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16 December 2013

Be careful what you agree to…

If you're involved in a potential dispute and it looks like you might be able to reach a quick, commercial settlement, it's often tempting to think that involving lawyers is unnecessary.  You're confident that you have worked out what needs to be agreed.  You might even agree the main items and then think about asking a solicitor to draft a full agreement recording those terms i.e. "drawing up the paperwork".

However, a recent High Court case highlighted the potential difficulties negotiating parties can get themselves into.

In the case of Mr Malcolm Newbury v Sun Microsystems [2013] EWHC 2180 (QB), one party thought that a binding agreement had been reached, the other party held entirely the opposite view.  There are lessons to be learnt for practitioners and the public, alike.

The parties had been involved in litigation since June 2011 and were due to go to trial earlier this year.  Shortly before that trial, the Defendant's solicitors wrote to the Claimant's solicitors offering circa £600,000 plus the sum of £180,000 towards costs with "such settlement to be recorded in a suitably worded agreement".  The Claimant's solicitors accepted.

However, when the "suitably worded agreement" was sent over by the Defendant's solicitors, it contained some clauses relating to taxation, national insurance as well as confidentiality.  The Claimant's said that that did not reflect the terms that had been agreed.  The Defendant's said that a "suitably worded agreement" meant that certain items still had to be negotiated and it would only agree to an agreement that was confidential i.e. they were still negotiating the finer details.

The Court ruled in favour of the Claimant.  It said that the Defendant's offer, and the Claimant's acceptance, included all the essential elements of a contract.  Once the Claimant accepted the Defendant's offer the parties had reached an agreement.  The Defendant's intentions relating to other terms (e.g. confidentiality) were irrelevant.  What mattered was what the parties had written.  That was simply that the terms of the agreement, already reached, would be recorded in a written agreement i.e. a separate document, nothing more.

The case highlights the nuances and potential pitfalls of settlement negotiations.  So, if you're involved in a potential dispute and thinking of trying to negotiate it yourself, consider seeking professional advice from the outset.

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