Learning From the Borat Case: Waivers and Merger Clauses in Contracts
The Wall Street Journal Law Blog reports that the federal judge who rendered the Borat decision has been nominated for an appointment to the U.S. Second Circuit Court of Appeals. I doubt there was an actual connection. So, we congratulate the judge and move on to more thought-provoking aspects of the story and case. The post is “In Wake of Borat Ruling, Judge Preska Nominated to 2d Cir High Five.” The decision ishere.
The case was also reported in ABAJournal in a post by Martha Neil (“’Borat’ Filmmakers Win Legal Battle”).
I have not seen the movie. But, I’m not going to discuss the movie. I am going to discuss waivers, merger clauses and the importance of understanding and resolving the ambiguities in contracts before they are signed.
In the Borat case, the claims against the producers for fraudulent inducement to participate in the movie were dismissed because the plaintiffs signed a contract that included a waiver of all claims. The court found that the waiver, for participation in a documentary-style film, was not ambiguous.
The determination that there was no ambiguity turned on the meaning of the term “documentary-style,” which described the movie. The Court emphasized that the operative word is “style.” Thus, the movie did not need to be an actual documentary. The plaintiffs’ argument that “documentary-style” is ambiguous was unavailing. The term “documentary-style,” according the Court, is a film “displaying the characteristics of a film that provides a factual record or report.”
The claim that the plaintiff-participants were fraudulently induced to enter into the film was defeated because each contract included a “merger clause.” The participants waived their reliance on promises or statements, other than any stated in the contract, by anyone involved with the film.
Although our small business clients may never be invited to participate in a “documentary-style” movie, they are invited to sign all kinds of contracts, all of the time. Thus, the Borat story has an element of universality: the parties to a contract will be presumed to have understood the contract terms.
And, the Borat litigation story also reminds us to be acutely aware of the merger clause in a contract. The Borat contract waiver, as is commonly the case, explicitly stated that the plaintiffs relied on no representations other than those stated in the contract. Thus, when ambiguous terms are defined, clarified or explained, it is important that the definitions, clarifications and explanations be in writing so as to become an integral part of the contract.
