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Merger Clauses

Agreement Allegedly Supersedes Prior Agreement
Produce Pointers

The Key Point: Merger clauses do not make agreements “retroactive.”
The Solution: Clear, explicit language can avoid similar disputes in the future.

We are a U.S.-based importer of citrus and other commodities from South America. Recently we entered into two agreements with a buyer on the East Coast. The first was a “bare bones” agreement intended to allow us to ship a few loads to see how [the receiver’s] customers liked the fruit. About a month later, before the earlier shipments were settled, the second agreement was entered into. This second agreement was far more in-depth and provided a minimum return formula to protect our suppliers. This agreement also included a “retroactive clause” providing that the second agreement would supersede all prior agreements. Therefore, we believe the minimum return formula applies to all the shipments we sent this customer, not just those shipped after the second agreement was signed. And because the buyer’s returns on some of these shipments were below this floor price, we are seeking additional compensation consistent with our agreement. Please advise.

The “retroactive clause” that you refer to in the second agreement appears to us to be a typical “merger clause.” It reads as follows—
Entire Agreement. This Agreement sets forth the sole understanding and agreement of the Parties hereto with respect to the subject matter hereof and supersedes all other prior and contemporaneous discussions, negotiations, and understandings, whether written or oral.

We don’t think you’re going to get very far arguing that this clause should be interpreted to mean the terms of the second agreement supersede the first. For one thing, this clause is limited to “the subject matter hereof,” and the subject matter of this agreement would appear to be limited to those orders placed after the second agreement was entered into. What’s more, there is nothing “retroactive” about a standard merger clause.

A merger clause is used to declare that an agreement is complete as written, and therefore, any terms and conditions not included within the four corners of the agreement were not agreed to, regardless of what the parties may have discussed prior to entering into the agreement.

For example, let’s imagine you and the buyer had spent the early stages of your negotiations (perhaps several months) contemplating that the buyer would be your exclusive supplier on the East Coast. But later, as the discussions progressed, this idea was discarded during a brief telephone conversation and never mentioned again.

In this scenario, a merger clause protects the supplier from a forgetful buyer who comes back months later pointing to ten emails indicating that the buyer would be the exclusive supplier on the East Coast (defining what exactly is meant by “East Coast,” which commodities and brands this would apply to, etc.). Without a merger clause in your agreement, a forgetful (or deceitful) buyer could use these emails to claim exclusivity was a part of the agreement and, at minimum, use this as a reason for delaying payment of your invoices.

So, while we think your use of a merger clause is wise, we do not think it supports your position here. As a practical matter, if an earlier agreement is to be superseded by a later agreement, then this should be expressly stated in the later agreement in a way that permits no other interpretation.

Your questions? Yes, send them in. Legal answers? No, industry knowledgeable answers. If you have questions or would like further information, email

Doug Nelson is vice president of the Special Services department at Blue Book Services. Nelson previously worked as an investigator for the U.S. Department of Agriculture and as an attorney specializing in commercial litigation.