Barkley v. Connally, a “bet-the-farm” case if there ever was one, invokes the merger clause, a basic principle of contract law. Clients and lawyers: Read this analysis so as to avoid boundless grief and disappointment for client and lawyer alike.
Jim Barkley, having undergone bankruptcy and nearing retirement, agreed to sell his farm to Connally, owner of an adjacent tract, if Jim and Ms. Barkley could buy back their residence and the 40-acre pasture across the road. Connally agreed. A Purchase and Sale Agreement was signed by all parties. Connally was represented by a real estate lawyer and a bankruptcy lawyer. A merger clause in the PSA said:
This Agreement constitutes the sole and only agreement of the parties hereto and supersedes any prior understanding or written or oral agreements between the parties respecting the within subject matter. This expressly includes the Offer to Purchase submitted to the Seller on or about April 10, 2017 … ..
The “Offer to Purchase” was to buy back the family home.
The transaction closed. The Barkleys remained on the property and emailed to the Connallys their readiness to buy back the home place and pasture for $60,000, the agreed price. The Connallys responded that there was no enforceable agreement for the sale and they had no intention of doing so due to the Barkleys’ “recent behavior toward the Connellys” (gotta wonder what that was all about).
The Barkleys sued. The court granted Connally’s motion for summary judgment dismissing the Barkleys claims for breach of contract, trespass to try title and promissory estoppel. After a trial the jury determined that the Connnallys had not induced the Barkleys into entering the PSA through fraud.
The merger doctrine
The general rule is that the courts presume that all prior oral and written agreements are merged into a subsequent written contract. A written merger clause is essentially memorialization of the merger doctrine. When parties have entered into a valid written integrated contract the parole evidence rule precludes enforcement of prior or contemporaneous agreements that address the same subject matter and are inconsistent with the written contract.
The court found that the subject matter was the same as the written agreement and rejected the Barkleys’ assertion that enforcement of the agreement for purchase of the house was collateral to and not inconsistent with the PSA and thus was enforceable.
A collateral agreement is one that is supported by separate consideration and that the parties might naturally make separately under the circumstances and would not ordinarily be expected to embody in the writing. The agreement to purchase the house was barred by the parole evidence rule.
Trespass to try title
The Barkleys did not assert any of the four methods allowed by the trespass-to-try-title statute and that claim was rejected.
Promissory estoppel as a claim for affirmative relief
The Barkleys’ promissory estoppel claim was denied. According to some Texas appellate courts, promissory estoppel can constitute the basis for a claim for affirmative relief, but in this one (the 7th Court in Amarillo), promissory estoppel is defensive in nature and not an independent cause of action.