Merger Clauses
What is a merger clause?
It is a clause in an agreement indicating that any other prior discussions do not form any part of the agreement itself.
What is a severability clause and where is it in PSA 1?
A severability clause in an agreement states that its terms are independent of one another so that the rest of the contract will remain in force should a court declare one or more of its provisions void or unenforceable.
It is section 12.15 in PSA 1.
What does a waiver clause purport to achieve?
- Invalidates unwritten waivers
- Limits effective waivers to specific matters
- Prevents effective waivers from applying to future events
What is the fundamental purpose of indemnification?
Risk shifting.
Which recent event prompted debates and pushed commercial contract drafters to define a new circumstance within the force majeure clause?
The pandemic.
What are the benefits and limitations of having a specific merger clause?
Courts are more willing to exclude evidence if the writing expressly disclaims representations as to a specific subject matter. However, it is not easy to determine or predict in advance the subject matter of the alleged misrepresentation.
What are the two approaches that a court might take when encountering a savings clause?
- Edit the clause to achieve the parties' desire
- Blue pencil approach
Which party might want to limit the scope of waivers?
The party that can enforce a right and want to ensure that it does not unintentionally waive its ability to do so in the future.
Why would an indemnitor want to include an indemnification section in the agreement?
By negotiating and contracting on indemnification, the indemnitor can limit the remedies a indemnitee can seek, therefore limit its exposure to liability risk and potential loss.
What are some ways to broaden a force majeure clause?
- By describing the circumstances rather than defining them.
- By adding a catchall phrase at the end.- By including the phrase "whether foreseen or unforeseen."
What is the relationship between merger clauses and the parol evidence rule?
A merger clause strengthens the presumption that the written document is complete and final by expressly stating that the written document is the final and full expression of the parties’ agreement.
If an agreement has both a severability provision and a savings provision, what is the order in which they should be applied?
Ideally savings clause should be applied first, and a provision should only be severed if it cannot be saved.
Is a no oral-modifications clause enforceable?
It depends on the court and the type of transaction.
What is the difference between "indemnify," "defend," and "hold harmless"?
"Indemnify" covers the actual liabilities.
"Defend" covers the cost of defending a claim, even if the claim is unsuccessful.
"Hold harmless" bars the indemnitor from bring suits against the indemnitee.
What is a knock for knock provision?
It is a form of indemnity that is used in many commercial service contracts. Knock-for-knock indemnity is reciprocal in nature and is based on ownership of property and personnel as opposed to allocating risk based on fault. Each party agrees to take responsibility for and to indemnify the other party against injury and loss to its own property and personnel.
What evidence will not be kept out despite a well-drafted merger clause?
Evidence related to illegality, duress, mistake, incapacity, and unconscionability.
What is the problem in giving the severability clause its natural meaning?
It essentially treats no provision of the agreement as truly essential.
Why would a no oral-modifications or a no oral-waivers clause be ineffective?
The theory is that the parties can by agreement change or by conduct waive this requirement.
Why do parties choose to negotiate an indemnification provision when they can sue for breach of contract or tort?
Indemnification often speeds up the recovery process for the indeminitees. It can also be less expensive than going to court. Additionally, it expands remedies beyond what would be available under contract or tort doctrines. It also provides greater certainty and flexibility to parties.
What did the Rissman v. Rissman court hold?
The court held that because the plaintiff included a non-reliance clause in the agreement, he is barred from making any claims that he was deceived.