Merger Clause Research Articles

IMPLEMENTATION OF THE MERGER CLAUSE BASED ON UNIDROIT PRINCIPLES OF INTERNATIONAL COMMERCIAL CONTRACTS (UNIDROIT Principles)

In the current era of globalization, there are a significant number of international transactions which require international commercial contracts. The increasing number of international commercial contracts has led to the development of international legal instruments that regulate these contracts and accommodate the needs of the parties involved in international business transactions. One of these instruments is known as the UNIDROIT Principles. A merger provision is typically written into a large number of contracts. This clause is governed by the UNIDROIT Principles, which can be found in one of its provisions. This research paper will analyse the implementation of the merger clause in the UNIDROIT Principles by courts and arbitration. Taking into account the fact that only a few cases have been decided relating to merger clause under UNIDROIT Principles, this research paper will discuss this topic. This paper aims to examine the implementation of merger clauses under UNIDROIT Principles by court and arbitration through the review of related cases. The method used in this study is normative juridical with a descriptive-analytical nature. To date, the judicial and arbitral decisions that are accessible shed light on the meaning of the merger clause and its relation to the interpretation of the contract.

Interpreting merger clauses in contracts governed by the CISG: delineating the scope for the use of extrinsic evidence

Abstract Under Article 8(3) of the United Nations Convention on Contracts for the International Sale of Goods (CISG), parties’ statements, prior negotiations and other external circumstances may be used to assess the presence of subjective or objective intent that can, in turn, be used to interpret contractual terms in international sales contracts governed by the CISG. However, parties to the contract can, through the adoption of an ‘entire agreement’ or ‘merger’ clause, opt out of this rule under Article 8(3) and restrict these interpretative tools in any manner as they see fit, depending on the requirements of their contract. Since the CISG does not explicitly address merger clauses and their effects, the CISG Advisory Council, in its Opinion no. 3, has provided a test to determine how the scope of a merger clause is to be determined. However, this test presents certain conceptual and practical limitations that render it inadequate for use in international commercial contracts. This article aims to analyse this test and the methods that have been used to interpret merger clauses under other uniform legal instruments and cases in common law jurisdictions. On this basis, the article proposes a test that attempts to fully capture the conceptual intent behind including merger clauses while ensuring that the parties are in the driver’s seat while determining their scope and effect.

The Americanization of contract law: the merger clause in the European perspective

It is a fact that the American contractual models and the American drafting style dominate the business environment. Professional operators use such models not only in international business relationships, but also when they enter into a purely domestic agreement. This means that professional operators circulate US contractual models for which the law of a civil law country is applicable.This paper explores the reasons underpinning such practice and how US contractual models react when they are subject to the law of a civil law country. In particular, considering the peculiarities of the US contract law, it is worth focusing on integration and interpretation that are based on two rules (parol evidence rule and plain meaning rule) that are quite the opposite of the principles applicable under the civil law.The analysis will specifically focus on the merger clause, which is unknown to the civil law tradition and instead is iconic of the US contract law sentiment, investigating if and how this clause can work under the law of a civil law country.

Are Merger Clauses Value Relevant to Bidder and Target Sharholders?

Merger and acquisition deals are governed by merger clauses which are negotiated between the bidder and target in order to communicate deal terms, specify risk sharing between the parties, and describe dispute management provisions in case of litigation. In a large sample of manually collected U.S. deal contracts involving publicly traded bidders and targets, we construct merger clauses indices based on legal scholars’ ex-ante prediction and examine the relationship between announcement returns and different types of merger clauses. We find that bidder protective clauses correlate with higher bidder returns while target protective clauses and pro-competition clauses correlate with higher target returns. We also find that bidder and target protective indices have larger impacts on announcement abnormal returns for “bad” deals than for “good” deals. Finally, we find that the inclusion of more bidder protective clauses leads to lower deal completion rates while the inclusion of more target protective clauses and pro-competition clauses has no impact on deal completion rates. These results are consistent with the expert lawyer/efficient contracting view of Cain, Macias, and Davidoff Solomon (2014), and Coates (2016), and against merger contracts as boilerplate agreements.

Tax Court Again Uses Merger Clause to Find Adequate Substantiation

The US Tax Court, on August 28, ruled that a charitable deduction for a gift of a conservation easement was available to the donor, which did not receive a substantiation letter from the donee, because of the existence of a suitable merger clause in the deed of easement (Big River Development, LLC v. Commissioner).

Tax Court Uses Merger Clause to Find Adequate Substantiation

The US Tax Court, on August 25, ruled that a charitable deduction for a gift of a façade easement was available to the donor, which did not receive a substantiation letter from the donee, because of the existence of a suitable merger clause in the deed of easement (310 Retail, LLC v. Commissioner).

The Interpretation of Commercial Contracts: An Empirical Study

The theoretical debate over contract interpretation revolves over one central question: what is the preference of most contracting parties for contract interpretation rules. Textualist theorists believe that most parties prefer textualist rules of interpretation, under which the contract interpreter must normally consider only the contract's written text. In contrast, contextualist theorists believe that most parties prefer contextualist rules of interpretation, under which the interpreter should consider all relevant contextual evidence to interpret the contract, beyond the written text. Despite the widespread debate over contract interpretation, there has been very little empirical research on this topic. This article aims to fill this research gap by empirically analyzing actual interpretation clauses of commercial contracts. Examining 1,521 commercial contracts that have been disclosed to the Securities and Exchange Commission, this article finds that a clear majority (75.28%) of contracts include a textualist “merger clause”, which typically triggers a set of textualist rules of contract interpretation. In addition, the results of this study indicate that the merger clauses, included in the sample contracts, are not mere arbitrary boilerplates, which were randomly added to the contracts. More specifically, the study found a significant statistical association between the contractual existence of a variety of textualist contractual clauses, other than a merger clause, and the existence of the textualist merger clause. The theoretical and practical implications of these results are discussed.

Merger Clauses in Contracts Governed by Polish Law

The use of so-called merger clauses while drafting contracts governed by the civil law is becoming increasingly popular. Since merger clauses originated from the common law, it is not easy to ascertain their legal effects under the civil law. This is also the case in Polish law. Not only is there little mention in the legal literature of the effects of merger clauses, but also legal scholars' views on the issue differ widely. This article tries to answer the question of what the legal effects of using merger clauses under Polish law are. Among others, it tackles the important issue of how a merger clause inserted into a contract influences the process of its interpretation and closing its loopholes. Moreover, it attempts to compare merger clauses' legal effects under Polish law and European private law model rules. The starting point of the analysis performed in the paper is the distinction between two functions of contractual clauses, which leads to a clearer description of the consequences of merger clauses' usage. The adoption of the aforementioned distinction leads to the conclusion that the legal effects of merger clauses under Polish law may be far more significant than is often considered. Additionally, it can be observed that these effects do not differ from the legal effects of merger clauses under European law model rules as much as has been claimed.

The Merger Clause: A Potential Defense to the Mann Frankfort Implied Promise?

It is not difficult to imagine a case where a long time salesperson leaves her former employer and begins work with a new employer. When the salesperson began employment with her former employer, the former employer required the salesperson to sign an employment agreement. This agreement contained a covenant not to compete that stated that the salesperson would not compete with the former employer after he resigned. It also provided that she would not use the former employer's confidential information. But the agreement did not provide any express promise that the former employer would ever give the salesperson any confidential information. Moreover, the agreement contained a merger clause that provided that the agreement was the only agreement between the parties and that there could be no implied promises by either party. After the salesperson begins working for the new employer, she begins communicating with customers whom she contacted while previously employed with her former employer. The former employer files suit and attempts to enforce the covenant not to compete. The issue in this example is whether the covenant is enforceable: Is there an otherwise enforceable agreement regarding confidential information even though there was no express promise by the former employer to provide any confidential information?

CISG-AC Opinion no. 3*, Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG, 23 October 2004

Article CISG-AC Opinion no. 3*, Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the CISG, 23 October 2004 was published on April 24, 2005 in the journal Internationales Handelsrecht (volume 5, issue 2).