Binding settlement by exchange of emails - Salutary reminder to include all main terms in a settlement offer

The Court has held that a binding agreement settling legal proceedings was reached in an exchange of emails between the parties’ solicitors even though the parties were unable to subsequently agree the terms of the Consent Order.

The case provides a salutary reminder to include all terms of importance within a settlement offer, and not simply the commercial terms such as amount and timing of payment. It also highlights the need to consider whether settlement negotiations should be expressed as being “subject to contract” in addition to being “without prejudice save as to costs”.

The case of Bieber –v- Teathers Ltd (In Liquidation) [2014] EWHC 4205 (Ch) concerned claims relating to the commercial failure of film and television production partnerships that the Claimant had invested in to take advantage of tax concessions. The claims totalled £20 million with approximately £10 million available to meet them although the amount in the pot was decreasing over time as the Defendant was in insolvent liquidation.

The parties entered into settlement negotiations. The negotiations had some time constraints as a further tranche of Counsel’s brief fees were due shortly and the Defendant would need to divert monies away from any settlement offer in order to meet those brief fees.

The parties’ solicitors entered into an exchange of emails which resulted in the Claimant’s solicitors accepting the latest offer the day before it was to be withdrawn. In the acceptance email the Claimant’s solicitors indicated that a draft consent order would subsequently be circulated to which the Defendant’s solicitors replied “Noted, with thanks”.

Upon receipt of the draft consent order, the Defendant’s solicitors sent a long form settlement agreement which provided for an indemnity in favour of the Defendant relation to third party claims. The Claimant refused to sign the agreement and sought a declaration that the exchange of emails amounted to a binding agreement.

The Court agreed and granted the declaration. It held that:

  •  The offer accepted by the Claimant was not expressed to be “subject to contract”. The settlement was driven by an intention to settle before a further tranche of brief fees became payable. Moreover, the response of the defendant: "Noted, with thanks", suggested that no further terms had to be considered;
  •  The Defendant had not reserved its position in relation to third party claims during the negotiations;
  •  The Claimant’s solicitors reference to a consent order did not affect the parties’ intention to reach a final and binding agreement as there was no indication by either party that there were issues of substance to be agreed after the exchange of emails.

This case highlights the need to be clear when putting forward an offer of settlement as to whether the offer contains all of the terms and to consider whether the offer is made “subject to contract”. If you are happy that the offer contains all of the terms of settlement then there is no need to include a provision of subject to contract but if you wish to include other terms then it is important to confirm the proviso. However, even terms that are considered boiler plate (such as a provision that there is no admission as to liability) may not be admissible in the settlement agreement if a binding agreement has already been reached.

It is also important to make sure that it is clear whether additional terms set out in an earlier offer are also intended to apply to an amended offer. It is very easy, particularly in exchanges by email which often lack formality and when there are time constraints to get the deal done, to simply make an offer for a different amount without expressly stating that previous other terms mentioned still apply. The Court may examine the email exchange and find that a previous offer has been rejected and a new stand alone offer has been made. We recommend that it is expressly stated early on in an email exchange that all of the negotiations are subject to contract and any further offers made during the exchange are deemed to include all of the original terms excepting those that have been specifically amended or rejected.

Posted on 01/07/2015 by Ortolan

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