SW Legal studies in Business

Clearly Written Contract Cannot Be Contradicted by Parol Evidence
Description Georgia high court dismissed a suit brought by parties to a contract who contended that they were made promises prior to signing the contract that were not fulfilled. Since the contract stated that all terms of the agreement were in the writing, oral testimony to the contrary could not be allowed.
Topic Contracts
Key Words Misrepresentation; Parol Evidence
C A S E   S U M M A R Y
Facts First Data purchased COIN Banking Systems for $2.5 million. The agreement stated that COIN's owners would receive additional payments for three years if they generated new business, but the agreement also stated that First Data could end COIN operations or change it in any way believed necessary. The contract contained "a standard merger clause" that stated that the agreement "constitutes the entire agreement between the parties with respect to the subject matter contained herein and supercedes all prior agreements and understandings, both oral and written by and between the parties." Later, COIN's sellers sued First Data, contending that it misrepresented its intention to increase COIN's business after the purchase, which induced them to sell COIN for less than it was worth. After complicated lower court proceedings, the case was appealed.
Decision Whenever the language of a contract is plain, unambiguous, and capable of only one reasonable interpretation, no construction is required or even permissible, and the contractual language used by the parties must be afforded its literal meaning. When the parties reduced their agreement to writing, all oral representations made before execution of the contract are merged into it and extinguished by the contract and are not binding upon the parties. Merger clauses exist in written contract specifically to preclude any claim of deceit by prior representations. The parol evidence rule prohibits the consideration of evidence of oral testimony that would change the clear terms of a written contract.
Citation First Data POS, Inc., v. Willis, - S.E.2d - (2001 WL 472983, Sup. Ct., Ga., 2001)

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