College Essay Examples

Managing Contract Risk with an Integrations Clause

Managing Contract Risk with an Integrations Clause

Asset purchases agreements are essentially contracts between a buyer and a seller that delineates the transfer of ownership of an object for a specified fee (Futrell & Magee, 2020). These differ from a merger-acquisition transaction in that, with an asset purchase agreement, the seller maintains control over which assets are sold and which are not. Conversely, in merger acquisitions, all assets are sold. Since the asset purchase agreement serves multiple goals for both parties, it is vital to be as comprehensive and specific as possible (Futrell & Magee, 2020). Avoiding “grey areas” and using ambiguous terminology is critical to avoid the potential exploitation of loopholes.

These agreements describe the assets to be purchased, but when specific assets are not being sold, exclusions and specificity of the inclusions and exclusions are essential. Also, the document should specify the conditions that allow for the assets to be transferred (Futrell & Magee, 2020).

In terms of integration clauses, or an integration contract, this stipulates that the contract is a complete and final agreement between the parties involved (Gros-Dubois, 2020). That is, it functionally overrides all prior informal understandings and agreements. The goal of an integration contract is to make sure that any material, terms, or agreement fully intended to be included in the contract are included (Gros-Dubois, 2020).

Primarily, an integration clause mitigates the risk of contractual disputes or litigation and the expensive nature of litigation (Gros-Dubois, 2020). These often arise when parties do not substantiate decisions that were agreed to informally or verbally. Therefore, an integration clause that formally and in writing acknowledges the nature and terms of the agreement, superseding any prior agreements, avoids this.

The precise phrasing of integration clauses may vary somewhat, but something to the effect of the following may be included:

“This Agreement sets forth the entire agreement and understandings of the parties hereto with respect to this transaction(s), and this Agreement supersedes and nullifies all other agreements made between the parties hereto.” (Chin v. GOFBA Inc, 2018).

Overall, integration clauses provided added clarity to all parties involved. This is especially true when the parties have engaged in considerable verbal negotiations before signing any formal binding contract, which it appears MG LLC has. It is advisable to be thoroughly informed about the implications of an integration clause rather than relying on assumptions that everything is understood (Gros-Dubois, 2020). The bottom line worth emphasizing is that if the parties to a contract have reduced their agreement to a single document, any action or statement that has been made outside of that document is not relevant and bears no weight to the contract.


Chin v. GOFBA Inc, 10.7 10. (2018).

Futrell, R.E., & Magee, J.R. (2020). M&A transaction structures. Wyrick Robbins.

Gros-Dubois, E. (2020). What is an integration clause in a legal contract. EPGB Business Law.


By Phillip Connoly

Phillip started his career working in small-town newspapers throughout central and western Canada before embarking on an online career. He writers blogs, branding content, white papers, business plans, resumes and cover letters.

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