FLORIDA BUSINESS LITIGATION, PART TWO: CONTRACTUAL “INTEGRATION” OR “MERGER” CLAUSES CAN REDUCE UNCERTAINTY IN BREACH OF CONTRACT LAWSUITS

This article is the second in a two-part series on contractual “merger” or “integration” clauses (the terms merger and integration are used interchangeably). Integration/merger clauses purport to define a contract as being limited to only what is contained in the written document signed by the parties. This can help ensure that neither party will later claim that he was promised something as part of the deal, but that promise was not actually written into the contract terms. Under Florida law, merger clauses are enforceable and effective ways to ensure that the parties are in complete accord as to the terms of their agreement. Integration clauses, however, are not ironclad and there are some limitations. Peter Mavrick is a Fort Lauderdale business litigation attorney and Miami business litigation attorney who has extensive experience with breach of contract lawsuits and related claims.

In the context of a case involving a non-compete contract, Environmental. Services, Inc. v. Carter, 9 So. 3d 1258 (Fla. 5th DCA 2009), gave great weight to an integration/merger clause that provided in pertinent part, “[t]his Agreement constitutes the complete agreement between the parties with respect to the subject matter contained herein and revokes and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral.” Environmental Servs. v. Carter, 9 So. 3d 1258 (Fla. 5th DCA 2009) (emphasis added). Environmental Services, Inc. v. Carter found that, “[a]lthough the existence of a merger clause does not conclusively establish that the integration of the agreement is total, it is a highly persuasive statement that the parties intended the agreement to be totally integrated and generally works to prevent a party from introducing parol evidence to vary or contradict the written terms” and “the merger clause precludes the consideration of other documents to vary the terms of the agreement.”

“That [a contract] contained a merger clause is not determinative; the law remains that ‘the existence of a merger clause does not per se establish that the integration of the agreement is total.’” Lowe v. Nissan of Brandon, Inc., 235 So. 3d 1021 (Fla. 2d DCA 2018). There are three types of claims concerning the completeness of an agreement that may survive a merger clause: allegations that terms are missing from patently incomplete and ambiguous agreements, allegations concerning an agreement unrelated to the agreement at issue, and allegations that there is fraud in the inducement concerning a party’s motivation to sign the contract based on representations of the opposing party.

If an agreement containing a merger clause contains a what Florida appellate courts call a “latent ambiguity” (i.e., an obvious ambiguity), then evidence of the party’s agreement can sometimes be used to explain the parties’ agreement with terms that are not part of the written agreement. “A latent ambiguity arises when a contract on its face appears clear and unambiguous, but fails to specify the rights or duties of the parties in certain situations.” Jenkins v. Eckerd Corp., 913 So. 2d 43 (Fla. 1st DCA 2005).“However, “where a contract is simply silent as to a particular matter, that is, its language neither expressly nor by reasonable implication indicates that the parties intended to contract with respect to the matter, the court should not, under the guise of construction, impose contractual rights and duties on the parties which they themselves omitted.” Gulf Cities Gas Corp. v. Tangelo Park Serv. Co., 253 So.2d 744 (Fla. 4th DCA 1971)

A contract with a merger clause that expressly limits itself only to a discrete part of the conduct between the parties or refers to a particular transaction does not necessarily cause all of the parties’ collective agreements to merge into that contract. Michael Anthony Co. v. Palm Springs Townhomes, 174 So. 3d 428 (Fla. 4th DCA 2015) (holding that a contract “executed by the same parties at or near the same time, in the course of the same transaction, and concern the same subject matter,” should be read together, even if one of those agreements has a merger clause); Hahamovitch v. Delray Prop. Investments, Inc., 165 So. 3d 676 (Fla. 4th DCA 2015) (holding that the way that a merger clause was written suggests that the parties had not intended to merge unrelated promises).

An integration clause is generally not helpful when there is a well-pled claim of fraud in the inducement for a party’s decision to agree to and sign the contract. As Florida’s First District Court of Appeal explained, “[n]either is the presence of a merger clause an impediment to a cause of action for fraud in the inducement.” Noack v. Blue Cross & Blue Shield of Florida, Inc., 742 So. 2d 433 (Fla. 1st DCA 1999); see Wilson v. Equitable Life Assurance Soc’y, 622 So.2d 25 (Fla. 2d DCA 1993) (it is a well-established rule that “alleged fraudulent misrepresentations may be introduced into evidence to prove fraud notwithstanding a merger clause in a related contract”). A court can rescind a contract based upon a party’s claim that he was fraudulently induced into entering into an agreement. Oceanic Villas, Inc. v. Godson, 4 So.2d 689 (1941) (action to rescind based on fraud in procurement survives integration clause); Ortiz v. Orchid Springs Dev. Corp., 504 So. 2d 510 (Fla. 2d DCA 1987) (“[O]ral agreements or representations may be introduced into evidence to prove that a contract was procured by fraud notwithstanding such a merger clause”); Cassara v. Bowman, 186 So. 514 (1939) (action to rescind not based on fraud in procurement does not survive integration clause). A claim of fraud must usually only be concerning then existing facts – a promise of future behavior usually cannot form the basis of a claim of fraud in the inducement. Mejia v. Jurich, 781 So. 2d 1175 (Fla. 3d DCA 2001) (“An action for fraud generally may not be predicated on statements of opinion or promises of future action, but rather must be based on a statement concerning a past or existing fact”).

Merger clauses provide a method by which parties can ensure that the parties’ entire agreement is entirely covered by a written contract. Parties can further protect themselves from claims that the agreement did not contain all of the parties’ terms by drafting their agreement in such a way as to fully articulate the parties’ respective responsibilities, any respective promises the parties are relying on, as well as the precise intended scope of any merger clause.

Peter Mavrick is a business litigation lawyer with offices in Fort Lauderdale and a Miami. This article does not serve as a substitute for legal advice tailored to a particular situation.