Contract Clauses You Need to Know: Merger Clauses
If you're a freelancer or consultant and don't know what a merger clause is, don't worry you're not alone. It's a seemingly insignificant term that's included in every contract that no one ever pays attention to.
But it in reality, it's the term in your contract that says what terms are a part of your contract and what terms aren't.
So if you've ever done something like:
Attached a scope of work with payment or other terms in it to your client's contract;
Agreed to figure out payment terms via email once the contract is signed; or
Negotiated a new scope for your contract via email
then you need to know what a merger clause is and how it's impacting your contracts.
In this article, we'll cover:
What a merger clause is
The purpose it's designed to serve
The implications for your client contracts and what to do about it.
If you're ready, let's get started.
What is a Merger Clause?
So like, what is a merger clause and where is it in the contract?
Usually you'll find this clause towards the end of your contract and it usually has some language about this contract being the only and entire agreement between the parties.
Here's an example:
Using the example above, the key parts of a merger clause are as follows:
A sentence that says this is the entire agreement between the parties. Key things to look for in this sentence is that it includes all the relevant aspects of your and your client's agreement to work together. That includes things like project schedules, scopes of work, or sometimes the proposal for work that you sent them.
A sentence and/or clause that says this contract replaces any other contracts, agreements, or understandings the parties have, which makes any past agreements or terms that fall outside of the defined “contract” null and void.
To change the agreement, the parties have to sign a written document to that effect. That means agreeing to a change in email is insufficient to modify the agreement. You have to actually write a change order or update the contract to reflect the new terms and both parties have to sign it.
And that's it. Those are the main things included in almost all merger clauses. Now let's talk about what merger clauses are designed to achieve.
The Purpose of a Merger Clause - What You Need to Know
Most people don't know what a merger clause is because they have no idea what it does. It's usually one of the clauses that's seemingly thrown into the end of a contract that feels like it's designed to cover the bases.
And while that's not completely wrong, merger clauses actually have a pretty big job in the world of contracts.
Have you ever asked yourself the question "how do I know which agreement is the agreement" when you find yourself in situations where you've agreed to different terms in more than one place with a client?
Even though I rarely see freelancers and consultants asking this question, I do see many of you agreeing to different terms with your clients in different places.
A written and signed contract might say what the services and deliverables are.
An email exchange might say how much those same services and deliverables cost.
A Google Doc or some Slack messages might set up a project timeline and payment schedule.
And you might have also had your client sign your service contract just for “good measure” just to make sure all your bases are covered.
But here's the problem with this approach: we don't know which one of these various agreements is an enforceable contract.
Is the contract the thing you signed, or is it the email agreement, or the Slack messages, or a combination of those things? And what happens if the signed contract, the email agreement, or the Slack message agreements contradict each other?
That's where a merger clause comes in. As you saw in the previous section, a merger clause says there's only one contract. And anything else that falls outside of whatever the merger clause says is included in the contract doesn't count, aka it's not enforceable.
So let's go back to our list of potential agreements between you and your client:
Signed contract your client sent you
Emails about what the project fee will be
Google doc + Slack messages about project timeline and pay schedule
Your service contract with your terms you need for every client contract.
99.95 times out of 100, the contract your client sent you that you signed will have a merger clause in it. That means whatever that contract says is the contract is what counts. Oftentimes, that merger clause will say the contract includes the document you signed and any attached scopes of work or project schedules.
That means anything outside of that DOES NOT COUNT. So things like an email agreement about the project fee would not be part of the contract and therefore would not be enforceable.
Same with the Google Doc or Slack messages that spell out the project timeline and pay schedule.
And same with your service contract that you asked your client to sign.
Why? Because merger clauses are designed to prevent what is known as a "Battle of the Forms" in contract law. That's an overly important name to say that merger clauses are there to keep folks from disagreeing over what the actual contract is between them.
If it didn't exist, then your client could argue that the contract is the template they sent you to sign and the Google Doc and Slack messages.
Without a merger clause, you might counter and say that the real contract is the template service contract you asked your client to sign and the email messages you all exchanged about cost.
As you can see, disputes over which contract is THE contract between the parties can get messy quickly. Merger clauses cut through the noise and say the contract is whatever is in this particular agreement or incorporated into this agreement by reference. Everything else is null, void, and unenforceable as a matter of law.
Their purpose is to create clarity in the event of a potential dispute. The idea is that as long as there's a contract with a merger clause in it, then there's no question as to what the agreement is between the parties. The agreement is whatever is in that contract.
Let's talk about why this matters for you and what you need to do about it.
How to Avoid the Downside of a Merger Clause
Now that you know what a merger clause is and what it's purpose is, let's talk about how to adjust your contracting strategy.
3 Contract Myths You Need to Ditch Right Now
First, you've probably already figured this out, but let's just make sure we're on the same page about some common contract myths that people have subscribed to in the past that don't hold up when a merger clause is involved.
Myth 1: We can figure out the payment details separate from the contract via email or I'll just put it in the invoice.
NO MA'AM! Now that we know a merger clause says the contract is what's in the contract, then we know the payment details including the price and when and how you'll get paid need to be in the contract.
Myth 2: The best way to get the terms you need into the contract is to have the client sign your contract and you agree to sign theirs.
ABSOLUTELY NOT. All that does is create 2 contracts. And if your client's contract has a merger clause, then your contract doesn't count anyway. If both of your contracts have a merger clause, then we're facing the question of which contract is THE contract.
The best way to get the terms you need into the contract is to ask to have them added to the contract your client sends you.
Myth 3: You can put payment terms like Net 30 and late fees terms on the invoice.
I mean you can, but they won’t mean anything IF THE CONTRACT YOU SIGNED HAS A MERGER CLAUSE. Because I have yet to see a merger clause that incorporates invoices by reference as part of the contract. If you want the payment terms to be Net 30 and you want to include a penalty for late payment, then it needs to be in the contract to be enforceable.
All right, now that we're on the same page on those 3 common contract myths, let's quickly cover 2 key rules you need to follow re: merger clauses.
Rule 1: Put Everything that Matters in the Contract
I feel like I've said this ad nauseam at this point, but it doesn't hurt to say it again: if there's a term you need to facilitate a successful working relationship, then it needs to be in the contract. Not in an email or a comment on a Google Doc, the actual contract.
If a client balks at including a key term like the project fee, payment terms, late fees, or something similar in the contract, that is a red flag. The key terms that say who is doing what in the working relationship and when need to be in the contract.
Rule 2: Make Sure Related Documents are Incorporated by Reference
Sometimes folks ask me if they should stop using scopes of work once they find out about merger clauses. The answer is no. What you do have to do is ensure that those scopes of work, or project proposals, or any other document that has key details about your working relationship is incorporated into the contract by reference.
A simple "This agreement, together with any Scopes of Work, constitutes the entire agreement between the parties" will do. So will "This agreement, together with any documents referenced herein, constitutes the entire agreement between the parties.”
You just need something included in the merger clause that makes it clear that your contract isn't just that one document, but that it includes supplemental materials related to the working relationship between the parties.
Conclusion: Things to Remember
The key thing to remember is that 99.999999555% of your client's contracts will have a merger clause in them, which means if it's not in the contract either directly or indirectly by reference, then it's not part of your legally enforceable agreement with your client.
The rule of thumb to follow here is that if it's important enough for you or your client to raise, then it needs to be in the contract. This is especially true for key contract terms like the services, deliverables, project fees, and payment terms.
Okay, that's what you need to know about merger clauses, friend.
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