It is always best to enter into a business contract in writing. While oral contracts are enforceable in New York, it is sometimes difficult to establish the specific terms agreed upon by the parties. A written contract can eliminate any uncertainty or ambiguity from the equation.
Many written contracts contain what is known as an “integration clause” or “merger clause.” This is basically language that states the contract covers all areas of agreement between the parties. For example, an integration clause cited in a2013 decision by the Appellate Division, Third Department, said a written employment contract between a hospital and a physician assistant constituted “the entire agreement between the parties with respect to the subject matter hereof, and no amendment, change or modification shall be effective unless in writing and signed by the parties hereto.” Litigation arose when the physician assistant claimed he was fired in breach of an oral promise made to him by hospital officials. Any such promise was irrelevant, the Third Department said, because the written employment agreement's integration clause preempted any such unwritten modifications.
Similarly, the Appellate Division, First Department, held in arecent decision that Manhattan Supreme Court properly dismissed a breach of contract claim arising from a booking dispute at a concert venue. There was no dispute the defendant was not in breach of the contract as written. The plaintiff therefore attempted to argue there were “subsequent emails” between the parties that purported to modify the written contract. The First Department said that was insufficient to support the plaintiff's lawsuit. The contract's integration clause clearly “precluded modification of its terms absent 'a writing signed by both parties.'”
How Integration Clauses Can Benefit You
The basic lesson from both of these cases is that an integration clause can trump any other oral or written promise made by one party to another. This can make it exceptionally difficult to prove fraud or breach of contract based on one party's representations. Anytime you negotiate or sign a business contract, make sure to look for an integration or merger clause.
That is not to say integration clauses are bad or cannot benefit your interests. The whole point of signing a written contract is to eliminate as much uncertainty as possible from a business relationship. If you are hiring an employee, a written contract with an integration clause can protect you from claims that you promised benefits above-and-beyond what the contract specifies. Likewise, in a contract for the sale of goods, an integration clause can prevent a customer from attempting to unilaterally change the terms of the agreement after it is signed.
An integration clause is just one element of a business contract you need to consider. Before negotiating or signing any contract, you should first retain a qualified New York business attorney who can advise you on the need for an integration clauses and/or any other language necessary to protect your interests in a transaction.Contact our office today if you have any questions.