In a contract, an integration clause expresses that the written contract is the final and complete agreement between the parties rather than any other written or oral statements. An integration clause aims to stop the parties from claiming that the contract doesn’t reflect their accurate and complete understanding of the agreement.
Integration clauses are also called “merger clauses” or “merger and integration” clauses. The laws overseeing integration clauses can differ from state to state, but they must be performed with the same formalities as any other contract clause requirement (signed, etc.). Integration clauses typically appear at the beginning or the end of a contract.
What is a Contract?
A contract is a legal document that creates mutual obligations between the parties entering the contract. There are many distinct types of contracts. Further, the laws regarding contracts vary by state. It is always essential for an individual to have an attorney review any agreement before signing.
A contract may be in written or oral form. In most cases, to be legally binding, a contract must be in writing and signed by all parties involved.
Courts generally require three things for a contract to be enforceable:
- Mutual assent, or agreement to the contract terms;
- A valid offer and acceptance; and
- Consideration.
Contracts are deemed the foundation of the business world. They may be simple or very complex. Examples of contracts include employment contracts, real estate purchase contracts, and insurance contracts.
Contracts must be entered into by all parties voluntarily. All parties signing the contract must do so of their own free will and not under duress. Contracts can be used whenever parties want to document an agreement to ensure all parties’ rights are protected.
Drafting a contract refers to writing the terms and details of a contract to determine and outline the legal obligations of all parties to the contract. This allows all parties to the contract to understand their duties and legal obligations to one another clearly.
Anyone can draft a contract, but it would be in the best interest of all parties involved to have an attorney draft a contract, especially if it is detailed or complex. For instance, a real estate contract often involves multiple parts, multiple parties, and complex land descriptions. To ensure your sale or purchase, financial investment, and rights are protected, having an attorney draft this type of contract would be preferable.
A contract will also provide sections outlining whether or not it may be canceled and how to cancel it. The contract will also outline the consequences if a party breaches the terms of the contract. A well-written contract will contain explicit definitions of what constitutes a breach of the contract so all parties can uphold their duties.
What is Necessary to Form a Contract?
Several elements are required to form a valid and legally enforceable contract.
These include:
The offer and acceptance elements are known as the “meeting of the minds,” or mutual agreement. All parties’ signing of the contract is often used to prove that agreement. In some circumstances, offers may have an expiration period, where the offer is open for a reasonable time. Some offers may not have a time limit.
Offers can be revoked until the time of acceptance.
Acceptance happens when the parties agree to the terms of the offer. If a change is made to the offer terms, it would be considered a counteroffer. Different states have different laws in this area of contracts, so it is essential to review local regulations.
For a contract to be proper, consideration must be provided. Consideration happens when both parties agree to provide something of value in exchange for a benefit. Consideration must be something of value and can include money, a vehicle, or manual labor.
For a contract to be valid, all parties must be legally competent. Some individuals cannot enter into contracts, such as minors or the mentally impaired. A party must be of sound mind and not under the influence of drugs or alcohol at contracting. All parties to a contract must be free from coercion at contracting.
Contracts will be declared void if there is a mistake, coercion, or fraud by one or more parties.
What Is a Merger Clause?
A merger clause (a.k.a. integration clause) prevents a party from claiming the contract does not reflect the parties’ entire understanding after the contract was formed. Parties often attempt to do this by relying on pre-contract negotiations or oral agreements after the contract is formed.
The merger clause ensures that the written contract is the complete agreement between the parties. A typical merger clause will say, “This agreement contains the parties’ entire agreement.”
What Type of Contracts Contain Merger Clauses?
Merger clauses are found in a majority of contracts.
Here are some examples:
- Employment contracts: Many employment contracts specify what benefits an employee will receive, such as health and retirement. Merger clauses are placed in these contracts to prevent employees from claiming they were promised more than the contract provides.
- Sale of goods agreement: Likewise, sale of goods agreements specify the amount of goods, price per unit, time of delivery, and other specific terms in the contract. A merger clause often prevents a buyer or seller from changing these terms.
Are Merger Clauses Always Enforceable?
Merger clauses are generally enforceable. However, some states will not enforce a merger clause unless specific as to what terms are merged. An experienced lawyer will be able to advise you on what is required for an enforceable merger clause.
What Are Some Examples of Integration Clauses?
Though the exact language may vary with each contract, an integration clause may utilize language such as the following:
“This contract contains the entire agreement of the parties concerning the subject matter of the Contract. The contract supersedes any prior agreements, understandings, or written or oral negotiations. This Contract can only be amended through a written document formally executed by all parties.”
Some examples of agreements in which integration clauses are commonly used include:
- Employment: An employer and employee may often choose to work according to an employment contract. Many employment contracts contain an integration clause to prevent either party from claiming more or less than what was agreed upon in writing.
- Sale of Products: Agreements for the sale of products may require much negotiation in terms of pricing, delivery, and other important aspects of the sale. A merger clause may be needed to prevent the parties from changing the terms later.
Therefore, merger and integration clauses provide the parties with clarity regarding those terms part of the contract. They are beneficial for the parties in heavy verbal negotiations before signing a written contract.
What if an Integration Clause is Violated?
Violations of an integration clause usually occur when 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.
Nevertheless, if one party refuses to perform under the written contract terms, the other party can usually file a lawsuit to receive the appropriate remedy. In most circumstances, the court may issue an injunction requiring the other party to perform their contractual duties according to the written agreement.
In some circumstances, the non-breaching party may receive a monetary damages award as compensation for any losses caused by the non-performance. However, eligibility for a damages award may depend on whether the plaintiff has requested an injunction first. Therefore, both parties should comprehend the legal consequences of an integration clause before incorporating one into their written contract.
Do I Need a Lawyer to Help Draft a Contract Integration Clause?
Integration clauses can have far-reaching effects on how an agreement is enforced. If you have any legal questions or needs regarding integration or merger clauses, you may wish to contact an experienced contracts lawyer right away.
Your attorney can help you draft and review the contract and any integration clauses needed. Your lawyer can also represent you in court if a lawsuit has become necessary.
