January 27, 2011 Articles

Using Contractual Merger Clauses in Defense of Fraud Claims

Many courts have dramatically narrowed, or outright rejected, the use of these clauses as a per se defense to fraud claims.

By Daniel P. Elms

The “merger” or “integration” clause, in one form or another, has found its way into most commercial contracts.[1] The merger clause comes in a variety of forms, but generally looks something like this:

This Agreement represents the Parties’ entire understanding regarding the subject matter herein. None of the terms of this Agreement can be waived or modified, except by an express agreement signed by the Parties. There are no representations, promises, warranties, covenants, or undertakings between the Parties other than those expressly set forth in this Agreement.

When the relationship sours and litigation results, many defendants assume that this contractual talisman will protect them from fraud, fraudulent inducement, or similar claims based on alleged precontractual promises or representations made to the plaintiff. But defendants should not rest so easy. Many courts have dramatically narrowed, or outright rejected, the use of these clauses as a per se defense to fraud claims.

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