17 Feb Common Questions About Business Contracts, Part III—the Integration Clause

In our last two blogs Edwards Law provided a sample business contract to demonstrate what a simple employee business agreement looks like, and sample language for prevailing party and indemnification provisions in your business contracts    Today, we address another important boilerplate provision usually found in business contracts—the integration clause.

What Is an Integration Clause?

An integration clause, also known as a “merger” clause, is a contract provision where the parties agree the written contract is the final and complete agreement between the parties, rather than any other written or oral statements.  Moreover, an integration clause routinely includes a provision which states that the agreement cannot be amended, other than by a specified process, usually a written amendment to the contract signed by the parties.

The purpose of an integration clause is to prevent the parties from claiming, later on after the contract is fully executed, that the contract does not reflect the parties’ true and complete understanding of the agreement.

A contract with an integration clause is known as an “integrated contract.”  With this type of contract, the final writing supersedes any previous negotiations the parties had prior to signing the final writing.

Thus, if you have an integration clause, the written contract is the final agreement between or among the parties, and overrides any other oral or written statements between or among the parties.  This clause prevents parties from claiming the contract does not reflect their agreement.

What Does an Integration Clause Look Like?

A sample integration clause is below.  It does not have to be lengthy to be effective.  However, the language of the clause should be broad:

This Contract contains the entire agreement of the parties with respect to the subject matter of the Contract. The contract supersedes any prior agreements, understandings, or negotiations, whether written or oral. This Contract can only be amended through a written document formally executed by all parties.

Please note that by providing this sample provision, Edwards Law is not providing legal advice.  The facts behind your particular contract may warrant additional language not covered in this sample provision.

Violations of an integration clause usually occur where one party is trying to claim that a prior oral statement was the basis of the agreement, rather than the terms contained in the written contract document.  In such cases, the presence of an integration clause would require the parties to follow the writing rather than any other prior agreements.

But no matter how well this clause is written, an integration clause is not conclusive proof that no extra conditions exist with respect to the contract’s performance.  Meaning, before the integration clause applies, one or more of the parties might need to do something pursuant to the contract terms.

Moreover, be careful about making any oral agreements or engaging in conduct outside the provisions of the parties’ written agreement.  Including an integration clause is not an automatic bar to a court considering evidence of these oral agreements or conduct if

• a party claims there is an ambiguity in the written agreement;
• if a party claims there is a separate agreement; or
• if a party says you committed fraud in the drafting of the written agreement.

If a court considers oral agreements or conduct as amendments to the written contract,  either could serve to materially alter the parties’ rights and responsibilities under the agreement.

Great care must thus be taken to not only properly draft an integration clause, but also to take the necessary steps in fulfilling the agreement and acting according to its terms.  You don’t have to do it alone.  Call Edwards Law today for a complimentary 20-minute consultation about your business contract needs.