Anyone in business should be careful to note whether their contracts contain “integration clauses.” A so called integration clause makes the contract “king” in terms of the promises and representations of a party to a transaction. In other words, if there is an integration clause in a contract that says “X”, even if one party may have orally maintained “Y” throughout the dealings with the other party, the other party will likely be cut off from using the oral representation of “Y” against the other party, because the contract states “X”. Nowhere is this more true than in the private investment context.
One New York case in particular demonstrated how an integration clause can foreclose an investor claim against the company in which he invested in. In Basel v. Traders Commercial Capital, LLC, 50775U Slip op. (N.Y.Sup.Ct. 2006), a 2006 ruling from the New York Supreme Court in New York County, the Court upheld the integration clause contained in the Operating Agreement and Subscription Agreement, which both referenced a Private Placement Memorandum purporting to contain the pertinent and definitive information regarding the subject investment proposition (“PPM”)(all three together, the “Contract”), barring the Plaintiff from relying on Defendants’ alleged representations outside of the Contract.
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