i-law

International Construction Law Review

LAYING SIEGE TO “FOUR WALLS” ENTIRE AGREEMENTS: THE PAROL EVIDENCE RULE AND ESTOPPEL IN CONSTRUCTION CONTRACTS

TREVOR THOMAS1

B Eng, M Eng, LL B, LL M Barrister and Solicitor of the Supreme Court of Victoria Senior Associate, Clayton Utz, Melbourne

1. INTRODUCTION

As any project manager knows, bringing a major construction project in on time and on budget is an arduous undertaking. Any number of extraneous factors can render an otherwise profitable venture uneconomic. As such, meticulous attention needs to be devoted to ensuring that the parties’ obligations are clearly set out, fully understood and adequately resourced before the development gets under way.
To this end, considerable attention is usually devoted to giving the greatest clarity possible to the scope of work and the contractual terms pursuant to which the project will be carried out. Where the parties have devoted such attention, it seems axiomatic that those obligations should be ring-fenced within the “four walls” of the contract.
This is commonly achieved by way of an “entire agreement” clause or “merger” clause. These provisions (which are frequently found in the boiler-plate clauses of standard form construction contracts) typically state that the terms of the contract constitute the whole of the parties’ bargain and all other terms are to be excluded. In this way, the parties may seek to prevent additional terms being implied into the contract as a consequence of pre-contractual assumptions or representations.
Common law jurisdictions also support the principle of limiting a party’s ability to look outside the terms of the contract to pre-contractual representations in order to bolster a claim that there are extraneous terms which should form part of the parties’ obligations. This is achieved by way of the parol evidence rule.
However, entire agreement clauses and the parol evidence rule are not an impenetrable defence to the importation of additional rights and obligations between the parties. There are a number of siege engines in a party’s armoury which may be deployed in an attempt to breach the four walls of a construction contract. These may include statutory claims of misleading


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Entire Agreements: the Parol Evidence Rule and Estoppel

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