LegalSifter Review uses algorithms to review draft contracts to see whether provisions addressing specific contract issues are present or missing. We call our algorithms “Sifters.” In this post, the spotlight is on the Sifter Not Relying on Statements Outside the Contract.
This Sifter helps alert sellers to language it would be prudent to include in a contract to reduce the chances of being the target of a claim for fraud. Allow me to explain.
This post is on LegalSifter’s blog. To read the rest of it, go here.
The issue I see here is that a facially adequate provision may be inadequate because of background law, however absurd.
If in Texas or other places affirming that extracontractual statements don’t exist permits later tort claims that they did exist, the drafter’s challenge is to know the relevant background law and to draft in its light.
Since it would be silly to draft a provision that amounts to saying ‘no extracontractual statements exist, but if they do, no party is relying on them’, one might choose to dump the nonexistence provision and go with just a no-reliance provision.
That doesn’t solve the underlying need for the drafter to know all relevant background law. For example, if a jurisdiction holds that ‘fraud vitiates everything’, a no-reliance provision might be as ineffective as a nonexistence provision to block a fraud claim.