Effect of entire agreement clause

Entire agreement clauses are designed to restrict the rights and obligations of the parties to those set out in the document itself, and to preclude reliance on any earlier provisional agreements or statements made by the parties during the negotiations for the contract in question. In Ravennavi SpA v New Century Shipbuilding Company Ltd [2006] EWHC 733 (Comm) the question which arose – although which ultimately did not need to be answered – was whether an arbitration clause in a contract containing an entire agreement clause superseded dispute resolution provisions in an earlier agreement between the parties.

Ravennavi: the facts

In December 2003 an option agreement was entered into between NC, a Chinese shipyard, and RS, an Italian shipowning company. Under the agreement NC granted RS or its nominee an option exercisable within a year to require NC to design and build up to two oil tankers. RS was to give notice of the exercise of the option, and notice would automatically bring into existence a fresh contract for the building of the vessel, which was to be replaced within a month by a fresh contract on much the same terms. The option agreement stated that it was governed by English law and any dispute was to be resolved by the English courts which were to have exclusive jurisdiction.