Daniel and Annie signed a contract providing that Daniel would lend $50,000 to Annie's craft beer business at an interest rate of 8 percent. During negotiations, Daniel and Annie agreed that the interest rate would go down to 5 percent once she had sold 25,000 cases. This provision never made it into the contract. After the contract had been signed, Daniel agreed to reduce the interest rate to 6 percent once volume exceeded 25,000 cases. The contract had an integration provision but no modification clause. What is an integration clause?

Question

Bruce Combs

Business

15 July, 19:27

Daniel and Annie signed a contract providing that Daniel would lend $50,000 to Annie's craft beer business at an interest rate of 8 percent. During negotiations, Daniel and Annie agreed that the interest rate would go down to 5 percent once she had sold 25,000 cases. This provision never made it into the contract. After the contract had been signed, Daniel agreed to reduce the interest rate to 6 percent once volume exceeded 25,000 cases. The contract had an integration provision but no modification clause. What is an integration clause?

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Deangelo Ibarra · Answer 1

An integration clause is a form of restriction in a contract which establishes that only the terms and conditions of the agreement written down in the contract will be taken into account, leaving other factors or treatments previously agreed upon prior to the signing of the agreement invalid. In this case, the verbal agreement to lower the interest rate to 5%, as it is not written in the contract, is not valid. For this reason, Annie would be forced to accept the 6% that Daniel finally offers her.