ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, September 15, 2008

Lone Star Supremes Enforce Waiver-of-Reliance Provision

Texasflag The Lone Star Supremes held that a waiver-of-reliance provision precluded a party from claiming fraud in the inducement with respect to an arbitration clause.  Two commercial parties settled a protracted dispute over oil and gas royalties.  The settlement agreement specifically disclaimed reliance "upon any statement or any representation of any agent of the parties" in executing the releases contained in the agreement.  A dispute arose and the plaintiff sought to compel arbitration.  In response, the defendant claimed that the arbitration clause was fraudulently induced.  The court held:

Here, sophisticated parties represented by counsel in an arm's length transaction negotiated a settlement agreement that included a clear and broad waiver-of-reliance and release-of-claims language.  Because that agreement conclusively negates reliance on representations made by either side, any fraudulent inducement claim, lodged here to avoid an arbitration provision, is contractually barred.

Jefferson Chief Justice Wallace Jefferson filed a dissent:

Under the Court's analysis, a party may intentionally misrepresent facts essential to the bargain to induce the other to sign, as long as the agreement says reliance is waived.  That is not sound policy[.]

Forest Oil Corp. v. McAllen, __ S.W.3d __, 2008 WL 3991058 (Tex. Aug. 29, 2008).

[Meredith R. Miller]

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