The Entire Agreement Clause : comparative analysis of the Entire Agreement Clause: “Can we speak of convergence between the English and the Dutch legal systems when taking the "Entire Agreement Clause" in commercial con

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MASTER THESIS EUROPEAN PRIVATE LAW

THE ENTIRE AGREEMENT CLAUSE

COMPARATIVE ANALYSIS OF THE ENTIRE AGREEMENT CLAUSE:

“CAN WE SPEAK OF CONVERGENCE BETWEEN THE ENGLISH AND THE DUTCH LEGAL SYSTEMS WHEN TAKING THE

‘ENTIRE AGREEMENT CLAUSE’ IN COMMERCIAL CONTRACTS INTO ACCOUNT?”

Daniëlle van Dorst June 2015

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Topic The Entire Agreement Clause

Sub-title Comparative analysis of the Entire Agreement Clause: “Can we speak of convergence between the English and the Dutch legal systems when taking the ‘Entire-Agreement Clause’ in commercial contracts into account?”

Date June 2015

Supervisor M.W. Hesselink

Second reader

Author Daniëlle van Dorst

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List of abbreviations

BW Burgerlijk Wetboek (Dutch Civil Code)

CAO Collectieve Arbeidsovereenkomst (Collective Labour Agreement)

EA-clause Entire Agreement Clause

HR Hoge Raad (Dutch Supreme Court) PECL Principles of European Contract Law

Rv Wetboek van Burgerlijke Rechtsvordering (Dutch Code of Civil Procedure) STC-clause Subject To Contract Clause

UCTA Unfair Contract Terms Act 1977

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Introduction

Lawyers tend to use standardised contracting models where practicable to save time drafting and negotiating (time is, after all, money) and to aid contractual certainty by using familiar ‘tried and tested’ provisions. The use of Anglo-American boilerplates and standard clauses within contracts has proliferated through the dominant position of England and the USA in international trade and the establishment of multinational companies. A commonly used boilerplate clause is the ‘Entire Agreement Clause’ (hereinafter referred to as the ‘EA-clause’). Its objective is to ensure that the contract contains the entirety of the agreement between the parties, creating contractual certainty for the parties1_{. Parties want to know beforehand what the legal effects will be of concluding their}

contract. In this way, legal risk can be quantified and the parties can better determine whether the contract is worth entering into.

The first notification of an EA-clause was in a series of contracts drafted since 1973 by a leading London law firm2. Subsequently, lawyers of common law jurisdictions can be said to have ‘endorsed’ the common use of the EA-clauses as boilerplate in continental Europe by insisting on their inclusion in international contracts. This has resulted in the use of such clauses becoming more widespread than only covering common law jurisdictions. However, whilst these provisions have been adopted and relied upon in the common law the validity and enforceability of EA-clauses is not always recognised in civil law jurisdictions.

Setting the Problem

Commercial contracts are characterised by the fact that they are (almost always) extensively negotiated between two or more professional parties, often written by lawyers. Lawyers from different jurisdictions include an EA-clause into commercial contracts to aid contractual certainty. To ensure the objective of aiding contractual certainty with an EA-clause one of the main prerequisites is legal certainty of the effects of that clause in the applicable law. However, as will be argued in this thesis, the legal effects of an EA-clause are not as straightforward for civil law jurisdictions as it is under common law. Nonetheless, the fact that continental lawyers have adopted and transplanted EA-clauses as boilerplate in their practice appears like convergence between the common and civil law legal systems when taking the legal effects of the EA-clause into account3. The main objective of this thesis is, therefore, to provide a comparative analysis of the legal effects of EA-clauses between a common law and civil law representative, specifically the English and the Dutch legal systems4_{. In so}

doing, thereby answering the main question: “Can we speak of convergence between the English and

1_{Schelhaas, De entire agreement clause in het Europese contractenrecht, in: Busch & Schelhaas (ed.),} 2_{Fontaine & De Ly, Drafting international contracts, 2006, p. 137}

3_{Samuel, An Introduction to Comparative Law Theory and Method, 2014, p. 115-117 & 163}

4_{Based on the division of jurisdictions into legal families by: Zweigert & Kötz (translated by Weir), An}

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the Dutch legal systems when taking the legal effects of the ‘Entire-Agreement Clause’ in commercial contracts into account?”

Method of Comparison

This thesis will use a functional method when comparing the legal effects of EA-clauses. This method is concerned with the comparison of the function of a legal concept or institution between different legal families (or sectors or periods of time) looking for similarities and/or differences5_{. In this thesis}

the legal effects of EA-clauses in the English legal system is taken as starting point for comparison as EA-clauses originated from the common law tradition. The Dutch legal system will represent the civil law tradition and will be the jurisdiction of comparison. Is an EA-clause valid and enforceable in the Netherlands? Or will the wording of an EA-clause have a different legal effect in the Dutch law than it has under the English law?

The functional method is also concerned with the presumption of similarity (‘praesumptio similitudinis’)6. Legal systems may apply different concepts or institutions; however, in the end societies face similar needs and therefore use legal techniques with similar results7_{. Perhaps other}

more suitable legal techniques from one jurisdiction could meet the same objectives for which an EA-clause was transplanted in the first place. This thesis will, therefore, also consider the possibility of functional equivalents of EA-clauses in the Dutch law.

Thesis Outline

Before entering into the discussion of comparison, the objectives of the inclusion of EA-clauses into a commercial contract and its different functions will be highlighted. The first chapter will, therefore, introduce the EA-clause in a contractual context. The second chapter will consider English law and the legal effect of the inclusion of an EA-clause within a commercial contract. The third chapter will provide for a general observation of the Dutch contract law and what legal effects an EA-clause therein currently has. The fourth chapter will compare the English concept of the EA-clause with the validity and enforceability of an EA-clause under Dutch law. Are there similarities, differences or are there other legal techniques that can be used to meet the objectives for which an EA-clause has been included in the contract? This thesis will conclude with a discussion on the convergence between the English and the Dutch law systems when taking the EA-clause into account.

5_{Samuel, An Introduction to Comparative Law Theory and Method, 2014, p. 65-78}

6_{Michaels, The Functional method of comparative law, in: Reimann & Zimmermann (ed.), The Oxford}

Handbook of Comparative Law, 2006, p. 369-372

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1. Contracts and the Entire Agreement Clause

1.1. Negotiating Contracts

(Commercial) business is about taking risks and managing these risks to maximise profits8. One of the key elements in business is the use of contracts by commercial parties to attempt to establish a degree of contractual and legal certainty. Contracts have been identified as the principal instrument by which companies communicate with each other: whereby the parties identify their common understanding of what their expectations are with respect to the transaction9. The contract is concluded to determine the bargain agreed upon so that the parties can rely upon the content of the contract. Not only will parties negotiate about the bargain agreed upon they will also use the contract as a means to eliminate the effects of other risks, such as the risks of unforeseen circumstances or other uncertainties10_{. Contracts}

try to define these uncertainties, limit liability and allocate the associated risks to the parties.

One of the leading principles in contracting is the ‘freedom of contract’11_{. If parties could}

freely include everything that they wanted and needed in the contract the only rule required would be: ‘pacta sunt servanda’ (Latin for “agreements must be kept”12_{). Contractual certainty will then lead to}

‘legal certainty’. However, negotiations are never perfect, consequently contracts are never perfect. Parties are bound by costs, time and other factors that limit the possibility to make explicit arrangements about every imaginable circumstance. Inequality of bargaining power can also lead to compromises in the provisions agreed to and the accepting of their associated risk13. This can especially be seen when parties need to make the deal; they will not always negotiate the terms as they should have, or will accept terms that are less favourable to them.

The ‘freedom of contract’ is furthermore limited by conflicting principles such as the principles of ‘certainty’ and ‘fairness’14. When taking the contract law of the common and civil law into account a clear distinction can be made between the two legal families. The common law is characterised by the principles of ‘certainty’ and ‘predictability’15_{. A contract is negotiated in detail so}

that in the end it provides little room for the Court to intervene. Civil law, on the other hand, relies

8_{Echenberg, Negotiating international contracts: does the process invite a review of standard contracts from}

the point of view of national legal requirements?, in: Cordero-Moss (ed.), Boilerplate Clauses, International Commercial Contracts and the Applicable Law, 2011, p. 11

9_{Vettese, Multinational companies and national contracts, in: Cordero-Moss (ed.), Boilerplate Clauses,}

International Commercial Contracts and the Applicable Law, 2011, p. 23

the point of view of national legal requirements?, in: Cordero-Moss (ed.), Boilerplate Clauses, International Commercial Contracts and the Applicable Law, 2011, p. 11

11_{Zweigert & Kötz (translated by Weir), An introduction to Comparative Law, 1998, p. 324-327} 12_{Black's Law Dictionary, 2004 (8th ed.)}

13_{Zweigert & Kötz (translated by Weir), An introduction to Comparative Law, 1998, p. 331-334} 14_{Cordero-Moss, International Contracts between Common Law and Civil Law: Is Non-State law to be}

preferred? The Difﬁculty of Interpreting Legal Standards Such as Good Faith, 2007/1 [online]

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more on codified law, ensuring ‘fairness’ and the possibility of the Court to intervene16_{. An extensive}

body of rules is applicable that governs the contractual relationship between the parties. Traditionally, continental contracts were less detailed than contracts drafted by common law lawyers as the latter is driven by a necessity of professional prudence to consider and draft for every eventuality. Although one must not exaggerate these differences, the underlying legal structures of the common and civil law still rely upon these characteristics17.

To save time drafting and negotiating, commercial parties use boilerplate and standard clauses18_{. Due to the dominant position of the common law countries in international trade and the}

establishment of multinational companies, the use of drafting models based on common law techniques is commonplace within the commercial and legal world19. This is, however, not without legal risks, as these drafting techniques will not always align with the governing law of the contract20_.

One possibility to eliminate the associated legal risks is to incorporate a provision into the contract concerned with a ‘choice of law’ that corresponds with the drafting models21_{. This will, nonetheless,}

not always be sufficient. As is stated above, the negotiation process is far from perfect and limited by time and money. In the end, a contract can be seen as an imperfect compromise between two parties. International commercial contracts could, therefore, contain elements of different jurisdictions and will not always reflect the structure of the chosen governing law22. Not only because through the negotiation process the parties end up accepting provisions that are not governed by their own law, but also because they accept standard provisions and boilerplate clauses.

Boilerplate clauses can be seen as a result of ‘best practices’ developed in business with regard to the allocation of contractual risks23. Parties try to attribute more certainty to the contract by including boilerplate clauses that attempt to exhaustively regulate the contract’s interpretation, enforceability, validity and other legal effects24_{. Consequently, it is hoped, to exclude the effects that}

the applicable law may have on the contract. Although the use of these clauses is widespread in day-to-day business these clauses will not always be enforced as the parties wanted and/or expected.

16_{Ibid, p. 10-13 [online]; Vettese, Multinational companies and national contracts, in: Cordero-Moss (ed.),}

Boilerplate Clauses, International Commercial Contracts and the Applicable Law, 2011, p. 24

17_{See: Neuhaus, P.H., Legal Certainty versus Equity in the Conflict of Laws, 1963 [online]}

19_{Ibid, p. 20-31}

the point of view of national legal requirements?, in: Cordero-Moss (ed.), Boilerplate Clauses, International Commercial Contracts and the Applicable Law, 2011, p. 18

21_{See for example: Article 3 Rome I Regulation}

22_{Specifically on this subject: Cordero-Moss, International Contracts between Common Law and Civil Law: Is}

Non-State law to be preferred? The Difﬁculty of Interpreting Legal Standards Such as Good Faith, 2007 [online]

24_{Cordero-Moss, Does the use of common law contract models give rise to a tacit choice of law or to a}

harmonized, transnational interpretation? Cordero-Moss (ed.), Boilerplate Clauses, International Commercial Contracts and the Applicable Law, 2011, p. 51

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Boilerplate clauses are moreover used as a tool of standardization in contracting. The denotation of a clause as ‘boilerplate’ can give the presumption that it is ‘copied and paste’ in every contract so that the content is every time the same. This does not always have to be the case, the clause is ‘boilerplate’ or ‘standard form’ in the sense that one party (or possibly both) requires a clause of that type, however, parties still have room to make arrangements on the precise content25_{. The process of}

negotiation and the circumstances of the case will influence the eventual content of these clauses. Conversely, lazy drafting can result in boilerplate clauses’ being included that has not been tailored to the particular circumstances, with both parties having a different understanding of what such clause is meant to cover and thereby negating the objective of contractual certainty.

The accepting of clauses and provisions that on their own do not correspond with the governing law of the contract can be detrimental to the establishing of legal certainty by means of the contract.

1.2. General remarks about the Entire Agreement Clause

An EA-clause is a boilerplate clause that is included into contracts to explicitly promote the objective of legal certainty by excluding certain elements or documents from the contract. If one of the parties claims that their agreement was partly in writing and partly oral or relied upon other extrinsic evidence, the EA-clause can offer direction; by declaring that the contract constitutes the ‘entire agreement’ between the parties. Hence the name ‘Entire Agreement Clause’ because it is ‘merging’ or ‘integrating’ the contract by excluding all that does not belong to the ‘four-corners of the contract’26. An example of an EA-clause reads as follows:

“This contract, including all the schedules attached hereto which represent an integral part hereof and have been signed by the parties, constitutes the entire agreement between the parties”27.

The EA-clause does not have one standard form or function. Most EA-clauses explicitly state what evidence is excluded from the contract. The initial function depends on the exact wording of the relevant clause. Nonetheless, it can be assumed that they all have an exclusionary function of certain agreed upon extrinsic evidence28. The Working group on International Contracts identified six different functions that may be attributed to EA-clauses: “1) Exclusion of Simulation (side letters, contre-letters); 2) exclusion of previous contracts; 3) exclusion of pre-contractual documents; 4) exclusion of written or oral representations; 5) exclusion of general conditions; 6) exclusion of future

25_{Peel, The common law tradition: application of boilerplate clauses under English law, in: Cordero-Moss}

(ed.), Boilerplate Clauses, International Commercial Contracts and the Applicable Law, 2011, p. 131

26_{Other names are also used such as: ‘integration clauses’, ‘merger clauses’ and ‘four-corner clauses’. This}

thesis will only use the denotation of ‘entire agreement clauses’

27_{This example is taken from: Fontaine & De Ly, Drafting international contracts, 2006, p. 130} 28_{Fontaine & De Ly, Drafting international contracts, 2006, p. 131}

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contracts”29_{. However, not all functions will be considered in this thesis. This thesis is only concerned}

with the EA-clause in its narrow sense (hereinafter referred to as the ‘normal’ EA-clause). Therefore, the fourth function attributed to the EA-clause by the Working group will not extensively be considered. This function precludes the functioning of the doctrine of misrepresentation or mistake that gives parties a possibility to declare a contract null and void30_{. This function can, however, in this}

regard be attributed to a ‘non-reliance clause’, which specifically excludes liability for misrepresentation31_.

Another type of clause that needs to be highlighted and distinguished from EA-clauses are the ‘Subject To Contract’ (STC) Clauses. An STC-clause is used in the preliminary negotiations to exclude liability from incomplete contracts, because parties did not reach any enforceable agreement32_{. Where an EA-clause tries to exclude extrinsic evidence from the content of the contract,}

a STC-clause is used to integrate (the negotiated) documents into the content of the contract when that contract is formally concluded.

It is debatable whether an EA-clause can also have, next to its exclusionary objective, an interpretational objective to show the effects of the contract. Fontaine and de Ly argue that on the grounds of the historical origin of the clause it cannot impose any strict or literal interpretation or intro-interpretation in order to deal with ambiguities and gaps in the contract33. However, the concept of ‘interpretation’ cannot precisely be defined with regard to different explanations of this concept between jurisdictions (as will become apparent in the next chapters for the English and the Dutch legal systems).

One of the most important concerns regarding the clause is what exact value an EA-clause has34_{. If an EA-clause has a conclusive nature the legal effects of the written contract can be}

enforced on the other party. This makes the presumption that the contract is deemed to express the parties’ full agreement irrefutable35. On the other hand, it can also be debated that an EA-clause will only have a (very strong) persuasive effect and is therefore rebuttable. What exact value an EA-clause has will also depend on the governing law of the contract.

The Principles of European Contract Law (PECL) and the UNIDROIT Principles for International Commercial Contract (UNIDROIT Principles) both explicitly recognise the validity of EA-clauses36_{. This facilitates insights into possible solutions on the previous mentioned issues.}

29_{Ibid, p. 130-150} 30_{Ibid, p. 145}

31_{For a significant understanding of non-reliance clauses extensive knowledge should be provided on tort and}

fraud. This, however, falls outside the scope of this thesis

32_{Cordero-Moss (ed.), Boilerplate Clauses, International Commercial Contracts and the Applicable Law, 2011,}

p. 120

33_{Fontaine & De Ly, Drafting international contracts, 2006, p.131}

34_{McLauchlan, The entire agreement clause: Conclusive or a question of weight?, 2013/3 [online]} 35_{Fontaine & De Ly, Drafting international contracts, 2006, p.117}

36_{Both recognise the EA-clause, although named ‘merger clause’ in both codes: Article 2:105 (1) PECL &}

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Although both international codes on contract law consider a subjective interpretation of contracts37_,

they both provide the possibility to exclude certain extrinsic evidence from the contract by including an EA-clause in the contract38_{. However, differences exist on the enforceability of an EA-clause in}

both codes. The UNIDROIT Principles recognises the conclusive nature of the clause. The PECL, however, only recognises the conclusive nature of the clause when it has been individually negotiated between the parties. If the clause is not individually negotiated an EA-clause can only create a presumption that the contract is the entire agreement39_{. Thereby leaving room to reverse the burden of}

proof to produce extrinsic evidence to show that the agreement was not fully in writing. This difference between the PECL and the UNIDROIT Principles can be explained by their different scope and their need of a different level of protection; the UNIDROIT Principles are only applicable on commercial transactions, where the PECL also covers consumer transactions40_.

Another distinction between these codes is situated in the fact that the UNIDROIT Principles explicitly provide that extrinsic evidence can still be used as a means for interpretation of the written contract41_{. Compare this with the PECL where, in contrast, interpretation of prior statements can be}

excluded or restricted when an EA-clause is individually negotiated42. Finally, the PECL provides leeway to waive the clause when statements or conduct by one party preclude the EA-clause from being reasonably relied upon43. Although these codes recognise the importance of the EA-clause for international transactions by explicitly including a provision on this legal concept into their codes, it also shows that even in international trading there is no common ground on the legal effects of these clauses.

What exact value and effect an EA-clause will eventually have will depend on the wording of the clause and the law that governs the contract. This will be illustrated in the following chapters by comparing the legal status of EA-clauses in the English and the Dutch legal systems.

37_{Article 5:101 PECL & Article 4.1 UNIDROIT principles}

38_{Article 2:105 (1) PECL excludes: “prior statements, undertaking or agreements which are not embodied in the}

writing”; article 2.1.17 UNIDROIT principles excludes: that a contract “cannot be contradicted or supplemented by evidence of prior statements or agreements”

39_{Article 1:101 PECL highlights the general application of the PECL} 40_{Article 2:105 (2) PECL}

41_{See: Comment on article 2.1.17 & article 4.3 UNIDROIT principles} 42_{Article 2:105 (3) PECL}

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2. English Contract Law

English law does not have any contract law code or act, but is a product of English precedents, established through case law, also known as ‘The Common Law of Contract’44_{. The validity and}

enforceability of EA-clauses has been widely accepted in the common law of contract. However, before entering into the debate on the validity and enforceability of EA-clauses insights will be provided into the establishing of the content of a contract by the Courts, as the significance of EA-clauses is to be found in the influencing of the ‘true’ content of the contract.

2.1. The Content of a Contract

The content of a contract depends primarily on the words used by the parties, also known as the express terms45_{. Terms that are not expressly stated can, in some circumstances, also be implied (see}

below). The Court will first try to establish the meaning and legal effects of the contract by interpretation of the express terms46_.

Traditionally, judges have been reluctant to look any further than the contract itself when identifying the meaning of the contract47_{. Here the parol evidence rule is of importance. Although the}

status of this rule is not as certain as it once was, the understanding of this rule is essential for the eventual understanding of the EA-clause. The parol evidence rule implies that no evidence can be admitted to add to, vary or contradict a deed or a written instrument48_{. The rule can be regarded as an}

expression of the objective theory of interpretation; the Court is concerned not with the parties’ actual intentions but with their manifested intention49_{. Evidence of the parties’ negotiations}50_{and other}

extrinsic evidence are excluded from the content of the contract51. However, the rule is only applicable when the parties intended that their agreement was wholly contained in the written contract52. Thus the complete agreement between the parties must have been confined to the ‘four corners of the contract’.

In 1986 the English Law Commission has proposed to ‘abolish’ the parol evidence rule as a rule of law53. First of all, evidence is always admissible to determine that the written contract was not

44_{Including equity for this purpose: Beale, Chitty on contracts, 2012, para.1-003; see also: Collins, Lord}

Hoffman and the Common Law of Contracts, ERCL 2009, p. 474-484 [online]

45_{Peel, The Law of Contract, 2010, para. 6-001} 46_{Beale, Chitty on contracts, 2012, para.12-041} 47_{Beale, Chitty on contracts, 2012, para. 12-096}

48_{High Court of Justice (Chancery Division) 18-12-1923, [1924] 1 CH 287 (Jacobs v. Batavia & General}

Plantations Trust Ltd) per P O Lawerence J at 295

49_{Furmston, Cheshire, Fifoot & Furmston’s - Law of Contracts, 2006, p. 158}

50_{House of Lords 01-01-1971, [1971] 1 WLR 1384 (Prenn v Simmonds) Lord Wilberforce [online]} 51_{House of Lords 04-04-1973, [1973] UKHL 2; (L Schuler AG v Wickman Machine Tools Ltd) [online]} 52_{Beale, Chitty on contracts, 2012, para. 12-098; McKendrick, Contract Law, text, cases and materials, 2003, p.}

330

53_{Law Commission, Report No. 154 - Law of Contract: The Parol Evidence Rule, Command Papers 1986/9700}

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intended to be the entire agreement between the parties54_{. It depends on the (objective) intentions of}

the parties whether a contract constitutes the complete agreement and is therefore a question of fact and not a rule of law. A written document that looks like the complete contract leads to the presumption that it will contain the whole agreement55. This presumption of completeness can however always be rebutted by contrary extrinsic evidence56_{. Next to that, justification on the}

‘destruction’ of the parol evidence rule can be found in the great number of exceptions that are applicable on the ‘rule’57_{: such as the acceptance of collateral agreements}58_{and the admitting of}

evidence that prove a custom or trade usage59_{. The general view is that the parol evidence rule is not}

as absolute as it once was60. The proposed ‘abolishing’ of the rule by the English Law Commission is, however, only a recommendation; exceptions on the parol evidence rule are therefore simply regarded as falling outside the rule by way of former established precedent61_{. The parol evidence rule is still}

regarded as one of the leading principles in the English common law.

The modern approach on the interpretation of contracts is provided by the ‘re-statement’ of the law by Lord Hoffmann in the Investors Compensation Scheme Ltd v West Bromwich Building Society62 case (ICS)63. The Court is still concerned with the establishing of the meaning of the contract by means of an objective interpretation. However, the ICS case provides for the ‘reasonable test’: what would a reasonable person have understood the words of the contract meant, having all the background knowledge, which would reasonably have been available to the parties in the situation in which they were at the time of the contract64. The context of the available background is also referred to as ‘the matrix of facts’65_{. For the factual context of commercial contracts Lord Bingham identified}

the importance of the business sense and the object of certainty; a businessman should not be frustrated in his reasonable expectations66_.

Evidence of pre-contractual negotiations may in general not be relied upon when interpreting the contract. It is stated that pre-contractual evidence will simply be ‘unhelpful’, only the final

54_{McLauchlan, The entire agreement clause: Conclusive or a question of weight?, 2013/3, p. 527-530 [online];}

Law Commission, Report No. 154 - Law of Contract: The Parol Evidence Rule, Command Papers 1986/9700, para. 2.6 – 2.17 [online]

55_{Peel, The Law of Contract, 2010, para. 6-013 – para. 6-014}

56_{Beale, Chitty on contracts, 2012, para. 12-098; Furmston, Cheshire, Fifoot & Furmston’s - Law of Contracts,}

2006, p. 138

57_{See for a more complete list of exceptions on the ‘rule’: Beale, Chitty on contracts, 2012, para. 100 to}

12-133; Peel, The Law of Contract, 2010, para. 6-014 – para. 6-030

58_{Peel, The Law of Contract, 2010, para. 6-029}

59_{High Court of Justice (Exchequer Court) 1836, [1836] EWHC J61 (Exch) (Hutton v Warren) [online]} 60_{Beale, Chitty on contracts, 2012, para. 12-100}

61_{Beale, Chitty on contracts, 2012, para. 12-127; Peel, The Law of Contract, 2010, para. 6-013}

62_{House of Lords 19-06-1997, [1998] WLR 896 (Investor Compensation Scheme Ltd v West Bromwich}

Building Society) Lord Hoffmann [online]

Building Society) Lord Hoffmann at p. 912 - 913 [online]

65_{House of Lords 01-01-1971, [1971] 1 WLR 1384 (Prenn v Simmonds) Lord Wilberforce [online]}

66_{House of Lords 13-03-2003, [2003] UKHL 12 ("Starsin", Owners of cargo & Ors v. "Starsin", Owners and/or}

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document will record the consensus between the parties67_{. Pre-contractual statements and documents}

can only give insights into the parties’ subjective intentions and can, therefore, not be used for objective interpretation68_{. Judges have been very sceptical in accepting oral or pre-contractual}

evidence69. Also evidence of conduct subsequent to the making of the contract is not relevant or admissible for interpretation70_.

Lord Hoffmann explicitly states in the ICS case that the pre-contractual statements can be of value for rectification71_{. This is however not an exception on the rule, but operates outside the rule}

(just as estoppel)72_{. Rectification, founded on equity, allows extrinsic evidence to amend the wording}

of the contract if there is an evidentially mistaken expression73. A ‘fundamental’ mistake can nevertheless be resolved by the process of interpretation when the meaning of the words would be absurd74_{. Next to that, pre-contractual statements and subsequent acts to the contract can be of value}

to raise an estoppel by convention75. Estoppel (also founded on equity) prevents a promisor from enforcing the contract that would lead to unfair (unequitable) results76_{. An estoppel can be raised only}

if another party had reasonably relied upon the conduct of the other party, but this reliance was broken.

The interpretation of a contract has been regarded as the ascertaining of the ‘common intention of the parties’77. However, the leading principle is still that the Court is not concerned with the parties’ actual intentions but with their manifested intention established by means of an objective interpretation and completed by the ‘reasonable test’78. The contract contains the common intention of the parties provided that the words of the agreement mean what the parties have in fact said. The ‘natural and ordinary’ meaning of the words (understood in the way that reasonable persons ordinarily

67_{House of Lords 01-01-1971, [1971] 1 WLR 1384 (Prenn v Simmonds) Lord Wilberforce [online]}

68_{Beale, Chitty on contracts, 2012, para. 12-119; McKendrick, Contract Law, text, cases and materials, 2003, p.}

408-409; House of Lords 01-07-2009, [2009] UKHL 38 (Chartbrook Ltd v Persimmon Homes Ltd & Ors) para. 28 [online]

69_{Beale, Chitty on contracts, 2012, para. 12-121; Court of Appeal (Civil Division) 07-03-2005, [2005] EWCA}

Civ 343 (Reeds Solicitors (A Firm) & Anor v Norwich Union Insurance Ltd & Ors) para. 11-15 [online]

70_{Beale, Chitty on contracts, 2012, para. 12-126}

Building Society) Lord Hoffmann at p. 912 - 913 [online]

72_{House of Lords 01-07-2009, [2009] UKHL 38 (Chartbrook Ltd v Persimmon Homes Ltd & Ors) para. 42}

[online]

73_{Rectification is a discretionary remedy: Peel, The Law of Contract, 2010, para. 8-059; see also: Beale, Chitty}

on contracts, 2012, para. 5-114

74_{Peel, The Law of Contract, 2010, para. 8-006; McKendrick, Contract Law, text, cases and materials, 2003, p.}

588

75_{Peel, The Law of Contract, 2010, para. 3-076 – para. 3-094; House of Lords 18-11-1999, [1999] UKHL 47;}

[1999] 1 WLR 2042; [1999] 4 All ER 89 (Carmichael and Another v. National Power Plc 7) [online]; Court of Appeal (Civil Division) 31-03-2011, [2011] EWCA Civ 353 (ING Bank NV v Ros Roca SA (Rev 1)) para.87 & 95 [online]

76_{Peel, The Law of Contract, 2010, para. 3-076 – para. 3-117} 77_{Beale, Chitty on contracts, 2012, para. 12-043}

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do) will provide insight into the common intention of the parties79_{. Nevertheless, a judge can deviate}

from the plain meaning of the words if this would otherwise lead to an unreasonable outcome. By ‘unreasonable outcome’ is not meant an outcome the judge considers inequitable, but rather, objectively, an outcome that no reasonable man would consider was meant by the words put into context because such a meaning would be absurd. The approach on the interpretation of contracts is recognised as “neither uncompromisingly literal nor unswervingly purposive”80.

The expression ‘construction’81_{of the express terms of the contract is divided into the}

establishing of the terms and the subsequent determination of the legal effects of these terms82_{. For the}

first matter the Court will try to establish the true content of the contract by looking for the meaning of the words used. This is a question of fact. The issue whether the agreement between the parties is only in writing or perhaps also partially oral or relies on other extrinsic evidence is examined here83_.

For the second matter the Court is concerned with the finding of the meaning of the terms agreed to and the legal effect of the contract. As soon as the words have become a matter of fact the ‘construction’ will become a question of law84_{. A Court will use the previous mentioned ‘rules’ on}

interpretation to identify the meaning of the terms. It is important to clarify that these ‘rules’ have to be regarded as at most ‘default rules’ or ‘principles’, always subject to the interpretation of the express terms of the contract85.

Terms that are not expressly stated can also be implied by fact, by operation of law, or by custom or usage86. Terms implied by fact are terms that the parties must have intended to include considering the common intention of the parties87_{. Although the process of interpretation and the}

doctrine of implied terms are traditionally distinguished from another, they are closely linked due to the modern approach on interpretation88_{. Because of the ‘restatement’ of Lord Hoffman in the ICS}

case the establishing of implied terms can be seen as a technique of interpretation of the contract89_.

The Court is seeking for both the interpretation and the establishing of implied terms what the

Building Society) Lord Hoffmann [online]; and reaffirmed in: High Court of Justice (Chancery Division) 28-06-2000, [2000] EWHC 224 (Ch) (Breadner & Ors v Granville-Grossman & Ors) [online]

80_{Court of Appeal 30-07-1993, [1995] C.L.C. 1396, 1400 (Arbuthnott v Fagan) [online]}

81_{The process of ‘interpretation’ is also referred to as ‘construction’ in the English common law. However, this}

thesis uses a much narrow understanding of the concept of interpretation. Therefore, the concept of

‘construction’ does not correspond with the English concept but is in this matter derived from the expression ‘construction’ used by: Beale, Chitty on contracts, 2012, para. 12-046

82_{Ibid, para. 12-046} 83_{Ibid, para. 12-047} 84_{Ibid, para. 12-046}

85_{Ibid, para. 12-045; Collins, Lord Hoffman and the Common Law of Contracts, ERCL 2009, p. 478-479}

[online]

86_{See for more details: Beale, Chitty on contracts, 2012, chapter 13; Peel, The Law of Contract, 2010, para.}

6-031- para. 6-048; Furmston, Cheshire, Fifoot & Furmston’s - Law of Contracts, 2006, p.172-191;

88_{Beale, Chitty on contracts, 2012, para. 13-005; Peel, The Law of Contract, 2010, para. 6-032} 89_{Collins, Lord Hoffman and the Common Law of Contracts, ERCL 2009, p. 483 [online]}

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contract would reasonably have been understood to mean applying the same ‘reasonable test’90_{. By}

including the implied terms into the process of interpretation Courts will not have to impose any ‘rule’ on the parties, but will merely enforce their true agreement91_{. This ideology is of paramount}

importance since judges will not re-write the contract bargain (and will go to great lengths to avoid any accusation that they have). Objectively determined outcomes by referring to the will of the parties is seen as leading to contractual certainty by restricting such judicial interference.

2.2. The Entire Agreement Clause

As a response to the ‘relaxation’ of the parol evidence rule there has been a commercial reaction to exclude evidence from the contract that would have been excluded in the past by the parol evidence rule by including an EA-clause into the contract92_{. The EA-clause is therefore sometimes regarded as}

an express incorporation of the parol evidence rule because both render extrinsic evidence inadmissible to prove terms other than those in the written contract93_{. The exclusionary effect on}

extrinsic evidence, such as pre-contractual statements and subsequent acts or statements, is an obvious consequence of the EA-clause and not truly discussed by the Courts. However, Lightman J. regards the operation of the EA-clause as “ to denude what would otherwise constitute a collateral warranty of legal effect”94_{. What exact effect an EA-clause will have will be highly influenced by its wording.}

Commercial parties try to promote legal certainty with an EA-clause by excluding liability for breach of contract for terms and statements other than those set out in the written contract95_{. Although}

its outcome can sometimes lead to unreasonable results, the EA-clause is regarded as a valid and enforceable legal concept in the English common law96_{. An EA-clause does however not preclude the}

use of the extrinsic evidence for interpretational purposes97_{. ‘Construction’ is (as described above)}

divided into the process of establishing the true content of a written contract and in the subsequent process of the determination of the meaning of the terms. A ‘normal’ EA-clause is, therefore, not

90_{The Judicial Committee of the Privy Council Division 18-03-2009, [2009] UKPC 10 (Attorney General of}

Belize & Ors v Belize Telecom Ltd & Anor) Lord Hofmann[online]

91_{Collins, Lord Hoffman and the Common Law of Contracts, ERCL 2009, p. 483 [online]} 92_{McKendrick, Contract Law, text, cases and materials, 2003, p. 334}

93_{See: Peden & Carter, Entire Agreement - and Similar – Clauses, JCL 2006, p. 4-5 [online]}

94_{High Court of Justice (Chancery Division) 28-06-2000, [2000] 2 Lloyd’s Rep. 611 (The Inntrepeneur Pub}

Company (GL) v East Crown Limited) [online]

95_{Beale, Chitty on contracts, 2012, para. 12-104; McKendrick, Contract Law, text, cases and materials, 2003, p.}

434

96_{Although it falls outside the scope of this thesis it must be highlighted that an EA-clause in a consumer}

contracts can be regarded as unfair under the Unfair Terms in Consumer Contracts Regulation 1999; McMeel, Construction of contracts and the role of ‘entire agreement’ clauses, CMLJ 2007, p. 59 [online]; Peel, The common law tradition: application of boilerplate clauses under English law, in: Cordero-Moss (ed.), Boilerplate Clauses, International Commercial Contracts and the Applicable Law, 2011, p. 137-140

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intended to exclude evidence from proving the meaning of ambiguous contract terms or to fill in gaps by interpretation98.

The Law Commission argued that an EA-clause does not have a conclusive effect, but merely a very strong persuasive effect that the contract was the whole agreement between the parties, provided that an EA-clause will give no insights into the intentions of the parties to prove that their whole agreement was contained within that contract99. However, as the objective interpretation attaches great value to the written contract and that the words of the contract mean what the parties have in fact said and intended, it will be hard to overcome the burden of proof that the contract was not the complete record of the parties’ intentions. The conclusive effect of the EA-clause has been accepted in numerous cases where it was objectively ascertainable that the parties intended the contract to be their whole agreement100_{. However, not all cases concerning EA-clauses are as decisive}

on the enforceability of the EA-clause; judges have attributed great importance to the wording and context of the particular case101_{. Next to that, the excluding of certain extrinsic evidence can cause}

problems for the validity and enforceability of an EA-clause.

2.2.1. Collateral Contracts

A collateral contract can be regarded as the preceding agreement to the main contract; the consideration of the collateral contract is the entry into or the promise to enter into another contract102_.

Although the admissibility of collateral contracts is regarded as a general accepted exception on the parol evidence rule, an EA-clause has specifically the legal effect to exclude collateral contracts from the contract. By assuming that an EA-clause is specifically intended to integrate the bargain agreed upon into the main contract Lightman J. regarded the EA-clause as “to denude what would otherwise constitute a collateral warranty of legal effect”103_{. Although the initial effect of an EA-clause will be}

highly influenced by the wording of that particular clause it has been acknowledged that the including of the wording ‘entire agreement’ in an EA-clause is sufficient to preclude the legal effects of any collateral agreement104_.

98_{Court of Appeal (Civil Division) 17-02-2006, [2006] EWCA Civ 69 (Proforce Recruit Ltd v The Rugby}

Group Ltd) para. 41 & 59 [online]; Court of Appeal (civil division) 24-06-2002, [2002] EWCA Civ 899 (John & Ors v Price Waterhouse) para. 47 & 67 [online]

99_{Law Commission, Report No. 154 - Law of Contract: The Parol Evidence Rule, Command Papers 1986/9700,}

para. 2.15 [online]; See also: McLauchlan, The entire agreement clause: Conclusive or a question of weight?, 2013/3, p. 531[online]

100_{High Court of Justice (Queens Bench Division) 20-12-2007, [2007] EWHC 3089 (QB) (Ryanair Ltd v SR}

Technics Ireland Ltd) para. 137 - 143 [online]

101_{The Court left room for other circumstances of the case to preclude the effect of the EA-clause: Court of}

Appeal (Civil Division) 11-10-2006, [2006] EWCA Civ 1303 (Whitehead Mann Ltd v Cheverny Consulting Ltd) para. 90 – 91 [online]; High Court of Justice (Queens Bench Division) 04-04-2006, [2006] EWHC 733 (Comm) (Ravennavi Spa v New Century Shipbuilding Company Ltd) para. 30-35 [online]

102_{Beale, Chitty on contracts, 2012, para. 4-030}

103_{High Court of Justice (Chancery Division) 28-06-2000, [2000] 2 Lloyd’s Rep. 611 (The Inntrepeneur Pub}

Company (GL) v East Crown Limited) [online]

104_{Court of Appeal 12-11-1998, [1998] EWCA Civ 1753 (Deepak Fertilisers &- Petrochemical Corporation v}

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2.2.2. Implied Terms

The excluding of implied terms with an EA-clause will not necessarily have the exclusionary legal effect that was sought with the including of the EA-clause105_{. As has been highlighted above, the}

implying of terms is not a question of ‘construction’ but rather an additional question. However, in the Exxonmobil Sales and Supply Corporation v Texaco Ltd case the Court accepted the excluding of the implied terms of custom and usage by enforcing the EA-clause on the ground that the words were a clear indication of the intention of the parties (therefore objectively ascertainable)106. In consideration of other implied terms the Court stated that it would not be preferable to enforce the legal effects of an EA-clause where it is necessary to imply a term to make the express terms work.

2.2.3. (Mis)representation and Mistake

Although this thesis will not extensively consider the doctrine of misrepresentation or mistake some remarks will be made about the non-reliance clause in connection to the EA-clause. First of all, a ‘normal’ EA-clause will not exclude liability for misrepresentation107. A clear distinction is made by the Courts between representation and collateral warranties: there where the wording ‘entire agreement’ is sufficient to preclude the legal effects of collateral contracts, the wording ‘representations’ in an EA-clause was held insufficient to cover misrepresentations108. Clear words are needed to exclude liability for negligent misrepresentation109_{. Parties should, therefore, explicitly}

include a specific non-reliance clause or section into the contract and not expect that the wording ‘excluding representation and statements’ in the EA-clause will have the non-reliance effect they want to achieve110_{. If the words are not clear a non-reliance provision can only achieve that the statements}

were mere promises i.e. collateral warranties111.

105_{McMeel, Construction of contracts and the role of ‘entire agreement’ clauses, CMLJ 2007, p. 70 [online]} 106_{High Court of Justice (Queens Bench Division) 01-08-2003, [2003] EWHC 1964 (Comm) (Exxonmobil}

Sales and Supply Corporation v Texaco Ltd.) para. 24 – 27 [online]

107_{A ‘normal’ EA-clause will therefore not be affected by the Misrepresentation Act 1967 or the Unfair}

Contract Terms Act 1977 (UCTA). However, an EA-clause can be challenged under the UCTA in relation to other provisions in the contract; Beale, Chitty on contracts, 2012, para. 12-104; High Court of Justice (Chancery Division) 28-06-2000, [2000] 2 Lloyd’s Rep. 611 (The Inntrepeneur Pub Company (GL) v East Crown Limited) [online]; High Court of Justice (Queens Bench Division) 19-12-2002, [2002] EWHC 2733 (TCC) (Sam

Business Systems Ltd v Hedley and Company) para. 62 [online]

108_{Court of Appeal 12-11-1998, [1998] EWCA Civ 1753, (Deepak Fertilisers &- Petrochemical Corporation v}

Davy McKee (London) Ltd & Anor) para. 34 [online]; Court of Appeal (Civil Division) 18-02-2011, [2011] EWCA Civ 133 (Axa Sun Life Services Plc v Campbell Martin Ltd & Ors) para. 80-81 [online]

109_{High Court of Justice (Queens Bench Division) 26-01-2010, [2010] EWHC 86 (TCC) (BSkyb Ltd & Anor v}

HP Enterprise Services UK Ltd & Anor) para. 382-387 [online]

110_{Affirmed in: High Court of Justice (Queens Bench Division) 09-03-2011, [2011] EWHC 484 (Comm) (Cassa}

Di Risparmio Della Repubblica Di San Marino Spa v Barclays Bank Ltd) para. 505 [online]

111_{Court of Appeal (Civil Division) 18-02-2011, [2011] EWCA Civ 133 (Axa Sun Life Services Plc v Campbell}

Martin Ltd & Ors) para. 38 & para. 98 [online]; Court of Appeal (Civil Division) 23-02-2001, [2001] EWCA Civ 317 (Watford Electronics Ltd v Sanderson CFL Ltd ) para. 40-41 [online]

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In addition, where a party raises an estoppel or wishes to rectify a mistake in the contract, the excluding of extrinsic evidence with a ‘normal’ EA-clause will have no legal effects112. Rectification and estoppel are both equitable remedies and operate outside the rules on ‘construction’ and allow (as stated above) pre-contractual statements and subsequent acts or statements (only possible for raising estoppel) to support the claim113_{. Accordingly, an EA-clause will have no influence on these claims}114_.

Next to that, the excluding of liability for fraudulent misrepresentation can neither be excluded with an EA-clause nor with a non-reliance clause115_.

2.2.4. Waiving the Entire Agreement Clause

An EA-clause can be waived through statements or conduct by the parties that indicate they do not rely on the EA-clause anymore. In Sam Business Systems Ltd v Hedley and Company the Court found due the fact that the claimant acted as if the conversations and letters were incorporated into the contract, precluded him from relying on the EA-clause116_{. This was seen as a waiver of a subsequent}

allegation that the EA-clause excluded such an understanding.

2.3. A Brief Summary of the Entire Agreement Clause in the English Law

English judges are traditionally reluctant to deviate from the plain meaning of the words of the contract. The parol evidence rule determines that no evidence can be admitted to add to, vary or contradict a deed or a written instrument. However, this rule is not as absolute as it once was. As a reaction to a perceived ‘relaxation’ of this rule commercial parties have tried to attain the same effect as the parole evidence rule by incorporating an EA-clause into their contract.

In a contract governed by English law, including an EA-clause can achieve the objective of excluding extrinsic evidence from the contract. A ‘normal’ EA-clause does not, however, preclude the use of extrinsic evidence in aiding contractual interpretation. Nonetheless, the eventual effect of an EA-clause highly depends on the exact wording of the clause.

112_{High Court of Justice (Chancery Division) 26-05-2010, [2010] EWHC 1291 (Ch) (Surgicraft Ltd v Paradigm}

Biodevices Inc) para.73 [online]; High Court of Justice (Chancery Division) 08-03-2012, [2012] EWHC 498 (Ch) (Procter & Gamble & Ors v Svenska Cellulosa Aktiebolaget SCA & Anor (08 March 2012) para. 99-109 [online]; High Court of Justice (Queens Bench Division) 24-10-2011, [2011] EWHC 2718 (Dubai Islamic Bank PJSC v PSI Energy Holding Company BSC & Ors (Comm)) para. 72 & 83 [online]

Building Society) Lord Hoffmann at p. 913 [online]

114_{Peel, The Law of Contract, 2010, para. 8-059; McLauchlan, The entire agreement clause: Conclusive or a}

question of weight?, 2013/3, p. 536-540 [online]

115_{High Court of Justice (Chancery Division) 03-03-2010, [2010] EWHC 358 (Ch) (Foodco UK Llp (t/a Muffin}

Break) & Ors v Henry Boot Developments Ltd) para. 167 [online]

116_{High Court of Justice (Queens Bench Division) 19-12-2002, [2002] EWHC 2733 (TCC) (Sam Business}

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3. Dutch Contract Law

The significance of the EA-clause in Dutch law has been the subject of discussion in two recent judgements of the Dutch Supreme Court (‘Hoge Raad’). However, before entering into the discussion on the validity and enforceability of the EA-clause in the Dutch law some remarks must be made on the process of interpretation117. The Dutch contract law makes a distinction between substantive law and procedural law; found in the Dutch Civil Code (Burgerlijke Wetboek, hereinafter referred to as ‘BW’) respectively the Dutch Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering, hereinafter referred to as ‘Rv’). For the understanding of contractual interpretation these codes must be considered in their totality.

3.1. Interpretation of the Written Contract

The process of interpretation of an agreement (‘overeenkomst’) is concerned with the determining of the content of the legal relationship – an obligation (‘verbintenis’) - between parties supported by evidence118. An agreement can be qualified as a juridical act, established by two or more parties, aiming to create a legal relationship between the creditor and debtor119_{. Any juridical act (written or}

oral) requires an intention of a party to produce juridical effects, which intention has manifested itself by a declaration120. An agreement is established by an offer and its acceptance121, both can be qualified as a declaration of the will. This is also known as the manifestation of the ‘common intention of the parties’ (‘Wilsovereenstemming’)122. An agreement can also be established when one of the parties had justifiably relied on the agreement, even though the declared and inner will of the other party did not correspond123. This is also known as the principle of the ‘justified reliance on the declaration of will’ (‘Wilsvertrouwensleer’). (Legal) persons have a general freedom to enter into an agreement (principle of ‘zelfbeschikking’ or ‘party autonomy’)124. Parties can fill in their obligations as they deem fit (principle of ‘freedom of contract’), but always with respect to the law and other principles of ‘usage’, ‘good moral’ and ‘public order’125_.

In most cases the parties will conclude a written contract to establish the agreement. A signed contract can be qualified as ‘conclusive’ evidence of the common intention of the parties to establish

117_{The concept of ‘interpretation’ will in this chapter be used as a denotation of the legal concept ‘uitleg’ in the}

Dutch legal system

118_{Tjong Tjin Tai, Bewijs van de (inhoud van de) overeenkomst, NJ 2008, p.810 [online]} 119_{Article 6:213 BW}

120_{Article 3:33 & Article 3:37 (1) BW} 121_{Article 6:217 (1) BW}

122_{Asser/Hartkamp & Sieburgh 6-III 2014/163 [online]}

123_{Article 3:33 BW & 3:35 BW: Hijma e.a., Rechtshandelingen en Overeenkomst, 2013, p. 30-43} 124_{Asser/Hartkamp & Sieburgh 6-III 2014/41 [online]}

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an agreement126_{. However, ‘conclusive’ evidence only indicates that there is a legal presumption of}

the truth, this presumption can always be rebutted by contrary evidence127. Also other evidence can provide for the existence of an agreement, such as proof of witnesses, correspondences or other extrinsic evidence128. The burden of proof is on the one claiming that there is indeed a legal relationship129_{. Although it is rather easy to establish that there is indeed a legal relationship between}

two or more parties, the real problem is the determining of the content of that legal relationship; what obligations have parties agreed upon in the agreement130_{. This is a question of interpretation.}

The Haviltex131_{case is the landmark judgement of the Supreme Court providing the main}

doctrine on the interpretation of contracts. The Haviltex-rule is concerned with the establishing of the common intention of the parties by first looking for the legal relationship between the parties by interpretation of the terms of the contract. The legal relationship can, however, not be established by a purely textual interpretation of the written contract. The Supreme Court stated that: “What it comes down to, in answering this question, is what parties in the given circumstances could reasonably expect of one another and what common intention they reasonably could attribute to a certain part of the agreement.What could be of importance is to what social classes the party belong and what legal knowledge could be expected of them”132_{. The terms of the contract only obtain meaning when put}

into context with the circumstances of the case. Other circumstances that are of importance could be derived from the preliminary negotiations133_{, the conduct of the parties towards each other after the}

concluding of the contract134, which party formulated the text, which interpretation is more in line with the goal of the contract etc.135_{. The (written) contract itself can, therefore, merely be regarded as}

evidence and a means to proof the content of the agreement136. The contract cannot be regarded as the only decisive factor, the common intention between the parties (whether or not correctly included in the contract) will be. With regard to other evidence such as prior statements, the Supreme Court has an open approach when considering such statements as part of the contract137. What it comes down to is what parties have reasonable attached to the terms of the contract, this can only be determined by interpretation.

126_{A signed contract can be qualified as an official document (‘akte’) (article156 & article 157 Rv) which will}

considered as ‘conclusive’ evidence (article 150 Rv)

127_{Article 151 Rv}

128_{Tjittes, Uitleg van schriftelijke contracten, 2009, p. 52-55} 129_{Article 150 Rv}

130_{Tjong Tjin Tai, Bewijs van de (inhoud van de) overeenkomst, NJ 2008, p.811-812 [online]} 131_{HR 13-03-1981, NJ 1981, 635 m. nt. Brunner (Ermes c.s./Haviltex) r.o. 2 [online]} 132_{HR 13-03-1981, NJ 1981, 635 (Ermes c.s./Haviltex) [online]}

133_{HR 13-01-1978, NJ 1978/302 (Swimming Pool/Algemene Verzekering Maatschappij Diligentia) [online]} 134_{HR 20 mei 1994, NJ 1994/574 (Gasunie/Gemeente Anloo) [online]; HR 27 november 1992, NJ 1993/273}

(Volvo/Braam) [online]

135_{Hartlief & Bollen, The Netherlands - European Review of Contract Law, 2006, p. 410 [online]} 136_{Tjittes, Uitleg van schriftelijke contracten, 2009, p. 50-52}

137_{Hondius, De ‘entire agreement’ clausule: Amerikaanse contractsbedingen in het Nederlandse recht, in:}

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Although the words of the written contract can never be conclusive to determine the content of the legal relationship between the parties, the Supreme Court has, in specific cases, attributed more significance to an objective interpretation of the contract. This is also known as the ‘CAO-rule’ (‘Collectieve Arbeids Overeenkomst’ - Collective labour agreement)138 and is developed particularly for parties that have not been involved in the negotiations of that contract and could thereby only rely on the text of the contract139. Only an objective interpretation of the written contract and the circumstances of the case can therefore give insights into the legal relationship140_{. However, this does}

not lead to a purely textual or literal interpretation. The objective interpretation is based on objective criteria; among others the wording of the contract read in conjunction with the contract as a whole and the circumstances of that case141.

Between the Haviltex-rule and the CAO-rule a fluid transition exists of possible interpretations of contracts142. The ‘rule’ is that a subjective interpretation (establishing the common intention of the parties) primarily precedes a more objective interpretation (establishing a reasonable interpretation on objective grounds)143_{. Although this cannot specifically be derived from the law, the}

underlying considerations of interpretation can be found in the principles of the ‘common intention’, the ‘justified reliance on the declaration of will’ and the requirement of ‘good faith and fair dealing’144.

The requirement of ‘good faith and fair dealing’ included in article 6:248 BW (‘de redelijkheid en billijkheid’)145 has more functions under Dutch law than just for interpretational objectives only. It can also have a supplementary or derogatory function on the legal effects of the agreement146. The court may supplement the agreement if there is a gap that needs to be filled147. First of all by law and otherwise by custom or usage148_{. Next to that, the court may correct or exclude}

certain legal effects from the agreement if this would lead to derogatory effects149_{. Evidentiary}

mistakes can be corrected by changing the agreement by the Court150. However, gaps and undesirable effects of the agreement can only become apparent after the interpretation of the agreement. So theoretically, the interpretational function of the requirement of ‘good faith and fair dealing’ will

138_{First established in: HR 17-09-1993, NJ 1994, 173 (Gerritse/Hydro Agri Sluiskil) [online]} 139_{Tjittes, Uitleg van schriftelijke contracten, 2009, p. 15-18}

140_{Article 3:36 BW}

141_{Hartlief & Bollen, The Netherlands - European Review of Contract Law, 2006, p. 412 [online]} 142_{HR 20-02-2004, NJ 2005, 493 (Pensioenfonds DSM-Chemie/Fox) r.o. 4.4 [online]}

143_{Tjittes, Uitleg van schriftelijke contracten, 2009, p. 11 & 79}

144_{Article 3:33, article 3:35 & article 6:248 (1) BW (requirement of good faith and fair dealing); The CAO-rule}

is also based on the requirement of good faith and fair dealing of article 6:248 BW: HR 20-02-2004, NJ 2005, 493 m. nt. Du Perron (Pensioenfonds DSM-Chemie/Fox) r.o. 4.5 [online]

145_{Derived from the Latin phrase ‘bona fides’ (translated as ‘good faith’). However, a more literal translation of}

the Dutch denotation of ‘bona fides’ in article 6:248 BW reads as follows: the requirement of ‘reasonableness and fairness’ (or equity).

146_{Asser/Hartkamp & Sieburgh 6-III 2014/365 [online]} 147_{Asser/Hartkamp & Sieburgh 6-III 2014/378 [online]} 148_{Asser/Hartkamp & Sieburgh 6-III 2014/381-386 [online]} 149_{Asser/Hartkamp & Sieburgh 6-III 2014/410 [online]} 150_{Article 6:230 (2) BW}

The Entire Agreement Clause : comparative analysis of the Entire Agreement Clause: “Can we speak of convergence between the English and the Dutch legal systems when taking the "Entire Agreement Clause" in commercial con