The Key Legal Trick to Getting Out of a Bad Contract
I often have clients ask me about getting out of unfavorable contracts they have signed. Many times, the complaint is that the other party made some untrue statement or engaged in deceptive tactics in negotiating the contract. However, in just about every contract drafted by a competent attorney—there is included what’s called a “merger” or “integration” clause. Such clauses typically read something like this: “This Agreement contains the exclusive, entire and final Agreement between the Parties regarding the subject matter described herein; no Party has made or relied upon any oral statements, representations or inducements not contained in writing herein.” In other words, each contracting party stipulates that the written agreement they are signing is the end-all, be-all of their transaction, and any alleged oral statements not reduced to writing in the Agreement itself are irrelevant. Georgia law is clear that these merger or integration clauses are valid, binding and enforceable.
So can a party who feels fraudulently induced into signing a contract get over this legal hurdle? Yes, under certain circumstances, but the key to doing so is this: Immediately rescind the contract and assert a claim for fraud, which is a common law tort, instead of suing for breach of contract or contractual fraud damages. If the false statement that duped you into signing the contract is not found in the written language of the agreement itself, and if that agreement contains a merger clause, you have no breach of contract claim. In that case, your only claim is for rescission based on the tort of fraud, and for that claim to work, you must make a timely demand for rescission of the contract—that is, you must promptly demand from the other party (preferably in writing) that the contract be canceled due to the fraud, and you must offer to return any benefits you have received to date under the contract. This demand for immediate rescission, along with the related tender back of any benefits received, is a strict requirement in Georgia for a fraud-in-the-inducement claim.
The best course of action to take when you feel you were tricked into signing a contract is to consult with an attorney who can help you jump through the appropriate legal hoops to rescind the contract. If a proper demand for rescission is not promptly made, you will likely lose any right to recover for the fraudulent party’s deception.
Authored by Stacey A. Carroll, Esq.