In a dispute? Think carefully about settlement terms

Year Published: 2014

If you are in a dispute and there is the risk of going to court, you may have worked hard to avoid this and reach a settlement. This may have been as a result of working hard yourself to sort out the dispute over the phone, via correspondence or even in a face to face meeting. You have certainly had to give up your valuable time and possibly spend money, if you needed the support of a solicitor.

I am sure you would be kicking yourself if you had resolved the headline issues but missed the finer details which, in themselves, could still be significant. For example, you may want to make the terms of the settlement confidential to the parties. In certain circumstances you may be bound by a settlement which does not include confidentiality. This could have very dire consequences for you or your business.

In fact this very issue occurred in a recent case:

AB v CD Ltd [2013] EWHC 1376

In short, the parties were able to agree a settlement on the headline issues following mediation but crucially not during the mediation. CD Ltd made an offer which was accepted by AB. After a draft settlement agreement had been sent by AB to CD Ltd, CD Ltd sought to include various terms into the settlement agreement including provision for confidentiality. AB refused to include the additional terms arguing that the deal had already been done.

AB applied to court for a declaration that the claim had been settled by an agreement i.e. they had accepted the offer made by CD Ltd.

CD Ltd sought to rely on the terms of the mediation agreement to argue that there was no binding settlement until it had been committed to writing.

The court held that CD Ltd’s offer was not caught by the terms of the mediation agreement as it was made after the mediation.

Consequences

CD Ltd was bound by the settlement which crucially did not include the confidentiality clause. It also did not include a clause stating that it was in a full and final settlement of all claims, whether known or ought to be known by AB.

What can you do?

Do not leave yourself in the same position as AB Ltd, where you are left bound by a settlement you do not want. Careful consideration needs to be given when making an offer. Even if you have been able to deal with the dispute in-house it is always worth getting a solicitor to assist you with the negotiations or in reviewing the terms of any offer you are proposing to make.

It is also worth making any offer ‘subject to contract’ to allow you the ability to incorporate terms such as confidentiality into the settlement agreement.

You may be lucky and the other party has no problem incorporating additional terms into the agreement beyond the headline terms. They may also want to keep matters private. However they may not. As a result, if they intend to tell every man and his dog the terms of the settlement, particularly if it’s been an acrimonious dispute, then you are going to struggle to get additional terms added after the event.

Do not leave the terms to chance. Whatever you do, don’t fall at the last hurdle and think carefully before making an offer.

For further information on settlement offers and terms contact Dispute Resolution team on 0161 475 7676.

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