Opinion ID: 2566850
Heading Depth: 2
Heading Rank: 2

Heading: whether the bfa constituted a substituted contract

Text: ¶ 21 The second main issue in this appeal is whether the BFA constituted a substituted contract that replaced the FPA, thereby saving AEFA from the obligation of fulfilling its responsibilities under the FPA. The trial court granted partial summary judgment for the Advisors on this issue, and AEFA argues that this decision was in error. Because we are reviewing a grant of summary judgment, we review for correctness to determine whether the trial court erred in applying the relevant law and whether a material fact was in dispute. WebBank v. Am. Gen. Annuity Serv. Corp., 2002 UT 88, ¶ 10, 54 P.3d 1139. ¶ 22 The parties do not dispute the law applicable to this question. A substituted contract is a new contract that replaces the terms of a prior contract, thereby discharging the parties' duties under the original agreement. Restatement (Second) of Contracts § 279(1), (2) (1981). The party claiming the existence of a substituted contract bears the burden of proving its elements. Epland v. Meade Ins. Agency Assocs., 545 N.W.2d 401, 407 (Minn.Ct.App.1996), rev'd on other grounds, 564 N.W.2d 203 (Minn.1997) (citing First & Am. Nat'l Bank v. Whiteside, 207 Minn. 537, 292 N.W. 770, 775 (1940)). These elements are that `(1) there must be an existing valid contract; (2) all parties must agree to a new contract; (3) the new contract must extinguish the old contract; and (4) the new contract must be valid.' Id. (quoting United Fire Ins. Co. v. McClelland, 105 Nev. 504, 780 P.2d 193, 195 (1989)); see also Nat'l Am. Ins. Co. v. Hogan, 173 F.3d 1097, 1105 (8th Cir.1999) (listing elements as (1) the existence of a previous valid contract; (2) the parties agreed to a new contract; (3) the parties formed a valid new contract; (4) the parties intended to extinguish the old contract and substitute the new (footnote omitted)). ¶ 23 In this case, the parties disagree about only one of the elements in the test for a substituted contract, namely, whether the parties intended for the BFA to extinguish obligations due and owing under the FPA. To determine the parties' intent, courts look to the parties' manifest intent, not their subjective intent. Vacura v. Haar's Equip., Inc., 364 N.W.2d 387, 392 (Minn.1985). Manifest intent can be shown by the express words of the parties or ... the facts and circumstances attending the transaction. Nat'l Am. Ins., 173 F.3d at 1107. ¶ 24 In its effort to prove that the Advisors and AEFA manifested an intent to extinguish the Advisors' rights under the FPA, AEFA relies primarily on the Disclaimer of Benefits provision of the BFA, which provides: Disclaimer of Benefits. Independent Advisor acknowledges that the Manuals, including the Compensation Schedule contained therein, constitute the complete list of the compensation and benefits owed Independent Advisor resulting from this Agreement or Independent Advisor's relationship with AEFA. Independent Advisor acknowledges that Independent Advisor has no claim to any other compensation or benefit plan, program or policy of or sponsored by AEFA unless such plan, policy or benefit plan specifically references Independent Advisors in their role as Independent Advisors as an eligible group under such plan .... (Emphasis added.) AEFA argues that this provision evidences the parties' intent to extinguish AEFA's obligations under the FPA, and that the provision's unless clause does not apply. It argues that the unless clause does not apply because the FPA does not specifically reference[] Independent Advisors in their role as Independent Advisors as an eligible group. ¶ 25 The Advisors counter that the unless clause does apply, for two main reasons. First, the Advisors point out that the Disclaimer of Benefits provision uses the present tense (Independent Advisor has no claim ... (emphasis added)), and this logically implies that the Independent Advisors are a group that existed prior to the introduction of the BFA and its Disclaimer of Benefits provision. Second, the Advisors argue that AEFA itself believed that the Independent Advisors mentioned in the Disclaimer of Benefits were the same as the independent contractor advisors who had participated in Star Quest pursuant to the FPA. The Advisors base this argument on deposition testimony from James Punch, who crafted the BFA, and who stated that the words Independent Advisor meant [a]ny independent contractor advisor that is signing this document. Thus, the Advisors argue, the unless provision in the Disclaimer does apply, and therefore the Disclaimer of Benefits does not evidence any intent of the Advisors to extinguish their right to benefits contributions under the FPA. ¶ 26 AEFA has failed to convince us that the FPA did not refer to the Independent Advisors who were the subject of the BFA. The present-tense language of the Disclaimer of Benefits provision itself contemplates that the Independent Advisors are a group that existed prior to the creation of the BFA. Furthermore, while the FPA does not use the specific term Independent Advisors, it does specifically refer to the Advisors as independent contractors and advisors. Thus, the FPA specifically refers to the same group of people known as Independent Advisors under the BFA, and the Disclaimer of Benefits therefore does not indicate any intent by the Advisors to extinguish their right to the welfare benefits contributions that they had already earned under the FPA. ¶ 27 AEFA also argues that the BFA's integration clause is evidence of the parties' intent for the BFA to be a substitute contract. The integration clause provides that [t]his Agreement, the attachments hereto, and the documents referred to herein constitute the entire Agreement between AEFA and Independent Advisor concerning the subject matter hereof, and supersede all prior and contemporaneous agreements, negotiations and representations (written and oral), no other representations having induced Independent Advisor to execute this Agreement. AEFA argues that this integration clause is clear evidence of the parties' intent to create a substitute contract. We disagree. ¶ 28 The integration clause, by its plain language, simply means that no other documents should be considered part of the BFA. The United States Court of Appeals for the Sixth Circuit faced an analogous issue in Security Watch, Inc. v. Sentinel Systems, Inc., 176 F.3d 369, 372 (6th Cir.1999). The agreement at issue in Security Watch provided, [t]he terms and conditions contained in this Agreement supersede all prior oral or written understandings between the parties, and constitute the entire agreement between them concerning the subject matter of this Agreement. Id. As in the instant case, the court had to consider whether the integration provision meant that previous contracts between the parties were superseded. See id. The court explained the universally understood purpose of this boilerplate clause thus: Merger clauses are routinely incorporated in agreements in order to signal to the courts that the parties agree that the contract is to be considered completely integrated. A completely integrated agreement must be interpreted on its face, and thus the purpose and effect of including a merger clause is to preclude the subsequent introduction of evidence of preliminary negotiations or of side agreements in a proceeding in which a court interprets the document. Id. (citation omitted). So it is in the instant case. The BFA's integration provision simply means that the entire agreement between the parties concerning the subject matter hereof  that is, concerning the Advisors' new association with AEFA after March 21, 2000  consists of [t]his Agreement, the attachments hereto, and the documents referred to herein. Likewise, the statement that the BFA agreement and its related documents supersedes all prior and contemporaneous agreements,... no other representations having induced Independent Advisor to execute this Agreement merely limits what we can evaluate when determining the parties' intent for the BFA. It says nothing about relieving AEFA of the obligations it had already incurred under the FPA. ¶ 29 We note, and reject, AEFA's argument that In re Worldwide Direct, Inc., 268 B.R. 69, 72 (D.Del.2001) should persuade us that the integration clause created a substitute contract. In Worldwide Direct, the parties initially agreed that the claimant would receive a $700,000 cash bonus for his work. Id. at 70. After the debtor refused to pay cash, however, the parties agreed in a Severance Agreement that the claimant would receive 45,000 shares of stock in lieu of the cash. Id. at 71. The Severance Agreement of Worldwide Direct is thus different from the BFA because the subject matter of the Severance Agreement was essentially identical to that of the prior agreement: both dealt with how the debtor would compensate the claimant for a single period of work time. The BFA, however, concerned compensation for the Advisors' future work, rather than the work they had already completed under the FPA. ¶ 30 In sum, we hold that the BFA does not manifest any intent on the part of the Advisors to extinguish their rights under the FPA and substitute the BFA. Consequently, we need not reach AEFA's alternative argument that the BFA is ambiguous on the issue of the parties' intent, and that such ambiguity necessitates remand for presentation of extrinsic evidence at trial. We therefore affirm the trial court's grant of summary judgment on this issue.