Sound Techniques, Inc. v. Hoffman - 50 Mass. App. Ct. 425, 737 N.E.2d 920 (2000)

Rule:

Whether the clause is referred to as a merger clause, an integration clause, or an exculpatory clause, the settled rule of law is that a contracting party cannot rely upon such a clause as protection against claims based upon fraud or deceit. This established rule is an exception to the basic principles concerning the freedom to contract and is grounded upon public policy concerns.

Facts:

In 1989, Sound, the operator of a professional sound recording studio, was seeking to lease commercial space in Boston. Michael McGloin, an employee of Hoffman's leasing agent, showed James Anderson, Sound's president, vacant space on the second floor of a building owned by Hoffman and located at 1260 Boylston Street. The first floor was occupied by a bar named Boston Ramrod. McGloin showed the premises to Anderson several times. On all these occasions, Anderson made it clear that Sound was seeking space for purposes of building a state-of-the-art recording studio. Noticing that Ramrod was doing expansion work, Anderson asked McGloin about the extent of the planned expansion. McGloin told Anderson that he need not worry and that Ramrod was expanding its dining area in which only background music would be provided. He assured Anderson that the space in question would accommodate Sound's needs. At the time of the signing of the lease, October 10, 1989, Sound was represented by counsel who had assisted in the lease negotiations and had reviewed the terms of the lease prior to its execution. The lease was conditioned upon Sound successfully completing an acoustical inspection of the premises before October 13, 1989. Prior to the signing of the lease, no one from Sound had walked through Ramrod on a weekend night to determine the noise level. Sound's acoustical engineer conducted a brief visual inspection of Ramrod during a weekday afternoon and concluded that the second-floor space was suitable for Sound's purposes. Although Sound's studio operates around the clock, seven days a week, the engineer did not visit the Ramrod late at night or during the weekend, did not measure the ambient sound level, and did not talk with anyone at Ramrod about the operation of its sound system. Soon after relocating to the premises in issue, Sound began to experience problems with noise coming from Ramrod, and Sound discovered that, contrary to McGloin's representations, Ramrod's expansion went beyond providing background music in the dining area. Rather, Ramrod had upgraded its sound system and had expanded its premises to include a dance floor. There were times, Sound claimed, when the whole building throbbed; sessions in its recording studio were disrupted and Sound was losing business. Sound then brought an action against Hoffman, claiming breach of contract, deceit, and negligent misrepresentation and alleging that McGloin's statements to Anderson regarding the limited nature of Ramrod's expansion plans induced it to enter into the lease. Although the jury found in Hoffman's favor on Sound's claims of breach of contract and deceit, they found in Sound's favor on its claim for negligent misrepresentation.

Issue:

May Sound refer to the merger clause in the lease contract as protection against claims based on negligent misrepresentation?

Answer:

No.

Conclusion:

To ignore a merger clause and allow recovery for a negligent misrepresentation does little to promote honesty and fair dealing in business relationships. An individual who makes negligent misrepresentations has honest intentions but has failed to exercise due care. As stated in Bates v. Southgate, it is intentional misconduct that justifies judicial intrusion upon contractual relationships in order to prevent the wrongdoer from securing contractual benefits for which he had not bargained. There is nothing in the evidence herein that shows or even suggests that the integrity of the bargaining process was tainted by illegality, fraud, duress, unconscionability, or any other invalidating cause. The lease was not a contract of adhesion. Nothing suggests that the bargaining powers of the parties were unequal. Indeed, the evidence showed that Sound was represented by counsel throughout the negotiation process and its acceptance of the lease was conditioned upon an inspection by an acoustical engineer that was in fact conducted. Based upon the evidence presented and the public policy of this Commonwealth, there is no reasonable basis for ignoring the plain language of the merger clause, in which Sound agreed that it was entering into the contract free from influence by or in reliance upon any representations other than those set out in the contract. On the pleadings and evidence presented, the mistake comes from the notion that the parol evidence rule has no application in this tort action. The court not prepared to ignore our general policy of upholding freedom to contract by allowing Sound to avoid a contractual disclaimer that it agreed to, uninfluenced by any fraud or other egregious or intentional misbehavior on Hoffman's part.