Legal Insights by John A. Myer
Merger clauses (sometimes referred to as integration clauses) are found at the end of most contracts and state that the contract represents the entire agreement between the parties.
It’s usually a bad idea to sign a contract without one. The absence of a merger clause allows the other party to argue, for example, that he sent you a letter with a proposal that you accepted (even though you know you called him to reject the idea). The other party can claim that the proposal is a separate oral contract. Sure, you can go to court and complain, but who wants to go to court?
Of course, if the contract contains a merger clause, you need to make sure that everything you agreed to is in the contract. That means that if you buying customized software you will want to add exhibits with detailed design specifications and acceptance procedures. The software consultant, on the other hand, will want to make sure that the deliverables do not inadvertently transfer the consultant’s rights to his tools, methods and patentable discoveries.
If you do have another agreement with the other party make sure that the merger clause says exactly that. For example: “This Software Installation Agreement constitutes the full and complete understanding and agreement of the parties hereto and supersedes all prior understandings and agreements, except for the Software Licensing Agreement dated _________, which remains in full force and effect.”
If the contract involves the sale of goods, then the Uniform Commercial Code applies, which is codified in Washington as RCW 62A and the statute addressing merger clauses is RCW 62A.2-202.
John A. Myer is a corporate and securities lawyer with Myer Law PLLC in Seattle, Washington. This posting does not constitute legal advice.
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