Disclaimer-of-Reliance Clause
A Disclaimer-of-Reliance Clause is a contractual provision that precludes parties from claiming reliance on extrinsic representations not included in the contract agreement.
- Context:
- It can typically be used to protect parties from claims of fraudulent inducement or misrepresentation by explicitly stating that the contract embodies the entire agreement between the parties, and that no external representations have influenced their decision to contract.
- It can often be included in contracts to prevent one party from later claiming that they were misled by statements or promises not included in the written agreement, thus limiting potential legal disputes.
- It can also be enforced to ensure that all negotiations and understandings are consolidated within the written contract, thereby upholding the principle of contractual finality and reducing the risk of extraneous claims.
- ...
- Example(s):
- A company entering into a merger agreement includes a disclaimer-of-reliance clause to ensure that the buyer cannot claim later that they relied on oral statements made during negotiations that were not included in the final contract.
- In a real estate transaction, the seller includes a disclaimer-of-reliance clause stating that the buyer is not relying on any verbal assurances about the property's condition that are not explicitly stated in the contract.
- A Reliance Waiver,
- A Non-reliance Clause,
- ...
- Counter-Example(s):
- See: Entire Agreement Clause, Contract Law, Contract Agreement, Contract Management, Fraudulent Inducement, Contractual Force Majeure-based Provision.
References
2024a
- (ChatGPT-OpenAI, 2024) ⇒ Prompt: Summarize the concept Disclaimer-of-Reliance Clause in 1- 2 paragraphs. ChatGPT (model:gpt-4o). Retrieved: 2024-08-18.
- QUOTE: A Disclaimer-of-Reliance Clause is a provision commonly included in contracts to specify that neither party is relying on any representations, statement, or warranties not explicitly detailed within the contractual agreement itself. This clause aims to limit liability by clarifying that the written document encompasses the entirety of the agreement, thereby precluding claims of reliance on any external or prior statements. It essentially ensures that parties cannot later assert that they were misled or induced into the contract based on information or promises not contained within the contract’s written terms.
In practice, a Disclaimer-of-Reliance Clause serves to protect parties from allegations of fraud or misrepresentation, underscoring the importance of the formal, written contract as the sole source of their agreement. However, the enforceability of such clauses can vary based on jurisdiction and specific circumstances, with courts sometimes scrutinizing them in cases involving significant power imbalances or potential bad faith. Hence, while these clauses can offer substantial protection, they must be crafted carefully and aligned with applicable legal standards.
- QUOTE: A Disclaimer-of-Reliance Clause is a provision commonly included in contracts to specify that neither party is relying on any representations, statement, or warranties not explicitly detailed within the contractual agreement itself. This clause aims to limit liability by clarifying that the written document encompasses the entirety of the agreement, thereby precluding claims of reliance on any external or prior statements. It essentially ensures that parties cannot later assert that they were misled or induced into the contract based on information or promises not contained within the contract’s written terms.
2023
- (Banta, 2023) ⇒ Cornelius “Lee” Banta, Jr. (2023). "Merger And Disclaimer Of Reliance Clauses: Guarding Against Crossed Fingers". In: Peckar & Abramson, P.C., ConsensusDocs.
- QUOTE: Unlike a merger clause, a disclaimer-of-reliance clause satisfies a court’s expectation of drafting clarity. By expressly disclaiming and waiving reliance on a counterpart’s representations, such clauses operate to bar a fraudulent inducement by directly addressing an essential element of a fraud claim--reliance. For instance:
The parties represent and warrant that neither has relied on any promises or representations by any other party in agreeing to the terms of this agreement or in deciding to execute this agreement. Each party is relying on its own judgment and each has been represented by legal counsel in this matter.
Such clauses allow sophisticated parties represented by legal counsel to disclaim reliance on representations about a specific matter in dispute.
Given the severity of their intended outcome, courts closely scrutinize the language of a disclaimer-of-reliance clause in determining its enforceability. For instance, Texas courts, traditionally known for their staunch “freedom of contract” jurisprudence, have developed a multi-factor test to determine a disclaimer-of-reliance clause’s enforceability. A party seeking to enforce the clause must show: (1) the terms of the contract were negotiated (rather than boilerplate) and during negotiations the parties specifically discussed the issue which has become the topic of the subsequent dispute; (2) the complaining party was represented by legal counsel; (3) the parties dealt with each other in an arm's length transaction; (4) the parties were knowledgeable in business matters; and (5) the release language was clear.
- QUOTE: Unlike a merger clause, a disclaimer-of-reliance clause satisfies a court’s expectation of drafting clarity. By expressly disclaiming and waiving reliance on a counterpart’s representations, such clauses operate to bar a fraudulent inducement by directly addressing an essential element of a fraud claim--reliance. For instance: