22 February 2019

Fawaz Al-Hasawi v Nottingham Forest Football Club Ltd v NF Football Investments Ltd, NFFC Group Holdings Ltd [2018] EWHC 2884 (Ch)

This case emphasises the need for careful drafting of an entire agreement clause.

What happened in the case?

  • NFFC Group Holdings Limited (the ‘Seller’) sold shares in Nottingham Forest Football club to NF Football Investments Limited (the ‘Buyer’).
  • During negotiations of the contract for the sale of shares, the Seller stated the club’s liabilities were approximately £6.6m. In reality, they were over £10m.
  • The Buyer claimed this was a negligent misrepresentation and that it was entitled to its losses.
  • The Seller argued that clause 12 of the contract (an entire agreement clause) prevented this claim as it stated:

"this agreement (together with the documents referred to in it) constitutes the entire agreement between the parties and supersedes and extinguishes all previous discussions, correspondence, negotiations, drafts, agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter."

Emphasis added

Decision

The High Court allowed the appeal in favour of the Buyer. The basis of the decision was as follows:

  1. The agreement did not exclude a misrepresentation claim relating to the liabilities;
  2. The entire agreement clause only related to claims in contract and negligent misrepresentation is not a contractual claim; and
  3. The Court stated it would not insert provisions in to the agreement that were not actually in, even if it would make commercial sense do to so, as this was not what was expressly agreed.

Conclusion

This case highlights the need for careful drafting of entire agreement clauses to expressly cover precise claims to be excluded i.e. misrepresentation.