The UK High Court recently found that a settlement offer became legally enforceable through the exchange of emails between parties without the need for a subsequent detailed settlement agreement.
The case concerned an email exchange between solicitors in which a settlement offer dealing with a sum of money to be paid to one party was being finalised. Having accepted by email the amount on offer, the solicitors for the accepting party stated they would circulate a draft order to present to the court to which solicitors for the offering party replied: “Noted, with thanks”. However, the solicitors for the offering party subsequently sent a formal settlement agreement which provided for terms other than those agreed in the email exchange such as a favourable indemnity to the offering party.
The accepting party refused to sign the formal settlement agreement.
In making its decision, the Court considered the negotiations between the parties from the outset and held it was the intention of the parties to agree no further terms and to make a final and binding settlement arrangement based on the exchange of emails regarding the settlement offer only. There were three factors that the Court relied on:
- No email or agreement in an email had been written “subject to contract” and the agreement was expressed to be in full and final settlement of all claims between the parties.
- During the negotiations, the party being sued had not reserved its position regarding third party claims.
- A previous offer made by the party being sued had been made “subject to contract” whereas the offer in these negotiations was not. Additionally, that party’s reply, “Noted, with thanks” suggested that all the terms of the settlement arrangement had been finalised.
This case serves as a stark reminder to all parties (particularly practitioners) involved in settlement negotiations to label all settlement offers and related correspondence “subject to contract”.
This decision highlights the potentially catastrophic consequences of not doing so.