FORT LAUDERDALE BUSINESS LITIGATION: INTEGRATION CLAUSES IN CONTRACTS DO NOT ALWAYS PROHIBIT FRAUD CLAIMS

A prevalent issue in business litigation is whether a party’s fraud claims are prohibited by an integration clause in a contract. Contracts typically include integration clauses to prevent contracting parties from later asserting claims based on oral statements that were not also expressed in the contract. Integration clauses or “merger” clauses can therefore effectively limit a party’s ability to rely on prior oral representations that were did not ultimately reduce to writing. However ,integration clauses must contain specific language to disclaim a party’s reliance. If an integration clause does not contain an express anti-reliance provision, then contracting parties typically can still bring fraud claims under Florida law. Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

Integration clauses will typically prohibit fraudulent inducement claims only if a specific reliance disclaimer exists within the contract. Lower Fees, Inc. v. Bankrate, Inc., 74 So. 3d 517 (Fla. 4th DCA 2011). Under Florida law, the mere “existence of an integration clause does not bar a claim for fraudulent misrepresentation.” Rodriguez v. Tombrink Enters., Inc., 870 So. 2d 117 (Fla. 2d DCA 2003). The rationale supporting this rule is steeped in the foundational purpose of fraud: a party cannot assent to an integration clause under false pretenses. Mejia v. Jurich, 781 So. 2d 1175 (Fla. 3d DCA 2002. Indeed, the “existence of a merger or integration clause, which purports to make oral agreements not incorporated into the written contract unenforceable, does not affect oral representations that are alleged to have fraudulently induced a person to enter into the agreement.” “[O]ral agreements or representations may be introduced into evidence to prove that a contract was procured by fraud notwithstanding such a merger clause.” Nobles v. Citizens Mortgage Corp., 479 So. 2d 822 (Fla. 2d DCA 1985). General integration clauses lacking specific reliance language therefore are not “an impediment to a cause of action for fraud in the inducement.” Noack v. Blue Cross & Blue Shield of Fla., Inc., 742 So. 2d 433 (Fla. 1st DCA 1999).

Absent very specific non-reliance language, integration clauses therefore do not prohibit specific causes of action for fraudulent inducement. Integration clauses cannot immunize a defendant in business litigation from its own fraudulent misrepresentations because standard and often boilerplate provisions would then enable an unbridled propagation of fraud. “If liability for such fraudulent inducements could be negated by the existence of a merger clause—a clause that has become standard in most commercial contracts—then there would be no deterrent to such fraud.” Trafalgar Capital Specialized Inv. Fund, FIS v. Atl. Energy Sols., Inc., 2010 WL 11505575 (S.D. Fla. Nov. 30, 2010). For example, in MeterLogic, Inc. v. Copier Sols., Inc., the Southern District Court of Florida refused to dismiss the plaintiff’s fraud claims based on an integration clause because the clause could not provide the defendants with a right to fraudulently induce the plaintiff into the contract. 126 F. Supp. 2d 1346 (S.D. Fla. 2000). The court determined the integration clause did not render the contract incontestable because the plaintiff claimed it was fraudulently induced into the contract. MeterLogic further held that: “[i]f a party alleges that a contract was procured by fraud or misrepresentation as to a material fact, an integration clause will not make the contract incontestable.” Indeed, under Florida law, the “presence of a merger/integration clause is not fatal to Plaintiffs’ cause of action for rescission because rescission vitiates every part of the contract.” Tigerdirect, Inc. v. Manhattan Assocs., 2006 WL 8430268 (S.D. Fla. Jan. 17, 2006).

Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.