Will this merger clause keep out the oral promises made during negotiation, and can the contract still be changed by a handshake?
A general merger clause does NOT bar parol evidence of fraud in the inducement; that principle is settled New York law. What does bar it is a SPECIFIC disclaimer: where the party has in the plainest language announced and stipulated that it is not relying on any representation as to the very matter it now says it was defrauded about, the disclaimer destroys the allegation of reliance. That is conditional, not automatic. Danann rested on there being no allegation that the contract was unread, that the disclaimer provision was not understood, or that the provision itself was procured by fraud; and it rests on a precept it states expressly, that "the asserted reliance must be found to be justifiable under all the circumstances before a complaint can be found to state a cause of action in fraud". The cases in which a fraud claim survives are those in which "the facts represented were matters peculiarly within the defendant's knowledge"; where they are not, and the complaining party "has the means available to him of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, he must make use of those means". Separately, GOL § 15-301(1) gives the no-oral-modification clause real force: a written agreement containing a provision that it cannot be changed orally cannot be changed by an executory agreement unless that agreement is in writing and signed by the party against whom the change is enforced. Section 15-301 does the same work for termination and for notice: an agreement that says it cannot be terminated orally cannot be discharged by an executory agreement except by a signed writing, and cannot be terminated by mutual consent except by an executed accord and satisfaction or a signed writing (§ 15-301(2)); and where the contract provides for termination or discharge on written notice, the writing requirement "cannot be waived except by a writing signed by the party against whom enforcement of the waiver is sought" (§ 15-301(4)), which bites "whether or not the agreement or other instrument states specifically that the notice must be in writing" once the agreement also forbids oral termination (§ 15-301(3)(c)). Two further subdivisions travel with any such clause: a discharge or partial discharge counts as a CHANGE under subdivision one, and not as a termination under subdivision two, "unless all executory obligations under the agreement or instrument are discharged or terminated" (§ 15-301(3)(a)); and a writing this section requires that is executed by an AGENT and relates to real property "shall be void unless such agent was thereunto authorized in writing" (§ 15-301(5)). Section 15-301 reaches only EXECUTORY oral change: once executed, the oral modification may be proved, and partial performance takes it out of the section only if that performance is unequivocally referable to the oral modification; analytically distinct from partial performance, a party who has induced another's significant and substantial reliance on an oral modification may be estopped from invoking the section to bar proof of it (Rose v. Spa Realty Associates).
The trap
Boilerplate is graded on specificity in New York. Danann said that 'Were we dealing solely with a general and vague merger clause, our task would be simple': an 'omnibus statement that the written instrument embodies the whole agreement, or that no representations have been made' does not keep out proof of fraud; the clause that worked also recited that the seller made no representations as to the physical condition, rents, leases, expenses or operation, that the buyer had inspected and took the premises 'as is', and that neither party relied on any statement not embodied in the contract. So the disclaimer must name the subject matter of the representation the other side will later claim. On modification, § 15-301 stops EXECUTORY oral changes only, and the two escapes are real: an oral modification that has been fully performed may be proved, but 'executed' means fully performed, and in Rose itself the modification was held NOT fully executed, because title had not been conveyed and no consideration had changed hands, so the writing requirement still had to be met some other way; partial performance works only where it is 'unequivocally referable' to the oral modification; and a party who induced significant and substantial reliance on it may be estopped from invoking the section at all, but only where the conduct relied on to establish estoppel 'must not otherwise be compatible with the agreement as written'. Note also how Danann itself ended: the order of the Appellate Division was reversed, Special Term's dismissal was reinstated and the certified question was answered in the negative: the specific disclaimer won.
17 authorities
The words that state the rule
Were we dealing solely with a general and vague merger clause, our task would be simple. A reiteration of the fundamental principle that a general merger clause is ineffective to exclude parol evidence to show fraud in inducing the contract would then be dispositive of the issue (Sabo v. Delman, 3 N Y 2d 155). To put it another way, where the complaint states a cause of action for fraud, the parol evidence rule is not a bar to showing the fraud—either in the inducement or in the execution—despite an omnibus statement that the written instrument embodies the whole agreement, or that no representations have been made.
The words that state the rule
Here, however, plaintiff has in the plainest language announced and stipulated that it is not relying on any representations as to the very matter as to which" it now claims it" was defrauded.
The words that state the rule
Such a specific disclaimer destroys the allegations in plaintiff’s complaint that the agreement was executed in reli *321 anee upon these contrary oral representations
The words that state the rule
The complaint here contains no allegations that the contract was not read by the purchaser. We can fairly conclude that plaintiff’s officers read and understood the contract, and that they were aware of the provision by which they aver that plaintiff did not rely on such extra-contractual representations. It is not alleged that this provision was not understood, or that the provision itself was procured by fraud.
The words that state the rule
The marshaling of phrases plucked from various opinions and references to generalizations, with which no one disagrees, cannot subvert the fundamental precept that the asserted reliance must be found to be justifiable under all the circumstances before a complaint can be found to state a cause of action in fraud.
The words that state the rule
When the citations are read in the light of this caveat, we find that they are generally concerned with factual situations wherein the facts represented were matters peculiarly within the defendant’s knowledge, as in the cases of Sabo v. Delman (supra) and Jackson v. State of New York (supra). The general rule was enunciated by this court over a half a century ago in Schumaker v. Mather ( 133 N. Y. 590, 596 ) that ‘ ‘ if the facts represented are not matters peculiarly within the party’s knowledge, and the other party has the means available to him of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, he must make use of those means, or he will not be heard to complain that he was induced to enter into the transaction by misrepresentations.
The words that state the rule
Accordingly, the order of the Appellate Division should be reversed and that of Special Term reinstated, without costs. The question certified should be answered in the negative.
- statuteN.Y. GOB Law § 15-301enactment date not established
The words that state the rule
1. A written agreement or other written instrument which contains a provision to the effect that it cannot be changed orally, cannot be changed by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement of the change is sought or by his agent.
The words that state the rule
The Purchaser has examined the premises agreed to be sold and is familiar with the physical condition thereof. The Seller has not made and does not make any representations as to the physical condition, rents, leases', expenses, operation or any other matter or thing affecting or related to the aforesaid premises, except as herein specifically set forth, and the Purchaser hereby expressly acknowledges that no such representations have been made, and the-Purchaser further acknowledges that it has inspected the premises and agrees to take the premises ‘ as is ’ * * * It is understood and agreed that all understandings and agreements heretofore had between the parties hereto are merged in this contract, which alone fully and completely expresses their agreement, and that the same is entered into after full investigation, neither party relying upon any statement or representation, not embodied in this contract, made by the other. The Purchaser has inspected the buildings standing on said premises and is thoroughly acquainted with their condition.
- statuteN.Y. GOB Law § 15-301enactment date not established
The words that state the rule
2. A written agreement or other written instrument which contains a provision to the effect that it cannot be terminated orally, cannot be discharged by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement of the discharge is sought, or by his agent, and cannot be terminated by mutual consent unless such termination is effected by an executed accord and satisfaction other than the substitution of one executory contract for another, or is evidenced by a writing signed by the party against whom it is sought to enforce the termination, or by his agent.
- statuteN.Y. GOB Law § 15-301enactment date not established
The words that state the rule
4. If a written agreement or other written instrument contains a provision for termination or discharge on written notice by one or either party, the requirement that such notice be in writing cannot be waived except by a writing signed by the party against whom enforcement of the waiver is sought or by his agent.
- statuteN.Y. GOB Law § 15-301enactment date not established
The words that state the rule
3. a. A discharge or partial discharge of obligations under a written agreement or other written instrument is a change of the agreement or instrument for the purpose of subdivision one of this section and is not a discharge or termination for the purpose of subdivision two, unless all executory obligations under the agreement or instrument are discharged or terminated. b. A discharge or termination of all executory obligations under a written agreement or other written instrument is a discharge or termination for the purpose of subdivision two even though accrued obligations remaining unperformed at the date of the discharge or termination are not affected by it. c. If a written agreement or other written instrument containing a provision that it cannot be terminated orally also provides for termination or discharge on notice by one or either party, both subdivision two and subdivision four of this section apply whether or not the agreement or other instrument states specifically that the notice must be in writing.
- statuteN.Y. GOB Law § 15-301enactment date not established
The words that state the rule
5. If executed by an agent, any agreement, evidence of termination, notice of termination or waiver, required by this section to be in writing, which affects or relates to real property or an interest therein as defined in section 5-101 in any manner stated in subdivisions one or two of section 5-703 of this chapter shall be void unless such agent was thereunto authorized in writing.
The words that state the rule
Thus, section 15-301 nullifies only "executory” oral modification. Once executed, the oral modification may be proved.
The words that state the rule
Contrary to the view of the courts below, for purposes of section 15-301 the agreement to modify reached by the parties, even as to the quantity term alone, was not fully executed. Perforce, an "executed” agreement is one that has been fully performed (see 1 Bouvier’s Law Dictionary [Rawle’s 3d rev], Executed Contract, p 1111; cf. Jemison v Citizens’ Sav. Bank, 122 NY 135, 142-143 ; see, also, 1 Williston, Contracts [3d ed], § 14). The conduct of both parties indubitably prepared the ground for completion of the sale of 96 unit sites. But title had not been conveyed, and no consideration had changed hands. Hence, to enforce what is less than a fully executed oral modification, the statute must be satisfied.
The words that state the rule
Where there is partial performance of the oral modification sought to be enforced, the likelihood that false claims would go undetected is similarly diminished. Here, too, the court may consider not only past oral exchanges, but also the conduct of the parties. But only if the partial performance be unequivocally referable to the oral modification is the require *344 ment of a writing under section 15-301 avoided
The words that state the rule
There is, however, another qualification to the mandates of section 15-301. Analytically distinct from the doctrine of partial performance, there is the principle of equitable estoppel. Once a party to a written agreement has induced another’s significant and substantial reliance upon an oral modification, the first party may be estopped from invoking the statute to bar proof of that oral modification (see, e.g., Zolar Pub. Co. v Doubleday & Co., 529 F2d 663, 667-668; cf. Imperator Realty Co. v Tull, 228 NY 447, 453 ; Thomson v Poor, 147 NY 402, 409-410 ; Gray v Met Contr. Corp., 4 AD2d 495, 497 ; The Savage is Loose Co. v United Artists Theatre Circuit, 413 F Supp 555,559 ). Comparable to the requirement that partial performance be unequivocally referable to the oral modification, so, too, conduct relied upon to establish estoppel must not otherwise be compatible with the agreement as written
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.