Mark Pestronk
Q: A technology vendor wants our agency to sign a multiyear contract. I am concerned that we might be stuck with it even if we do not like the product. When I read the contract, I don't see any way for us to terminate it early, but the vendor sales rep keeps stating that if we are unhappy, we can terminate it at any time on 30 days' notice. He even put it in writing in an email to me. If I sign the contract, will the 30-day promise be enforceable in case we want to get out of the contract?
A: The 30-day promise might be enforceable, depending on the exact terms of the contract, the exact circumstances of the email and what each party believes when you sign the contract. However, if the vendor disagrees, it would be very time-consuming and expensive to get a court to agree with your position, so you should try to make the promise part of the contract when you sign.
Almost all B2B contracts contain a clause stating that the contract contains the entire agreement of the parties and supersedes all prior understandings. This clause is called a "merger" clause because the written contract is supposed to merge all prior dealings and understandings into it.
Here is a typical example. The standard Sabre contract states, "This agreement contains the entire agreement between the parties with respect to the subject matter hereof and, as of the effective date, supersedes all prior agreement ..., oral and written, between the parties with respect to the subject matter hereof."
So at first blush, it looks like the email sent prior to the contract signing is superseded by the contract, which has no 30-day out. However, courts have recognized several exceptions to the merger clause.
First, if both you and the sales rep genuinely believed that the contract contained a 30-day out, a court could reform the contract to include the omitted term. This is called the doctrine of "mutual mistake."
Second, if the rep knowingly induced you to sign based on an intentional misrepresentation of what the contract stated, you could possibly have the contract terminated on the grounds of fraud.
Third, if the contract contained an ambiguity about a party's ability to terminate, then a court may interpret the ambiguity against the party that drafted it, which in this case would be the technology vendor. For example, if the contract stated that the term was "five years, unless terminated by either party on 30 days' notice as set forth herein" and the only other mention of termination was for breach of contract but did not mention 30 days, then a court could find that the contract could be terminated on 30 days' notice even if there was no breach.
My best advice is not to rely on any of these exceptions but to insist that a 30-day promise be added to the agreement. It can be part of the clauses governing term and termination, and it can also take the form of a simultaneous addendum added to the end of the contract.