This article appeared in the April 2017 issue of Club Life.
A club, like any other commercial enterprise, will be involved in many commercial relationships and transactions in the course of its operations. These commercial arrangements will more than likely be regulated by a contract between the club and the other party – it may be verbal or in writing but it will be a contract nonetheless.
A club’s choice between a verbal and written contract is often a matter of commercial reality. For example, it would not make much commercial sense for the club to require one of its members or guests to enter a written contract when purchasing a drink from the bar, but it would make commercial sense for the club to enter into a written contract with the supplier of that drink.
The great advantage of the written contract is that it allows each party to clearly identify their contractual obligations and rights. Written contracts can be very long and contain numerous provisions, which might be standard as far as lawyers are concerned but they are usually there for a very good reason, whether that be due to developments in case law or related to commercial experience and practice.
One of those “standard” provisions is what is commonly referred to as the “Entire Agreement” clause. This clause comes in a variety of forms. Examples include:
“This Agreement constitutes the entire understanding and agreement of the parties about its subject matter and any previous understanding or agreements on that subject matter cease to have any effect.”
“This Agreement is the entire agreement between the parties in relation to the subject matter and replaces all previous representations or proposals not contained in this agreement.”
So, what is the purpose of such a clause and why is it important? In simple terms, the clause provides certainty as to the full extent of the agreement reached by the parties.
The clause can be used to stop one party saying that certain promises were made and not kept if the promises do not appear in the final version of the signed contract. It also has the effect of saying that any agreement or understanding made before the signed contract will cease to have any legal effect unless they appear in the contract.
So what lesson is there here for a club? Simply put, make sure the final contract – before it is signed – includes all the matters that your club requires to be in the contract and have been discussed and agreed with the other party. Once the contract is signed, it may be too late to claim that the other party should honour promises or agreements that, even if made, are not provided for in the contract.
If it is very important to make sure that whoever is dealing with the club’s solicitor gives clear and complete instructions on all the points that should be included in the contract so he or she can include appropriate provisions. This process may take more time and expense at the front end of the contract process, but it can save a lot of grief and disappointment at the other end if things do not go to plan and the club becomes involved in a contractual dispute.
For more information contact Bruce Gotterson on b.gotterson@pigott.com.au
This article is intended to provide general information in summary form on a legal topic, current at the time of publication. The contents do not constitute legal advice and should not be relied on as such. Formal legal advice should be sought in specific circumstances.