Just this weekend, after breaking up a Minecraft dispute among four my young children, I sent them back to the world of digital building. Within minutes, they were fighting again. Makes you wonder about whether whether you have really settled the dispute after you have settled the dispute?
The Court of Appeals of Tennessee recently addressed this issue in McNeese v. Williams, No. 2014-CV-30, which involved two adjoining landowners who had a dispute over an easement. Right before trial, the parties reached an agreement and notified the court that the trial was unnecessary. The attorney for the Williams drafted a short letter agreement and sent it to opposing counsel. An agreed order of dismissal was also submitted to the attorney for McNeese. When Williams was “unable to obtain” a signature on the agreed order from opposing counsel, they filed a motion to enforce the settlement agreement.
Following the hearing, the trial court found that the parties, through their attorneys, had entered into an agreement to resolve all matters of controversy between the parties. The trial court found that the agreement was fair and equitable, and that it would be enforced, despite the fact that Mr. McNeese no longer consented to the agreement.
On appeal, the Court of Appeals found that the trial judge lacked the power to enter the agreed order when he knew that Mr. McNeese had withdrawn his consent to the oral settlement agreement reached by the parties’ attorneys. In other words, Mr. McNeese may have “had” a settlement agreement with the other party, but he repudiated that agreement prior to the hearing on the motion to enforce the settlement agreement. Accordingly, the appellate court ruled that the trial judge should have granted the motion to set aside the agreed order.
So what? While the issue in this case generally is one for attorneys, it also provides guidance to businesses about how to treat their settlement discussions via email. Whether you are talking about a change order, outstanding payment application, or claim for delay damages, your agreement on a dispute may be binding depending on the circumstances. First, your written contract may have a provision that requires all changes and modifications to be in writing. Therefore, an oral agreement to resolve the dispute may not be sufficient. Second, even if you agree to resolve the dispute in writing, the outcome may be dependent on whether you have timely repudiated the agreement.
In the McNeese case, it was a matter of whether the attorney for McNeese had the authority to approve the settlement agreement and whether he had provided the final agreement by his client. Mr. McNeese ultimately repudiated the agreement, which the court found important in its decision. In this situation, the best way to confirm an agreement on a dispute is to make sure you add appropriate language at the end of your communication such as, “This agreement is final and binding until a formal change order (or settlement) is signed by the parties.” That way, the other side will have an opportunity to object. If they do not object, you will have evidence of their agreement.