posted on Wednesday, April 25, 2007 1:40 PM
by
Lou Michels
Get It in Writing
The Seventh Circuit recently decided a case involving a situation that occurs frequently enough that it should be of concern to anyone involved in settling litigation. The dispute arose after the employee ostensibly agreed to settle his case against his employer following an exchange of oral offers and counteroffers between the lawyers. There were some fairly definite terms regarding a money payment (in the experience of your humble blogger, the money term is almost never in dispute; both sides are usually crystal clear as to how much the employee is to get), reinstatement to a particular position, an opportunity to train and retest for a new job, and initial work site location after the employee returned to work.
But then the parties exchanged a written settlement agreement. The employee found the employer's first draft of the settlement agreement to be unacceptable because of several additional items that were not discussed originally. The employee then added new terms that he demanded be incorporated, which also were not discussed between the parties.
It's not unusual to have settlement agreements containing terms that the parties did not discuss in their haste to consummate a deal cutting off further litigation expense. These are usually resolved between the lawyers and their clients, frequently as a result of additional horsetrading between the parties. In this case, the employee not only wanted the employer's horse, he wanted the saddle, blankets, bridle and a barn thrown in for good measure. The employer, of course, rejected this and the settlement stalled.
The Court noted that enforcing settlement agreements was a matter of state contract law, in this case Illinois. State law provides for the enforcement of oral contracts (thus disproving Samuel Goldwyn's famous observation that "an oral contract isn't worth the paper it's written on") and the court looked to what the parties had agreed on in their oral discussions to determine the material terms to be enforced. The court quickly disposed of the employee' s claim that a number of material terms had not been included and therefore there was no meeting of the minds to support contractual intent. Instead, the judge reviewed the parties testimony to see what he could determine (actually, what the magistrate had determined) were the terms agreed on by the parties in their oral discussions-these were the material terms that were ultimately enforced.
The lesson here-I try to make it a practice to exchange offers and counteroffers by e-mail or letter, especially as the pace of negotiations picks up when it appears we might be able to settle the case. And at settlement conferences, somebody should have a copy of a draft settlement agreement with them so that both sides are clear about the terms of the deal.