Contract picOver the many years I have practiced law in California, I have dealt with a wide array of disputes involving written contracts. In some instances, my clients’ have asserted that prior to signing a written contract (whether it was a business contract, real estate contract, construction contract etc.) they and the other contracting party had both orally negotiated and agreed that certain terms were to be included in the written contract. However, as is sometimes the case, after the written contract was prepared (either by an attorney for one of the parties, or by using a generic form such as an AIA construction contract or California Association of Realtors form) the parties fail to closely review the written contract to ensure that all bargained for terms were included, before they both signed the contract.

In some instances, as performance of the contract ensues, a dispute later arises between the parties when one of the parties contends that the other party failed to perform a condition and/or term that they had earlier “orally” agreed to perform. If the parties are unable to informally resolve the contract dispute, it may lead to litigation and a detailed legal analysis (by an attorney) of what rights a party has to enforce “oral” terms that were intentionally or inadvertently omitted from the final written contract.

Many written contracts (drafted by attorneys or included in some of the form contracts referenced above) include a short paragraph usually entitled “Entire Agreement” or “Integration Clause.” Although brief in nature, this paragraph has huge implications to both contracting parties, especially if one of the parties is attempting to enforce a term that was orally agreed to between the parties, but omitted from the final contact. Integration clauses generally read as follows:

All understandings between the parties are incorporated in this Agreement. Its terms are intended by the parties as a final, complete and exclusive expression of their Agreement with respect to its subject matter and supersede and replace all prior or contemporaneous discussions, negotiations, letters, memoranda or other communications, oral or written, with respect to the subject matter hereof and may not be contradicted by evidence of any prior agreement (either written or oral).

Integration clauses are strictly enforced by courts in the State of California. Although some exceptions may exist to enable a party to enforce an oral term that was omitted from the final contract, the party seeking to enforce such a term faces an uphill and very difficult battle. The exceptions to this rule are rare, and parties should immediately contact legal counsel to determine if such an exception may apply in their case. Consequently, a party signing a written contract involving a substantial financial commitment or a significant legal obligation, should closely review the contract and may wish to retain legal counsel to review the contract and ensure it includes all essential terms before the contract is signed.

The California business attorneys at Reid & Hellyer have extensive experience in construction, real estate and contract law.

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About Steven G. Lee

Steven G. Lee practices litigation, real estate and business law with the Riverside law firm of Reid & Hellyer. He is president of the Inland Empire chapter of the J. Rueben Clark Law Society.

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