February 13, 2019 Contract Boilerplate Series

Effective Use of Merger Clauses: Part V

Rule of practical construction 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. In the fourth, we discussed the effect of exceptional circumstances on the enforceability of merger clauses. Here, in the fifth and final installment of this series, we discuss the rule of practical construction and consideration of extrinsic evidence to determine the parties’ intent as to merger clauses.

The Rule of Practical Construction and Merger Clauses

Some extrinsic evidence may be admissible to prove the parties’ intent even where the agreement is integrated and contains a merger clause. Courts may look to the parties’ conduct to inform their analysis. Whether the court must first find the agreement to be ambiguous before looking to the parties’ conduct is subject to some dispute. The general rule, however, is that the contract need not be ambiguous for the court to look to the conduct of the parties. While this article focuses on how this rule has developed under Tennessee law, it has developed in similar ways in other jurisdictions. See, e.g., Soberman v. Groff Studios Corp., 99 Civ. 1005 (DLC) 2000 WL 328781, at *6 (S.D.N.Y. March 28, 2000); Simon & Son Upholstery Inc. v. 601 West Assocs., LLC, 702 N.Y.S.2d 256, 257 (1st Dep't 2000); Federal Ins. Co. v. American Ins. Co., 691 N.Y.S.2d 508, 512 (1st Dep't 1999).

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