What is the effect of a “merger clause” in an agreement?

A “merger clause” is “[a] provision in a contract to the effect that the written terms may not be varied by prior or oral agreements because all such agreements have been merged into the written document.”  A merger clause freely negotiated by similarly sophisticated parties as part of the bargain in an arm’s-length transaction has a different effect than a provision in a standard form contract which cannot be negotiated and cannot serve as the basis of the parties’ bargain. 

In Armstrong v. Am. Home Shield Corp., the merger clause provided that “This Agreement shall constitute the entire contract between the parties and supersedes all existing agreements between them, whether oral or written, with respect to the subject matter hereof.”  The court found that although the language, standing alone, did not specifically refer to prior representations, when considered with the contract as a whole, there was an unequivocal disclaimer of reliance.  

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