Opinion ID: 2382863
Heading Depth: 2
Heading Rank: 6

Heading: The Arbitration and Integration Clauses and Their Consequences.

Text: Hercules contends that Shama's alleged oral misrepresentations regarding its financial resources, made during the negotiations which preceded execution of the contract, were material to the agreement between them, even though none of Shama's statements was included in the contract as signed. In order to evaluate this contention, as well as Hercules' related claim that its reliance upon these oral statements was justified, we must first assess the significance of that exclusion. If the contract was not a completely integrated instrument, additional assurances and promises made by one party to another during their negotiations are surely relevant if the trier of fact is to understand the entire arrangement. If, on the other hand, the parties intended the written contract to settle everything, such promises and assurances have far less, if any, significance. We must therefore determine whether or not the contract between the parties was integrated and, if it was, whether it was completely or only partially integrated. [14] To do so, we must ascertain the intent of the parties at the time they entered into the agreement. Howard Univ. v. Good Food Servs., 608 A.2d 116, 126 (D.C.1992); Ozerol v. Howard Univ., 545 A.2d 638, 641 (D.C.1988); Mitchell v. David, 51 A.2d 375, 377-78 (D.C.Mun.App.1947). The first and most important step in ascertaining that intent is examination of the contract itself. We have held that if [a] document is facially unambiguous, its language should be relied upon as providing the best objective manifestation of the parties' intent. 1010 Potomac Assocs. v. Grocery Mfrs. of Am., Inc., 485 A.2d 199, 205 (D.C.1984); Bolling Fed. Credit Union v. Cumis Ins. Soc'y, 475 A.2d 382, 385 (D.C.1984). In the present case, we have no difficulty in ascertaining the parties' intent from the terms of the agreement they executed. First of all, the agreement to arbitrate which Hercules signed was unconditional. Article 13 of the contract provides that all claims or disputes between [Hercules] and [Shama] arising out of or relating to the Contract Documents or the breach thereof shall be decided by arbitration.... This clause does not say that disputes will be sent to arbitration only if Shama is financially sound, or if Shama deposits money into a certain bank account, or if Shama uses its construction loan exclusively to pay Hercules. On its face, the arbitration clause is complete and unambiguous. It specifies how disputes are to be settled (by arbitration) and does not provide for any exceptions or envisage any conditions. The written document also contains a merger clause which states that the parties intended to enter into a single completely integrated agreement regarding the renovation project. Article 6 of the standard AIA contract between Hercules and Shama provides that [t]he Contract Documents, which constitute the entire agreement between the Owner and the Contractor, are listed in Article 7 and, except for Modifications issued after execution of this agreement, are enumerated as follows.... (Emphasis added). After this clause, nine specific documents are enumerated: the Agreement, the General Conditions of the Agreement (which are actually Articles 7-20 of the Agreement), the drawings and specifications relating to the construction site, supplementary general conditions, certain special conditions, and three addenda. Article 7 of the contract further elaborates on the meaning of the term contract documents as it is used in Article 6: The Contract Documents consist of this Agreement with General Conditions, Supplementary and other Conditions, the Drawings, the Specifications, all Addenda issued prior to the execution of this Agreement, and all Modifications issued by the Architect after execution of the Contract.... The intent of the Contract Documents is to include all items necessary for the proper execution and completion of the Work. [ [15] ] (Emphasis added.) When coupled with the specific enumeration of which extrinsic items are part of the contract documents, [16] the italicized words in the two quoted passages establish beyond peradventure that the parties intended their written contract to be an expression not only of the final agreement as to the terms in the contract but also of the entire agreement they reached. [17] In other words, the contract between Hercules and Shama was completely, rather than partially, integrated. [18] A completely integrated contract may not be supplemented with prior representations not ultimately included therein, even if those representations are not expressly contradicted by the contract itself. Ozerol, supra, 545 A.2d at 642. According to the parol evidence rule, when the parties to a contract have reduced their entire agreement to writing, the court will disregard and treat as legally inoperative parol evidence of the prior negotiations and oral agreements. Giotis v. Lampkin, 145 A.2d 779, 781 (D.C.Mun.App.1958). In other words, when a court makes a determination that a contract is completely integrated, one consequence is that no evidence may be introduced of prior (or contemporaneous) agreements or terms, whether consistent or inconsistent, within the scope of the written agreement. Ozerol, supra, 545 A.2d at 642; see also Flippo Constr. Co. v. Mike Parks Diving Corp., 531 A.2d 263, 269 (D.C.1987); Stamenich v. Markovic, 462 A.2d 452, 455 (D.C.1983). As we held in 1010 Potomac Assocs., supra, 485 A.2d at 210, the purpose of the parol evidence rule is to promote the stability of transactions by preventing disgruntled parties from avoiding obligations by alleging oral understandings that conflict with their written agreements when those agreements were reduced to writing in order to forestall just such contentions.