What is a merger clause?

| Jan 28, 2022 | Business Litigation |

No business owner wants to risk their stability and assets due to a business dispute. Unfortunately, these issues just come part and parcel with owning a business, and you cannot entirely stave off the possibility of a dispute ever occurring.

It is thus more important to spend time in advance setting up situations that can make possible disputes easier for you down the line, rather than living as if they may never occur. To that end, you may want to consider including a merger clause in your contracts.

The use of a merger clause

The American Bar Association discusses effective uses of merger clauses. This clause, sometimes called an integration clause, specifies that the contract in question contains the agreement of all parties involved. Thus, in the event that a dispute happens and a judge oversees the case, they will only review the contents of the contract itself. Parties cannot submit evidence that involves proof of conversations or negotiations before or after the contract that the contract does not specifically contain.

Potential risks

This move may prove a potentially risky one, however. While it prevents the other party from bringing forth and utilizing evidence of discussions outside of the contract, it also prevents you from doing the same thing. You equally bind yourselves into the contract, limiting your potential stretch outside of it.

If you want to include a merger clause in your contract, it is best to word it clearly and carefully. You may want to enlist legal aid while going over this and other portions of your contracts to ensure they will remain airtight and supportive in the event that a party decides to litigate.

Archives

FindLaw Network