Entire understanding: Overview, definition, and example
What is entire understanding?
Entire understanding refers to the comprehensive and complete agreement between parties regarding the terms, conditions, and expectations of a contract or agreement. It is often expressed in legal documents with phrases such as "this agreement constitutes the entire understanding between the parties" or "this agreement supersedes all prior discussions, negotiations, or understandings." This ensures that no prior verbal or written agreements, representations, or understandings are binding unless they are included in the final written contract.
Why is entire understanding important?
The concept of entire understanding is important because it ensures clarity and prevents confusion or disputes about what was agreed upon by the parties. By stating that the written agreement is the full and final understanding, it removes the possibility of one party claiming that there were informal, oral agreements or promises that were not included in the official contract. This principle also helps streamline contract enforcement by establishing a clear, singular reference point for the terms and conditions agreed upon.
Understanding entire understanding through an example
Imagine two companies entering into a partnership agreement. During negotiations, one company might mention a future product collaboration that is not ultimately included in the contract. After signing, if the other company tries to claim that the product collaboration was part of the agreement, the entire understanding clause in the contract would make it clear that the written document is the only valid agreement, and the prior mention of the collaboration is not legally binding unless included in the final version.
In another example, an employee signs an employment contract with a company that includes an entire understanding clause. During the hiring process, the employer mentioned the possibility of a promotion after one year, but this was not included in the final contract. The entire understanding clause would make it clear that no such promise of promotion is part of the contractual agreement, as it wasn’t written into the final document.
An example of an entire understanding clause
Here’s how an entire understanding clause might appear in a contract:
“This Agreement constitutes the entire understanding between the Parties with respect to the subject matter hereof and supersedes all prior or contemporaneous discussions, agreements, and understandings, whether written or oral.”
Conclusion
The concept of entire understanding ensures that a written contract is the complete and final reflection of the parties' agreement, leaving no room for external or prior discussions or understandings to be considered part of the contract. This principle protects both parties by establishing a clear, unambiguous reference point for the contract terms and prevents misunderstandings or claims based on informal or oral agreements. It is a vital element in ensuring that the contract serves as the definitive document governing the relationship between the parties.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.