Litigation

Even When Purchase Order Has Integration Clause, Course of Dealing Evidence Admissible to Interpret Contract

By H. William Allen et al.

The Arkansas Court of Appeals affirmed a $1.3 million judgment in L.F. Brands Marketing, Inc. v. Dillard's, Inc., No. 07-1210 (March 11, 2009).

L.F. Brands sold clothing to Dillard's. When Dillard's would make a purchase, it would submit a purchase order that included an integration clause saying the purchase order represented the entire agreement. However, for years the parties agreed on a gross margin for Dillard's to achieve each fashion season. During the season, L.F. would process allowances and chargebacks so Dillard's would achieve this margin.

L.F. Brands filed suit, claiming the terms of the purchase orders were the final terms and course of dealing evidence was inadmissible. The trial court  disagreed and admitted the course of dealing evidence. The jury rendered a verdict for Dillard's. On appeal, the court of appeals held the course of dealing evidence supplemented rather than contradicted the parties' agreement. The court also said that merger clauses do not apply to subsequent modifications. The judgment was affirmed.

Full post as published by Arkansas Business Litigation Blog on March 12, 2009 (boomark / email).