should the player, for whatever reason, not join Bristol Rugby Club the £ 15,000 will of course be repayable.

At a meeting on 12 May 2000, White, his agent and the club’s chief executive went through the provisions of the draft contract and it was agreed that the provision relating to the £ 15,000 advance would be amended so that instead of the whole sum being deducted out of the salary payable in the first year, it would be repaid at the rate of £ 5,000 per annum over the three years of the contract term.

There was also some discussion as to the circumstances in which the £ 15,000 would be repayable. At the end of the meeting, White signed the contract. However, he did not ask for the £ 15,000 advance until September.

However, White began to have doubts about joining Bristol and, eventually, he decided that he wanted to exercise the right, which he thought he had, to opt out. He also decided to terminate his agreement with his original agent and appointed a new one. On 31 January 2001, the new agent wrote to Bristol notifying them that White would not be joining the club on 1 July 2001 and enclosing a cheque for £ 15,000 as repayment of the advance of salary. The letter alleged that the club’s chief executive had represented that White could walk away from the agreement at any time on repayment of the £ 15,000 and it was only in reliance on that representation that White had agreed to sign the contract. The club returned the cheque, maintaining that no such representation was made and that the contract was valid and binding.

Subsequent attempts to resolve the dispute amicably failed, notwithstanding an open offer from Bristol to White on 11 May 2001 to improve the contract terms by increasing his salary from £ 80,000 to £ 100,000, adding a bonus of £ 500 for each match in which he was selected to play in the first team and giving him an option to break the contract after the first season.

At all times since the end of January 2001, White denied that he was bound by any obligation to join Bristol. Since 1 July, which was the first day of employment under the contract, he was absent from the club premises and made no attempt to make contact with the club or to offer his services. The club, in turn, refused to pay him so long as he remained unwilling to make himself available to them.

In view of this standoff, White began legal proceedings against Bristol, seeking a declaration that he was not bound by the contract.

His primary case was that, by virtue of the alleged representation of the club’s chief executive, the contract contained an express oral term to the effect that he could opt out of it by returning the advance of £ 15,000.

In the event of a finding that the contract was still binding because it contained no “opt-out” clause, a further argument was advanced to the effect that the contract had been terminated by White’s repudiatory breach of contract and that Bristol, by their conduct in various respects, had accepted the repudiation as bringing the contract to an end. Alternatively, it was submitted that that conduct amounted to a repudiation by Bristol which White had accepted.

The High Court, Queen’s Bench Division [Bristol Mercantile Court] (Judge Havelock-Allan QC) on 17 August 2001 found that the contract between the claimant and the defendants remained valid and subsisting and dismissed the claim.

 

The English High Court decision in the White and Bristol Rugby Club case

The Court held as follows.

The contract between the claimant professional rugby player and the defendant rugby club could not be interpreted as containing an express oral clause allowing the claimant to opt out of the contract by returning a salary advance of £ 15,000.

Such an interpretation was precluded by a clause in the written contract under which the parties to the agreement acknowledged that “this agreement and its schedules together with the documents referred to in this agreement contain the whole agreement between the parties and that they have not relied upon oral or written representations made to them by other persons, its employees or agents”.

The Court noted that entire agreement clauses are an increasingly common feature of sophisticated and detailed contract documents and, if clearly worded so as to do so, which the clause in the present case was, are effective to exclude claims “based on collateral warranties or oral terms outside the four corners of the written document”.

In the present case, therefore, the clause precluded the claimant’s contention that the contract included a separate oral term not reflected in the written document or that anything said at a meeting which was not reflected in the written wording may nevertheless have acquired contractual force as a contract term or collateral warranty.

It could not be accepted that the provision in the agreement that “Should the player, for whatever reason, not join Bristol Rugby Club the £ 15,000 will of course be repayable”, when properly construed in the context of statements allegedly made, conferred a right to opt out on the claimant. The wording of that provision was not apt to create a right not to join the club; it simply addressed what was to happen if the player did not join. In any event, the evidence did not substantiate that any statement had been made which the claimant could fairly interpret as giving him the right to opt out of the contract on repayment of the salary advance.

The Court went on to say that there was nothing in the defendants’ conduct which indicated that they had accepted the claimant’s repudiation as bringing the contract to an end, notwithstanding their declared position that the contract was still open and the claimant was welcome to join them at any time.

An acceptance of a repudiation must be unequivocal. If a party says one thing and does another, his conduct is equivocal. Although it is possible for a party to a contract to declare that he is treating it as open for performance by the other party who is in repudiatory breach, but to be held in reality to have accepted the breach as bringing the contract to an end, that would be an unusual case and would probably only arise where there was conduct on the part of the innocent party which had effectively disabled him from entertaining further performance by the party in breach. For example, in the context of the present case, it would not have availed the defendants to announce that the claimant’s contract was being kept open if at the same time they had engaged someone to replace him. It was not suggested, however, that the defendants had done anything so final.

The Court further held that the defendants’ conduct in failing to pay the claimant his salary was not an indication of their acceptance of the claimant’s repudiatory breach in refusing to make himself available to train and to play for the club. Nor was it a repudiation of the contract by them. The claimant was not entitled to any salary because he did not do any work. Whilst it is entirely possible for a contract of employment to provide that an employee should receive his full wage even where he refuses to turn up for work through his own free choice and through no fault of the employer, the contract in the present case could not be read as containing any such provision.

It could not be accepted the defendants must be regarded as having accepted the claimant’s conduct as bringing the contract to an end because the trust and confidence on which the master and servant relationship is based had been irrevocably destroyed and they could therefore have no purpose in keeping the contract alive. If the logic of that argument was accepted, it would come very close to acknowledging that an employee can, by unilaterally refusing to serve his employer, bring about the termination of the contract of employment.

That was precisely, the Court pointed out, the result which Vice-Chancellor Megarry declined to countenance in Thomas Marshall Ltd v. Guinle[6]. In any event, in the present case, the master and servant relationship had not irretrievably broken down.

The Court went on further to point out that:

“[a] repudiation of a contract is not to be lightly inferred (see Lord Wright in RossT Smyth v Bailey [1940] 3 AER 60 at 71). If, as I find, Bristol have not accepted Mr White’s repudiation of the contract as bringing it to an end, they have certainly not repudiated it themselves […] no reasonable person, viewing the whole of Bristol’s conduct since the end of January 2001, would infer that Bristol had repudiated the Contract.

Thus, the Court found that White’s contract with Bristol Rugby Club was valid and remained in existence and that White was legally bound by it. In other words, Bristol was entitled to damages from White for his anticipatory breach of the contract. All, because of a misunderstanding and a failure to expressly include in the final agreement the alleged representation made by Bristol to White in the pre-contract negotiations, which was excluded by the entire agreement clause that was included in the agreement, which he had signed. A costly mistake!

 

Concluding remarks

Entire agreement clauses, like other so-called “boiler plate” clauses, should be included in sports marketing agreements with great care with a clear understanding of their legal nature and effects.

They should never be included as a matter of course, but always with a view to their usefulness and relevance to the particular sports marketing deal that needs to be reflected contractually in the agreement concerned. They should also be customised to fit the particular circumstances of each case. This is particularly true in the case of entire agreement clauses (as noted above).

As with any other provisions in sports marketing agreements, entire agreement clauses, where it is appropriate to include them, should be drafted with great care and precision to avoid any ambiguities and thus disagreements in the future regarding their meaning, application and scope.

The old drafting adage that standard clauses have been included in agreements because they do not do any harm and may also do some good is a dangerous one to follow in practice. Each clause included should be carefully considered; serve a definite purpose and, therefore, be deliberately included; and not merely included on the off chance – or in the pious hope – that they may do some good!

Let the White and the Bristol Rugby Club case and entire agreement clauses serve as a salutary lesson to us all!

 

[1] International sports lawyer, academic, author and member of the Court of Arbitration for Sport and may be contacted by e-mail at ian.blackshaw@orange.fr.

[2] Also known, in the jargon, as “belt and braces” clauses!

[3] See chapter 19 on “boiler plate” clauses in: Prof Dr Ian Blackshaw, Sports Marketing Agreements: Legal, Fiscal and Practical Aspects (TMC Asser Press, The Hague, The Netherlands 2012).

[4] Contrast the English cases of Poussard v. Spiers and Pond (1876) 1 QBD 410 and Bettini v. Gye (1876) 1 QBD 183.

[5] [2002] IRLR 204.

[6] [1978] IRLR 174 HC.