Construction relationships are usually governed by multiple contracts, such as various form AIA contracts, addenda, real estate purchase contracts, and financing agreements. Scores of different entities can be involved. A good deal of Utah jurisprudence holds that multiple contracts signed around the same time, concerning the same subject matter, between the same parties, will be construed legally as one agreement. See, e.g., Far West Bank v. Robertson, 2017 UT App 213, ¶ 20. Because integration clauses are strictly enforced in Utah, however, parties should ensure that all documents that govern their relationship are clearly referenced and incorporated as part of the contract that contains an integration clause. Indeed, a recent decision by the Utah Court of Appeals in Montes v. National Buick GMC, Inc. 2023 UT App 47 greatly strengthened Utah’s jurisprudence on integration clauses when the Court found that the integration clause from one contract invalidated a separate contract signed simultaneously that was not mentioned in the fully integrated contract.
In Montes v. National Buick GMC, Inc., Montes purchased a used vehicle from National. Both parties signed the Purchase Agreement, which identified the car, set the price, and acknowledged other fees. Importantly, the Purchase Agreement contained an integration clause which, inter alia, stated that this contract “cancels and supersedes any prior contract and as of the date hereof comprises the complete and exclusive statement of the terms of the contract relating to the subject matters covered hereby.” The Purchase Agreement had a large box at the bottom of the contract where “other terms agreed to” could be noted, but the parties left that space empty, and a checked box labeled “NONE” was marked with two Xs'. On the same day, the parties executed the Arbitration Agreement during the course of signing paperwork for the sale, which provided that any dispute arising from this Agreement would be resolved by arbitration.
The next month, Montes filed a complaint against National alleging deceptive sales practices. National filed a motion to stay litigation and compel arbitration. After briefing, the trial court found that the Arbitration Agreement was ineffectual because the Purchase Agreement was fully integrated and represented the complete and exclusive terms of the contract between the parties, and the parol evidence rule barred the consideration of the Arbitration Agreement.
On appeal, National contended that the trial court erred by considering the Purchase Agreement and the Arbitration Agreement as one agreement, not separate. Montes, on the other hand, argued that the integration clause found in the Purchase Agreement precluded the Arbitration Agreement from applying to the Purchase Agreement entirely. In its ruling, the Court noted the Utah Supreme Court’s recent change in its jurisprudence regarding the treatment of fully integrated contracts, categorically stating that extrinsic evidence is not admissible where the contract at issue contains a clear integration clause.
The Arbitration Agreement, the Court held, “was not admissible in the face of an integration clause unless the separate instrument is expressly referenced by the contract as being included or unless there is ambiguity in the contract” (emphasis added). Utah case law provides that once a document (or a group of documents) is deemed integrated, under the parol evidence rule, evidence of contemporaneous conversations, representation, or statements offered for the purpose of varying or adding to the terms of the integrated contract is inadmissible. And the Arbitration Agreement certainly added a term to the relationship—requiring arbitration. Further, giving effect to the Arbitration Agreement would contradict the terms of the Purchase Agreement, which explicitly stated “NONE” for “other terms agreed to.” The fact that National included the blank space to list “other terms” that would be included in the Purchase Agreement shows that National knew how to integrate other terms into the Purchase Agreement. That National failed to mention the Arbitration Agreement in the “other terms” simply cut against National.
While the Arbitration Agreement was signed on the same date as the Purchase Agreement, though it was not clear which was signed first, the plain language of the integration clause canceled the Arbitration Agreement if it were signed before the Purchase Agreement and excluded it if it was signed the same day. In other words, the plain text of the integration clause served as both a backward-looking and a forward-looking invalidation of agreements made outside the Purchase Agreement.
Finally, the Court addressed the dissent’s argument that the Arbitration Agreement falls under the collateral contract exception, which provides that the presence of a merger clause does not prohibit the forming of a separate agreement contemporaneously with another contract. The Court rejected this argument, reasoning that if an integration clause renders a certain contract the parties’ entire agreement, and if parol evidence of additional — not just contradictory — terms is prohibited, collateral contracts appear to be a legal impossibility under Utah law.
