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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: December 1, 2020

Integration Clause Bars Claim Based on Alleged Pre-Signing Promises

On November 17, 2020, the First Department issued a decision in Cambridge Invs. LLC v. Prophecy Asset Mgt., LP, 2020 NY Slip Op. 06703, holding that an integration clause barred a claim based on pre-signing promises, explaining:

Plaintiff’s second cause of action (breach of the implied covenant of good faith and fair dealing) depends on its conversations and understandings with defendant. However, the parties’ contract contains a merger/integration/no-oral-modification clause. Courts enforce such clauses. Furthermore, the contract does not say plaintiff has the right to make defendant invest at any particular rate; on the contrary, it says that allocations and account exposure may be reduced at defendant’s sole discretion and that an increase in allocation requires both parties’ agreement. Defendant cannot breach the covenant of good faith and fair dealing if the contract gives it sole and complete discretion.

(Internal citations omitted).

New York contract law–usually straightforward–has traps for the unwary, like the effect of an integration clause, which disclaims prior discussions and agreements and states that the parties’ entire agreement is just the written contract. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.

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Posted in Commercial, Contracts
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