The purpose of this report is to investigate how merger clauses are to be used in Danish contract law. The term merger clause originates from common law countries and is being used more and more often in contracts subject to Danish law. The problem that arises is the fact Denmark is a civil law country with a very different culture compared to common law countries regarding contract interpretation. Many common law countries usually uses the parole evidence rule and has as a rule that parties contracts are the complete agreement between the parties. In Denmark contract law as a starting point sees the contract as the important center for a dispute resolution but the contract is generally interpreted in the light of materials from negotiations, prior agreements and so on. The question then arises of how Danish courts will interpret a contract which contains a merger clause but otherwise is subject to Danish law. Offhand you could say that freedom of contract should entail that a merger clause is accepted at courts. However in Danish law the parties do not decide how courts should interpret their agreement and so the merger clause will be subject to assessment in case it will have an extensive influence on the ruling of the courts. It follows that the courts will then need extrinsic evidence in order to decide whether or not to disallow extrinsic evidence from the case. This is the major problem when using merger clauses combined with Danish law. The judges deciding to accept merger clauses or not will not make this decision based on a general opinion of merger clauses but rather on a case to case basis where justice in a specific situation is the main concern. Because of this it will not be possible to establish a general overview on courts approach to contracts containing a merger clause until Danish courts has made rulings in a lot of cases that may give a reasonable overview. This paper seeks to give an idea of the concerns the courts should take into consideration when cases start to appear before them. For the time being and as long as merger clauses are not as widespread as in common law countries, we conclude that parties should take into consideration the very likely possibility that courts may set aside agreed merger clauses. Even if courts accept the merger clause in their final ruling they will probably do this after already having viewed the extrinsic evidence. The theories of law and economics has discussed interpretation widely and the effect of interpretation on parties when they write contracts. Shavell concludes that interpretation is especially in the interest of the parties when they are able to approximately foresee how the courts are going to interpret the contract. This will save the parties costs associated with writing the contract. The pros connected to using merger clauses in contracts can be widespread. Principals may be able to control their agents if the principles have final approval of the contract. Parties should be better able to predict an outcome of a possible litigation because of the reduced evidence to consider and at the same time save costs of litigation. The conflict between the Danish legal outlook on merger clauses and the economic approach is that the legal system takes a lot of other considerations in regard to whether or not a merger clause should be granted full effect. We will make a model to exemplify the different aspects the parties should consider when they contemplate on using a merger clause in a contract that will be subject to Danish law. We set up a game tree to give an overview of the parties’ choices and possibilities. We then give our view on how a party should take the different types of costs into account when deciding on whether or not to use a merger clause in their contracts.
|Educations||MSc in Commercial Law, (Graduate Programme) Final Thesis|
|Number of pages||121|