Opinion ID: 1113463
Heading Depth: 1
Heading Rank: 2

Heading: integration/merger clause

Text: Rexham argues that the existence of paragraph 4.07, the integration clause, in the contract bars ESI from introducing evidence of oral representations on which it claims to have relied. As discussed above, the parol evidence rule applies to legal claims concerning the meaning and enforceability of contracts; the rule has no application to legal claims of fraud. An integration, or merger, clause is a portion of a particular contract that restates the rationale of the parol evidence rule within the terms of the contract. See Guilford v. Spartan Food Systems, Inc., 372 So.2d 7 (Ala.1979) (noting that it is presumed at law that all prior negotiations are merged into the written contract, which purports to cover the entire transaction). An integration clause, therefore, is also not applicable to exclude evidence relating to a fraud claim. [5] See Downs v. Wallace, supra; Harris v. M & S Toyota, 575 So.2d 74 (Ala. 1991); Dixon v. SouthTrust Bank of Dothan, N.A., 574 So.2d 706, 708-09 (Ala.1990); Ramsay Health Care, Inc. v. Follmer, 560 So.2d 746, 748 (Ala.1990); Curry Motor Co. v. Hasty, 505 So.2d 347, 351 (Ala.1987); Parker v. McGaha, 294 Ala. 702, 707, 321 So.2d 182, 185 (1975) (noting that [e]vidence of fraud is always admissible, even though there is a completely integrated writing); Nelson Realty Co. v. Darling Shop of Birmingham, Inc., 267 Ala. 301, 309, 101 So.2d 78, 84 (1957); Stanard Tilton Milling Co. v. Mixon, 243 Ala. 309, 312, 9 So.2d 911 (1942). Thus, the law in this state renders an integration, or merger, clause ineffective to bar parol evidence of fraud in the inducement or procurement of a contract. Other courts and general authorities have acknowledged that this rule is well established. See 3 S. Williston, Williston on Contracts §§ 811-811A (3d ed. 1961); Restatement of Contracts § 573 (1932); 3 A. Corbin, Corbin on Contracts § 578, p. 405, n. 42 (3d ed. 1960 and 1992 Supp.) (noting that a merger clause does not prevent proof of fraudulent representations by a party to the contract, or of illegality, accident, or mistake and further noting that [s]uch evidence may directly contradict the writing; but at the same time it shows the whole writing to be void or voidable, including the statement by which representations and mistakes are denied); id. § 580, p. 431, n. 65 (noting that it is in no case denied that oral testimony is admissible to prove fraud). See also 37 Am.Jur.2d, Fraud and Deceit § 453 (1968) (noting that [t]he general rule that parol or extrinsic evidence is admissible to prove that a written contract was procured by fraud ordinarily applies ... in spite of special provisions in the contract which purport to limit the application of parol evidence). In Downs v. Wallace, supra, this Court noted that such a holding is required: To hold otherwise is to encourage deliberate fraud. 622 So.2d at 342. Rexham argues that Callis v. Colonial Properties, Inc., 597 So.2d 660 (Ala.1991), in which this Court affirmed a summary judgment in the defendant's favor against the plaintiff's fraudulent inducement claim, stands for the proposition that a merger clause bars extrinsic evidence of fraud inducing one of the parties to enter a contract. If this Court adopts the construction of Callis that Rexham urges, then Callis would overrule dozens of Alabama cases and a century and a half of case law on the inapplicability of the parol evidence rule to fraud actions. It is unfathomable that this Court would overrule such a long-standing precedent without even mentioning the parol evidence rule or referring to any of the earlier cases on point; therefore, we construe Callis as consistent with our prior cases. Accordingly, we construe the opinion in Callis to have reached this conclusion based on a theory of promissory fraud, rather than based on an application of the parol evidence rule or a merger clause to Callis's fraud claim, as Rexham suggests. [6] The alleged misrepresentation in Callis related to a promise of future performance on the part of the defendant, i.e., that it would not lease space in a shopping mall to discount houses. This Court has held: The only basis upon which one may recover for fraud, where the alleged fraud is predicated on a promise to perform or to abstain from an act in the future, is when the evidence shows that, at the time the promise of future action or abstention was made, the promisor had no intention of carrying out that promise, but rather had a present intent to deceive. Fraser v. Reynolds, 588 So.2d 442, 446, n. 3 (Ala.1990) (emphasis in original). Callis's complaint alleged that Colonial Properties promised to abstain from leasing to discount stores in the future; therefore, this Court construed her claim to be one for promissory fraud. Because she did not present substantial evidence creating a genuine issue of material fact as to whether the defendant, when it made the alleged representations, intended to deceive her and intended not to abstain from leasing to discount houses, that failure of proof was an adequate basis for the Court to affirm the summary judgment. The holding in Callis does not, therefore, overrule or conflict with the well-established principle making the parol evidence rule and the merger doctrine inapplicable to fraud actions. Since deciding Callis, this Court has reaffirmed the principle that in fraud actions the parol evidence rule does not bar the introduction of evidence extrinsic to a written contract. See Downs v. Wallace, supra; Joseph Land & Co. v. Gresham, 603 So.2d 923, 927 (Ala.1992); Lake Martin/Alabama Power Licensee Ass'n v. Alabama Power Co., 601 So.2d 942, 945 (Ala.1992). Again, we reaffirm the long-standing principle that the parol evidence rule and the merger doctrine do not apply to fraud actions. Accordingly, the trial court improperly held that ESI is barred from presenting parol evidence to substantiate its claim of fraud in the inducement.