Commercial contracts are central to the day-to-day operations of your business. Merger and integration clauses document that your written contract alone governs the relationship between you and the other party and that there are no oral or written agreements outside of the contract. These clauses are enforceable and can protect your interests.
How M&I Clauses Work
Regardless of verbal conversations and even promises, the agreements that are inked in the contract are what hold up in a court. The parties agree that there are no side deals or other agreements, and when you sign the contract that you are not relying on anything the other party has told you. A merger and integration clause essentially states that you are agreeing to what is in the contract, not what the other side has told you in previous or subsequent conversations. It states that the agreement is complete and final.
One of the benefits of merger and integration clauses is that if there is a dispute, the parties don’t have to spend time taking depositions, asking people what they said or what they told each other before the contract. These clauses are called disclaimers of reliance. The court will likely hold these disclaimers to be valid when it is a contract among equal parties.
The Car Dealership Example
If there’s a contract between a car dealership and an individual buying a car, the court is generally not going to let the car dealer put a disclaimer of reliance in the contract and be able to promise the purchaser outlandish things before they sign the contract like, “this vehicle is a cream puff and nobody ever drove it except on Sundays and it’s never been in the rain.” If they’ve said those things, the court is likely to side with you, and not the dealership, regardless of whether you signed a contract with a disclaimer of reliance, as the two parties to the agreement are clearly not “equal parties.”
On the other hand, if there is an agreement dispute between two car dealerships and they’re of equal bargaining power, and one of them claimed that the vehicle was a cream puff, the court is likely to say, “you are two car dealers–you should have known that the other guy was just lying to try to sell the car and if you signed a contract with a disclaimer of reliance, then you’re stuck with what you bought.” That’s important because otherwise, the parties could spend hundreds of thousands of dollars litigating about what everybody said before they signed the contract.
If you have valid non-reliance provisions in your contract, you can likely get the case resolved relatively efficiently and avoid disputes over conflicting testimony that are expensive to resolve.
If you are in need of legal representation or assistance in clarifying your commercial contract, schedule a consultation with Richards Rodriguez & Skeith today.