If you've ever negotiated with a landlord or had recourse to a standard form of lease, you will no doubt have noticed some generic clauses that are systematically included near the end of the lease, such as a Choice of Court clause (to determine where and under what laws a dispute is to be heard and resolved), the Time of Essence clause or the Entire Agreement clause, the subject of this article.
The Entire Agreement clause generally stipulates that all assertions made to the tenant in the lease are included in the lease (it supersedes all prior agreements or understandings, whether oral or implicit), and that the lease can only be modified by means of a written agreement between both parties.
By including such a clause in the lease, the lessor aims to limit the recourse available to a tenant who finds, for example, that the premises are too noisy and that the landlord has failed to ensure the tenant's right to reasonable privacy and quiet enjoyment, or that an exclusivity verbally agreed upon during negotiations has not materialized.
It is thus very important for the tenant to ensure that all the essential elements previously discussed be included in the lease before signing any lease containing an Entire Agreement clause.
Such a clause, however, has its limits.
In a recent Superior Court judgement made by the Honourable Paul Mayer, a tenant claimed that he had concluded an agreement with his landlord whereby the lease could be terminated by simple notification, as the lessor intended to redevelop his building anyway.
Without going over all the arguments he put forth, the landlord invoked the Entire Agreement clause, stating to the court that the tenant had contractually relinquished the right to show proof of a verbal agreement, including the right to terminate the lease.
The magistrate (whose previous law practice specialized in leases) also included in his judgement a highly detailed analysis of Entire Agreement clauses, outlining their limits.
Basing his arguments on Articles 6, 7 and 1375 of the Civil Code of Quebec (which stipulate the obligation to exercise good faith in contractual relations), he concluded that one party cannot unilaterally oppose the other party by invoking the Entire Agreement clause when the instigating party knows full well that a verbal agreement had been made.
To invoke such an argument is to act in bad faith.
The judge made sure that the lease (notably its Entire Agreement clause) would not become a means of exploitation or be used contrary to the principles of basic justice.
Finally, the judge dismissed the clause and acceded to proof of an evidentiary agreement.
To sum up, as regards commercial rental agreements, each party must not only be aware of the limits of the generic and relevant clauses such as the Choice of Court and Entire Agreement clauses, but also demonstrate proof of reasonableness and good faith when invoking such clauses, regardless of their apparent force.
François Nantel, lawyer
Développement Olymbec Inc. vs. Avanti Spa de Jour Inc., 2019 QCCS 1198.