August 28, 2018 Contract Boilerplate Series

Effective Use of Merger Clauses: Part IV

A discussion of the effect of exceptional circumstances on enforcement of merger clauses in the context of the parol evidence rule.

By Jason R. Scheiderer and Michael Malone

Note: In the first installment of this series, we discussed the history of the parol evidence rule and the use of merger clauses. In the second, we discussed the legal effect of merger clauses and various jurisdictions’ approaches to them. In the third, we discussed the enforcement of merger clauses. Here, we discuss the effect of exceptional circumstances on the enforceability of merger clauses.

Exceptional Circumstances and Merger Clauses

The primary purpose of merger clauses and the parol evidence rule is to limit interpretation of a written agreement to the four corners of the agreement and keep unreliable or irrelevant evidence from the trier of fact. The benefits are obvious. The rule promotes objectivity and predictability, two desirable traits in the marketplace. However, the rule also carries with it certain risks. For instance, there is a risk that the parol evidence could be used to exclude truthful, reliable evidence of genuine agreement that was not included in the parties’ final writing. If the writing contains a merger clause, the party trying to introduce evidence of an otherwise valid agreement that is not encompassed in the writing will not be able to do so.

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