A merger clause is a final agreement between two parties that supersedes any previous oral or written agreements. It ensures that the contract represents the entirety of the agreement between the two parties and replaces any previous agreements. Courts will not accept any claim that a pre-existing agreement should be honored if a merger clause is present. Employment, sale of goods, and franchise agreements often include a merger clause.
A merger clause is a clause in a contract stating that the contract in question is the one and only agreement between two parties. Also known as a supplementary clause, this clause usually represents the final agreement between the two parties and supersedes any previously existing oral or written agreements, also known in contract law as proof of speech.
Merger clauses are useful as they prevent one of the parties involved from walking back after signing the contract and claiming that the deal is not complete. Employment agreements, sale of goods agreements, and franchise agreements are three examples of agreements that may contain a merger clause.
When two parties include a merger clause in a contract, it ensures that the contract represents the entirety of the agreement between the two and that any terms not included do not have to be met. Since this is the case, those who agree to such a clause must be certain that the agreement satisfies all predetermined needs. Only a subsequent written agreement can cancel the terms agreed in a contract bound by a merger clause.
These clauses also replace any previous agreements between the two parties. Under contract law, any informal or verbal agreements do not have to be honored by the parties involved once an integration clause has been inserted. Any claim by either party that an implied agreement, which is not contemplated in the original contract, is disregarded is futile. The merger clauses render such unwritten agreements essentially meaningless.
If a dispute arises regarding such contracts, the courts will generally rule that any contract which contains an amalgamation clause has been properly discussed and negotiated to the maximum extent by both parties, and therefore will not accept any claim that a pre-existing agreement should be honored . Such extraneous agreements are known as verbal evidence, and the law prevents such evidence from being considered in the case. In this way, probation laws are effective in preserving the integrity of written contracts.
Some types of contracts typically include a merger clause to consolidate the deal. Employment contracts detailing the rate of pay and medical and pension benefits contain the clause to prevent an employee from claiming that he did not get what he promised. Sale-of-goods agreements often specify the price, delivery time, and quantity of goods sold, and include merger clauses to prevent either party from changing these terms after the fact. Franchise agreements cover the franchisor and the franchisee and may also include a merger clause as a way to lock in the terms of the franchise agreement.
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