Does an Integration Clause Void Terms from an Earlier Written Contract?
An integration clause, also known as a merger clause, is a provision in a contract that declares it as the final and complete agreement between the parties. This clause ensures that no previous agreements or terms can contradict or add to the current contract.
The standard integration clause in a contract is often looked at as boilerplate, added toward the end of the document, and in many cases ignored by parties that follow a different course of behavior in performing their obligations. It provides that written contract is all of the parties agreement and that it can be changed only in writing.
Sometimes there are more than one agreements at issue, either executed together or one after the other. On those occasions when the parties memorialize a new agreement in writing, and that second agreement contains an integration clause, does it completely supersede the first?
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Here, we have two subscription agreements for the purchase of common stock, neither of which, according to the plaintiff, were fulfilled. In a suit against the buyer that never paid the purchase price, the plaintiff Origin Inc. sues Magid Financial Services, Inc. and its principal owner Joseph Magid on both the intial and an amended subscription agreement. (Origin, Inc. v . Magid Financial Services, Inc., Civ. Action No. 19-14435)
Subscription Agreements Contain Integration Clauses
District Judge Castner in the United States District Couirt for New Jersey holds that the integration clause providing that the second agreement incorporates all of the parties agreement does away with the first unless the second expressly memorializes the parties’ intention that it still applies.
Entire Agreement; Assignment. This Agreement represents the entire agreement between the parties hereto with respect to the subject matter hereof, superseding all prior or contemporaneous agreements, understandings or promises between the parties hereto. This Agreement may be terminated, modified, waived, or amended only by a writing executed and delivered by both parties. Neither the Company nor Subscriber has relied on any representations not contained or referred to in this Agreement. No right or obligation of a party shall be assigned or otherwise transferred without prior notice to and the written consent of the other party. Any assignment or transfer in violation of the foregoing shall be null and void.
An unambiguous integration clause is applied according to its terms, like any other agreement, the judge held, should be enforced according to its terms. The defendants in the case argued that there were other terms agreed to by the parties that were not included in the agreement. The judge distinguished between ambiguous and partially integrated agreements, when the court might look beyond the four corners of the document, and the current contreact.
Is the Same Subject Matter Covered by the Agreement?
If it was within the subject matter of the agreement, and the agreement said it was integrated in a clear and unambiguous manner, then the court would not look further. To do otherwise would be to make a better contract than the parties made for themselves.
When the parties entered into unambiguous Subscription Agreements with unambiguous merger/integration clauses, they manifested a clear intent to be bound by those agreements. The Court cannot now graft onto the Subscription Agreements a condition not included therein by the parties themselves. Defendants’ contention that the parties understood that the Subscription Agreements would remain revocable unless and until Defendants obtained certain funds from “a third-party trading platform, for which Magid had no control over,” (see ECF No. 50 at 9), is belied by the express terms of the Subscription Agreements that Magid executed on behalf of MFS in 2017 and 2018.