A restaurant owner leased a property from Prudential Insurance but discovered a persistent sewer gas problem making the space unusable. The owner sued for fraud and breach of warranty. Texas's highest court ruled that a standard merger clause in a contract does not automatically block fraud claims. The court found that unless a contract explicitly and clearly states the tenant is not relying on the landlord's representations, fraud claims can still proceed. This matters to subcontractors because it means merger clauses alone won't shield contractors from fraud liability if they made false statements about project conditions or capabilities.
Merger clauses must explicitly disclaim reliance on representations to block fraud claims—a standard merger clause is not enough
Even in commercial contracts between sophisticated parties, fraud claims survive unless the contract uses clear, unequivocal language rejecting reliance