- Posted by Justin K. Schwemmer
- On 2015-01-16
- 0 Comments
- contract law, contracts, integration clause, integration clause example, integration clause sample, merger clause, merger clause example, merger clause sample
Recently, I was in an exciting discussion with two friends about contract clauses (lawyers are a blast at parties, I’m telling you). One friend was a business owner who had drafted contracts for use with his clients, and another dealt with contract negotiations at his job (it was not his favorite work-related activity). Our conversation made its way to problems that occur when a party to a contract thinks there was a term that was supposed to be in the written agreement, but is not.
There are many issues involved when this happens, and many of them might involve legal costs. But there are a few ways to help prevent those problems from happening in the first place. One is to have a lawyer look over an agreement before it is signed, or to have the lawyer directly involved in the negotiations. The fees involved at such an early stage are small compared to the costs to litigate a dispute after it has occurred, and are a wise investment.
I mentioned to my friends a short clause that is usually included in many standard contracts of all sorts, from construction contracts to leases, from divorce settlements to album recording agreements. It’s known as an integration clause or a merger clause, and you’ll probably recognize it as one of those paragraphs in legalese that seems to be too obvious to even include in a deal. Basically, a standard integration clause says that what’s written in the contract is the whole deal, and if it didn’t make it into the written contract, it’s not part of the deal.
In fact, in Maryland, it’s already part of the law that a contract should be interpreted by what’s actually in the contract, and not what the parties involved were thinking at the time. Contracts in Maryland are already presumed to be integrated, unless there is evidence to the contrary. Then why include an integration clause?
Well, with almost every business transaction, you’re going to discuss some terms beforehand. Sometimes, those discussions can become evidence that the agreement is not what it says it is. An integration clause can help convince a judge or jury that those preliminary negotiations that didn’t make it into the final written contract should stay out.
Integration clauses are not foolproof—there have been cases where there was strong evidence that other terms were part of an agreement—but they are evidence that the agreement is the complete understanding between the parties.
So what does an integration or merger clause look like? They can sometimes be long and complicated, but here’s one that’s short and sweet: “This Agreement contains the entire understanding between the parties.” If there are specific documents that are part of the agreement, or that you want to specifically exclude from the agreement, then you should reference them by name in an integration clause, even if they are incorporated by reference elsewhere. I recommend that you consult an attorney who can tailor your contract, including any merger clauses, to your specific needs.