A merger clause is a clause contained in a contract that states the contract in question is the sole and complete agreement between two parties. Also known as an integration clause, this clause usually represents the final agreement between the two parties and supersedes any previously existing oral or written agreements, which are also known in contract law as parol evidence.
Merger clauses are useful in that they prevent any chance for one of the involved parties to go back after the contract is signed and claim that the agreement is not complete. Employment contracts, sale of goods agreements, and franchise contracts 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 totality of the agreement between the two, and that any terms not included need not be fulfilled. Since that is the case, those who agree upon such a clause must be certain that the agreement fulfills all of the predetermined needs. Only a subsequent written agreement can nullify the terms agreed upon in a contract bound by a merger clause.
These clauses also supersede any previous agreements between the two parties. By contract law, any informal or oral agreements need not be honored by the parties involved once an integration clause has been included. Any claims by one party that some implied agreement, that is not covered in the original contract, is being neglected are useless. Merger clauses essentially render those unwritten agreements meaningless.
If a dispute arises concerning such contracts, courts generally rule that any contract that contains a merger clause has been properly discussed and negotiated to the fullest extent by both parties, and therefore will accept no claims that some preexisting agreement should be honored. Such extraneous agreements are known as parol evidence, and the law prevents such evidence from being considered in the case. In this manner, the laws regarding parol evidence are effective in preserving the integrity of written contracts.
Certain types of contracts typically include a merger clause to solidify the agreement. Employment contracts that detail pay rate and medical and retirement benefits contain the clause to prevent an employee from claiming that he is not receiving what was promised. Sale of goods agreements often specify the price, delivery time, and amount of goods being sold and include merger clauses to prevent either side from changing these terms after the fact. Franchise contracts cover the franchiser and franchisee and may also include a merger clause as a way of locking in the terms of the franchise agreement.
