## Facts

- A software vendor and a customer entered a written software license and implementation/services agreement.
- The contract contained an integration clause stating the writing was the complete and exclusive agreement.
- The contract also included warranty disclaimers and limitations on remedies and damages (including limits on consequential damages).
- After performance problems, the customer asserted that pre-contract oral statements about the software and implementation induced the deal and that the system did not perform as promised.
- The customer sought to avoid payment and to defeat the contract’s disclaimers and limitations through defenses and counterclaims framed as nonperformance and misrepresentation.
- The vendor sued to enforce the contract and recover amounts due; the district court enforced the written agreement and entered judgment for the vendor.

## Issues

1. Whether the written software and services agreement was fully integrated, barring reliance on alleged prior oral representations under the parol evidence rule.
2. Whether warranty disclaimers and contractual limits on remedies and damages were enforceable despite alleged unsatisfactory performance.
3. Whether any limited remedy failed of its essential purpose or whether the limitations were unconscionable so as to permit broader relief.
4. Whether alleged misrepresentation or fraud could circumvent the integration clause and agreed limitations of liability.

## Decision

- The Seventh Circuit affirmed the judgment for the vendor.
- The court treated the agreement as fully integrated and declined to allow prior oral statements to vary or supplement the written contract.
- The court enforced the contract’s disclaimers and limitations of liability in the absence of a showing that they were invalid under commercial law.
- The court rejected arguments that the limited remedies failed of their essential purpose based solely on dissatisfaction with performance.
- The court declined to allow contract-based complaints to be recast as misrepresentation or fraud to avoid the written allocation of risk.

## Legal Principles

- A clear merger/integration clause in a commercial contract supports a finding of full integration and triggers the parol evidence rule against prior or contemporaneous extrinsic terms that would alter the writing.
- Warranty disclaimers, remedy limitations, and exclusions of consequential damages are generally enforceable in commercial transactions absent unconscionability or other grounds for invalidity.
- “Failure of essential purpose” requires more than poor performance; it requires a showing that the contractual remedy structure effectively deprives the aggrieved party of a meaningful remedy.
- Fraud or misrepresentation theories cannot be used to revive barred oral promises or negate explicit contractual risk allocations where the allegations conflict with the integrated written terms.

## Conclusion

The court enforced the software contract as written, holding that the integration clause barred reliance on alleged pre-contract oral assurances and that the disclaimers and liability limitations remained effective because the customer did not establish unconscionability, failure of essential purpose, or a viable fraud theory that could override the contract’s express terms.


J.D. Edwards & Co. v. Podany, 168 F.3d 1020 (7th Cir. 1999)