In today’s Freedom Friday blog and email newsletter, I want to talk about a topic that I don’t usually get asked about, but probably should be asked about more often, and that’s what is called the merger clause in a contract. If you’ve ever signed a contract as a small business owner, you might see language in it that says, “This contract is the entire agreement between the parties…” or something similar to that effect. If you’ve ever wondered what that language means, this blog is for you. In today’s Freedom Friday blog and email newsletter, I’m answering the question, “What is a merger clause in my small business contract?”
A merger clause, which also is called an integration clause, is a statement in the contract that says, “This contract represents the entire agreement between the parties…” or something along those lines. The reason why a merger clause is in your contract is that it is meant to prevent disputes over what may have been said or promised before the parties signed the contract and basically provides that only the written terms (or the four corners, if you will) of the written contract apply.
The question that my clients should be asking more often is if their contract has a clause like this, is the other side prevented from bringing up emails, text messages, or even verbal conversations leading up to the signing of the contract and perhaps thereafter to indicate a change in terms. In some circumstances, yes, emails, text messages, and conversations can be introduced into evidence in a breach of contract dispute. This type of evidence is called “parol evidence,” and Oklahoma follows the “parol evidence rule.” Oklahoma courts will look beyond the contract at parol evidence if the contract is ambiguous, to show fraudulent inducement (one side made the other side sign in a fraudulent manner), mistakes such omissions or incorrect terms, and to show collateral agreements (oral agreements on a matter not covered by the written contract itself). In addition, if the parties behave in a way different from what is within the contract, that also can sometimes outweigh the written contract language.
Despite the concerns with parol evidence, merger clauses still have their use in that they can make it more difficult for the other side to claim unwritten promises in light of a written agreement, but it is not a cure all. You should always have a contract drafted and/or reviewed by an attorney to ensure that it is not an ambiguous contract.
Thinking about starting a small business? Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth? Please contact me at Jonathan@libertylegalok.com to schedule a FREE strategy session.
For more information about Liberty Legal Solutions, LLC, please visit our website at https://www.libertylegalok.com/